Fiche du document
- handle: 10670/1.ycobho
- hal: hal-04490037
- doi: 10.1016/j.jmoneco.2014.02.002
Ce document est lié à :
info:eu-repo/semantics/altIdentifier/doi/10.1016/j.jmoneco.2014.02.002
Sujets proches
Fortunes Household income Personal income Family incomeCiter ce document
Tobias Broer, « Domestic or global imbalances? Rising income risk and the fall in the US current account », HAL-SHS : économie et finance, ID : 10.1016/j.jmoneco.2014.02.002
Métriques
Partage / Export
Résumé
When default leads to exclusion from financial markets, the implied loss of consumption smoothing opportunities is more costly when income volatility is high. A rise in income risk thus makes default less attractive, allowing creditors to relax borrowing limits. I show how, in an open economy, this endogenous financial deepening may reduce aggregate foreign assets in response to a rise in individual income risk, against the precautionary savings intuition. Conditions for this depend on whether default constrains complete or uncontingent contracts. The post-1980 rise in US household income risk strongly reduces foreign assets when domestic markets are complete or world interest rates low.