Global Imbalances and Policy Wars at the Zero Lower Bound

• Ricardo J Caballero ^[2] ; Emmanuel Farhi ^[3] ; Pierre-Olivier Gourinchas ^[1]
  1. [1] University of California System

     University of California System

     Estados Unidos

     
  2. [2] MIT, NBER and CEPR
  3. [3] Harvard, NBER and CEPR

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• Localización: Review of economic studies, ISSN 0034-6527, Vol. 88, Nº 6, 2021, págs. 2570-2621
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • This article explores the consequences of extremely low real interest rates in a world with integrated but heterogeneous capital markets, nominal rigidities, and an effective lower bound [a zero lower bound (ZLB) for simplicity]. We establish four main results: (1) At the ZLB, creditor countries export their recession abroad, which we illustrate with a new Metzler diagram in quantities; (2) Beggar-thy-neighbour currency and trade wars provide stimulus to the undertaking country at the expense of other countries; (3) (Safe) public debt issuances and increases in government spending anywhere are expansionary everywhere; and (4) When there is a scarcity of safe assets, net issuers of these assets import the recession from abroad.