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dc.contributor.authorMiller, Marcusen_US
dc.contributor.authorZhang, Leien_US
dc.date.accessioned2010-02-23en_US
dc.date.accessioned2011-11-18T11:47:35Z-
dc.date.available2011-11-18T11:47:35Z-
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/10419/51445-
dc.description.abstractThis paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict modest current account surpluses in the emerging markets if they face higher risk than the US itself. But, with pronounced Loss Aversion in emerging markets, their precautionary savings can generate substantial 'global imbalances', especially if there is an inefficient supply of global 'insurance'. In principle, lower real interest rates will ensure that aggregate demand equals supply at a global level (though the required real interest may be negative). While a precautionary savings glut appears to be a temporary phenomenon, a process of correction triggered by a 'Sudden Stop' in capital flows to the United States might lead to a 'hard landing'.en_US
dc.language.isoengen_US
dc.publisherInter-American Development Bank, Research Dep. Washington, DCen_US
dc.relation.ispartofseriesWorking paper // Inter-American Development Bank, Research Department 593en_US
dc.subject.jelD51en_US
dc.subject.jelD52en_US
dc.subject.jelE12en_US
dc.subject.jelE13en_US
dc.subject.jelE21en_US
dc.subject.jelE44en_US
dc.subject.jelF32en_US
dc.subject.ddc330en_US
dc.subject.keywordstochastic dynamic general equilibriumen_US
dc.subject.keywordloss aversionen_US
dc.subject.keywordliquidity trapen_US
dc.titleFear and market failure: Global imbalances and self-insurance”en_US
dc.typeWorking Paperen_US
dc.identifier.ppn585535442en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Research Department Working Papers, Inter-American Development Bank

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