Vincenzo Quadrini, University of Southern California, 21.06.2022

Please note: Due to this year´s summer school, two seminars will be held in this week.
Abstract: "The sharp, secular decline in the world real interest rate of the past thirty years suggests that the observed surge in global demand for financial assets outpaced the growth in supply. We argue that this phenomenon was driven by (i) faster growth in emerging market economies, and (ii) changes in the financial structure of both emerging and advanced economies. We then show that the low-interest-rate environment made the world economy more vulnerable to financial crises. These findings are derived quantitatively using a two-region model in which financial assets provide direct services to production and private debt can be defaulted on."