Global Imbalances with Safe Assets in Eurozone

Ly-Dai, Hung (2014): Global Imbalances with Safe Assets in Eurozone.

Abstract

In one open two-country economy, a higher domestic productivity level raises both mean and variance of wealth dynamic, and can lead to a greater accumu- lation of safe assets. The empirical evidences on the 19 countries of Eurozone confirm that the safe assets exchange supports the international risk-sharing across countries. Moreover, in comparison with the risky investments (FDI and Portfolio Equities), the safe assets (Bonds) are the dominant driver of global imbalances within Eurozone.

• Item Type: MPRA Paper
• Language: English
• Keywords: Current Account, Endogenous Portfolio Choice, Safe Assets, Productivity Level
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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