Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies /
We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a larger-than...
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- Sprache:
- Englisch
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Cambridge, Mass.
National Bureau of Economic Research
2022.
- Zusammenfassung:
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We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a larger-than-average fiscal deficit experiences both a large increase in private savings ("excess savings") and a small but persistent current account deficit (a slow-motion "twin deficit"). These patterns are consistent with the evolution of the world's balance of payments since the beginning of the Covid pandemic.
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- 1 online resource: illustrations (black and white);
- Anmerkungen:
- June 2022.
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