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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/31583
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| Title: | The Making of America's Imbalances |
| Authors: | Schularick, Moritz
Wachtel, Paul |
| Keywords: | savings rate
flow of funds
wealth effects
financial instability
global imbalances
current account deficit |
| Issue Date: | 9-Jul-2012 |
| Abstract: | This paper tracks the development of sectoral saving and borrowing in
the US economy over the past 50 years. We show that the financial
imbalances that erupted in the financial crisis of 2008 were long in the
making and preceded the emergence of global imbalances in the 2000s. The
record low household savings rate in the past decade was the product of
two separate trends: a sharp fall in the asset acquisition of American
households in the 1990s, and an explosion of mortgage borrowing in the
2000s. We present novel disaggregated estimates of the wealth effect on
savings. We show that households reduce active savings in response to
gains in financial wealth and increase borrowing with rising housing
wealth. Finally, we argue that the American credit boom of the 2000s had
few direct links to reserve accumulation in emerging markets. The
mortgage boom was financed by the US financial sector which
intermediated foreign funds from private sources. |
| URI: | http://hdl.handle.net/2451/31583 |
| Appears in Collections: | Economics Working Papers
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