Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis

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Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis

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Title: Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis
Author: Laibson, David I.; Mollerstrom, Johanna Britta

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Citation: Laibson, David, and Johanna Mollerstrom. 2010. Capital flows, consumption booms and asset bubbles: a behavioural alternative to the Savings Glut Hypothesis. Economic Journal of London 120(544): 354-374.
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Abstract: Bernanke (2005) hypothesized that a “global savings glut” was causing large trade imbalances. However, we show that the global savings rates did not show a robust upward trend during the relevant period. Moreover, if there had been a global savings glut there should have been a large investment boom in the countries that imported capital. Instead, those countries experienced consumption booms. National asset bubbles explain the international imbalances. The bubbles raised consumption, resulting in large trade deficits. In a sample of 18 OECD countries plus China, movements in home prices alone explain half of the variation in trade deficits.
Published Version: doi:10.1111/j.1468-0297.2010.02363.x
Other Sources: http://www.nber.org/papers/w15759
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4686766

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  • FAS Scholarly Articles [6466]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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