Credit Constraints and Growth in a Global Economy

A paper by Nicolas Coeurdacier, Stéphane Guibaud, and Keyu Jin published in the American Economic Review, 105 (9): 2838-2881

This article was one of seven articles profiled in the American Economic Association's online "Research Highlights" in October 2015. In particular, the AEA's Tim Hyde underscored their important contribution to "a puzzling macroeconomic development: the steady decline in global interest rates." Read the full AEA Research Highlight "Are credit constraints responsible for low interest rates?  Understanding the global savings glut"

Abstract

We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints —more severe in fast-growing countries— can explain three prominent global trends: a divergence in private saving rates between advanced and emerging economies, large net capital outflows from the latter, and a sustained decline in the world interest rate. Micro-level evidence on the evolution of age-saving profiles in the US and China corroborates our mechanism. Quantitatively, our model explains about a third of the divergence in aggregate saving rates, and a significant portion of the variations in age-saving profiles across countries and over time.

Read the article (pdf, 1,06 Mo)

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Nicolas Coeurdacier is an Associate Professor at the Sciences Po Departement of Economics. Specialist of international macroeconomics and finance, he is the Principal Investigator (PI) of the INFINHET, a projetc supported by the European Research Council (ERC). 

Stéphane Guibaud is an Associate Professor at the Sciences Po Departement of Economics. His research interests focuse on international finance, asset pricing, dynamic contracting and macroeconomics.

Keyu Jin is lecturer in Economics at the London School of Economics. Her research interests focuse on international macroeconomics, international finance and trade and the Chinese economy.