Global Imbalances and Policy Wars at the Zero Lower Bound / Ricardo J. Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas.

Format:

Book

Author/Creator:

Caballero, Ricardo J.

Contributor:

National Bureau of Economic Research.

Farhi, Emmanuel.

Gourinchas, Pierre-Olivier.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21670.

NBER working paper series no. w21670

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

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

Notes:

Print version record

October 2015.