The Effects of the Saving and Banking Glut on the U.S. Economy
We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the increase in U.S. house prices and household debt that preceded the financial crisis. The key to these findings is that the model generates the sustained low level of interest rates observed over that period.
We would like to thank our discussants Klaus Adam, Federico Signoretti, and Martin Uribe for their useful suggestions, and Efrem Castelnuovo, Gianluca Benigno, Andrea Ferrero, Andrea Raffo and participants in several conferences and seminars for comments. Aaron Kirkman and Todd Messer provided outstanding research assistance. The views expressed in this paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Banks of Chicago or New York, nor of the Federal Reserve System, nor of the National Bureau of Economic Research.
Giorgio Primiceri is a consultant for the Federal Reserve Bank of Chicago and a research visitor at the European Central Bank.
The Effects of the Saving and Banking Glut on the U.S. Economy, Alejandro Justiniano, Giorgio E. Primiceri, Andrea Tambalotti. in NBER International Seminar on Macroeconomics 2013, Clarida, Gopinath, and Reichlin. 2014
Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2014. "The effects of the saving and banking glut on the U.S. economy," Journal of International Economics, vol 92, pages S52-S67.