The Real and Financial Implications of the Global Saving Glut: A Three-Country Model
Résumé
The model presented in this paper has two objectives. First, it models global imbalances in a simple way while conserving real and - nancial approaches. This double approach is necessary because Global Imbalances are due to the conjunction of nancial and real phenomena: the increase in the price of commodities, the accumulation of foreign reserves by the Asian central banks, the limited absorption capacity of the OPEC countries, the insufficient development of the Asian nancial system and the perception of better returns in the US. The second objective is to model the global saving glut hypothesis and to show its implications. In order to avoid the recession linked to the increase of their propensity to import, the United States increase their propensity to spend. This adjustment has a cost. The Global Imbalances grow quickly with an increase of current account imbalances and NFA in both the US and Asia. The euro area supports an appreciation of its exchange rate wich put it in a long depression.
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