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The Demand for Liquid Assets, Corporate Saving, and Global Imbalances

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  • Bacchetta, Philippe
  • Benhima, Kenza
Abstract
In the recent decade, capital outflows from emerging economies, in the form of a demand for liquid assets, have played a key role in the context of global imbalances. In this paper, we model the demand for liquid assets by firms in a dynamic open-economy macroeconomic model. We find that the implications of this model are very different from standard models, because the demand for foreign bonds is a complement to domestic investment rather than a substitute. We show that this complementarity is at work when an emerging economy is on its convergence path or when it has a higher TFP growth rate. This framework is consistent with global imbalances and with a number of stylized facts such as high corporate saving rates in high-growth, high-investment, emerging countries.

Suggested Citation

  • Bacchetta, Philippe & Benhima, Kenza, 2012. "The Demand for Liquid Assets, Corporate Saving, and Global Imbalances," CEPR Discussion Papers 9268, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9268
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    More about this item

    Keywords

    Capital flows; Credit constraints; Global imbalances;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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