Working Paper: CEPR ID: DP9109
Authors: Nicolas Coeurdacier; Stéphane Guibaud; Keyu Jin
Abstract: In a period of rapid integration and accelerated growth in emerging markets, three striking trends have been (1) a divergence in the private saving rates of emerging markets and advanced economies, (2) large net capital outflows from emerging markets, and (3) a sustained decline in the world interest rate. This paper shows that in a multi-period OLG model, the interaction between growth and household credit constraints --- more severe in emerging markets --- is able to account for all of the above facts. We provide micro-level evidence that corroborates our mechanism: saving behaviors across age groups in the U.S. and China are broadly supportive of the predictions of the model.
Keywords: capital flows; credit constraints; globalization; lifecycle; household savings; saving and current account imbalances
JEL Codes: F21; F32; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tighter household credit constraints in emerging markets (F65) | higher saving rates relative to advanced economies (E21) |
| growth acceleration in emerging markets (O53) | alteration of saving rates and capital flows (F32) |
| interaction of growth and credit constraints (O43) | decline in the world interest rate (E43) |
| differences in credit constraints across economies (F65) | divergence in saving rates between the US and China (F62) |