Asset prices and creation in a global economy

We analyze a two country stochastic open-economy framework in which countries differ in their ability to create liquid assets. We examine the consequences of this asymmetry on international asset prices and asset creation. Higher volatility, financial integration of emerging markets drive up the liquidity premium of assets created in advanced economies, and also stimulate the latter's production of liquid assets. Financial development (innovation) in advanced economies, on the other hand, also drive up the liquidity premium of these assets, and boost growth in both economies.

[1]  Hélène Rey,et al.  External Adjustment, Global Imbalances and Valuation Effects , 2013 .

[2]  O. Jeanne,et al.  Global Safe Assets , 2012 .

[3]  P. Bacchetta,et al.  The Demand for Liquid Assets, Corporate Saving, and Global Imbalances , 2012 .

[4]  Gianluca Benigno,et al.  Reserve Accumulation, Growth and Financial Crises , 2012, Journal of International Economics.

[5]  Keyu Jin,et al.  Credit Constraints and Growth in a Global Economy , 2012 .

[6]  A. Ferrero,et al.  House Price Booms, Current Account Deficits, and Low Interest Rates , 2012 .

[7]  J. Tirole,et al.  Inside and Outside Liquidity , 2011 .

[8]  G. Angeletos,et al.  Financial Integration, Entrepreneurial Risk and Global Imbalances , 2010 .

[9]  Ricardo J. Caballero.  A Caricature (Model) of the World Economy , 2010 .

[10]  Kenza Benhima.  A Reappraisal of the Allocation Puzzle Through the Portfolio Approach , 2010 .

[11]  Francisco J. Buera,et al.  Productivity Growth and Capital Flows: The Dynamics of Reforms , 2009 .

[12]  Mark Aguiar,et al.  Growth in the Shadow of Expropriation , 2009 .

[13]  Kjetil Storesletten,et al.  Growing like China∗ , 2008 .

[14]  B. Bernanke.  The global saving glut and the U.S. current account deficit , 2005 .

[15]  Erich Battistin.  Errors in survey reports of consumption expenditures , 2003 .

[16]  John Y. Campbell,et al.  Consumption-Based Asset Pricing , 2002 .

[17]  L. Kotlikoff,et al.  Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis , 1996 .

[18]  D. Slesnick.  Aggregate Consumption and Saving in the Postwar United States , 1992 .

[19]  Gianluca Benigno,et al.  CEP Discussion Paper No 1161 August 2012 Reserve Accumulation , Growth and Financial Crises , 2012 .

[20]  Pierre-Olivier Gourinchas.  Global imbalances and global liquidity , 2011 .

[21]  M. Loretan,et al.  Nber Working Paper Series , 2022 .

[22]  D. Backus,et al.  Financial Integration , Financial Development and Global Imbalances 1 , 2008 .