This paper provides a tractable framework for the joint explanation of the Global Financial Cycle and Global Imbalances. I show, both theoretically and empirically, that fluctuations in global banks’ leverage play a key role in driving global external imbalances.
The U.S. would not have grown its way out of its WWII debt without interest rate distortions and primary surpluses.
This paper discusses the welfare implications of inter-generational transfers and debt rollovers in a stochastic overlapping-generations (OLG) economy where the growth rate is higher than the safe rate but lower than the average marginal product of capital.