Economics, Econometrics and Finance
8 years ago

Financial integration leads to savings gluts and asset price booms.

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SSRN Electronic Journal
Savings Gluts and Asset Price Booms: The Impact of Domestic Imperfect Enforcement and Global Financial Integration
Felix Zhiyu Feng, Will Jianyu Lu, Caroline Zhu

Paper Summary

The article discusses how when a country opens up to global finance, it can lead to more savings and higher asset prices. This happens because companies can invest in safer foreign assets, which makes them wealthier and want to invest more at home. This can cause a surplus of savings and a boom in asset prices.

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