Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/29909
Authors: 
Belke, Ansgar
Gros, Daniel
Year of Publication: 
2009
Series/Report no.: 
Ruhr economic papers 128
Abstract: 
The purpose of this contribution is to illustrate the mechanism by which higher oil prices might lead to lower interest rates in the context of a simple model that takes into account the global external savings equilibrium. The simple model has interesting implications for how one views the huge US current account deficit and how the emergence of China's savings surplus and oil supply shocks impact the global economy.We show that the new equilibrium is located at a lower interest rate but also at a lower income level than without the China effect. Moreover, we argue that the lower real interest rates resulting from excess OPEC savings have facilitated the adjustment to the subprime crisis.
Subjects: 
China factor
current account adjustment
interest rate
oil prices
saving glut
JEL: 
E21
E43
F32
Q43
ISBN: 
978-3-86788-140-1
Document Type: 
Working Paper

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