Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis / David Laibson, Johanna Mollerstrom.

Format:

Book

Author/Creator:

Laibson, David.

Contributor:

National Bureau of Economic Research.

Mollerstrom, Johanna.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15759.

NBER working paper series no. w15759

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Capital Flows, Consumption Booms and Asset Bubbles

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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.

Notes:

Print version record

February 2010.