On the macroeconomics of asset shortages
By: Ricardo J. Caballero
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 06-30; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 06-30.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Number of pages: 16
Description: The world has a shortage of financial assets. Asset supply is having a hard time keeping up with the global demand for store of value and collateral by households, corporations, governments, insurance companies, and financial intermediaries more broadly. The equilibrium response of asset prices and valuations to these shortages has played a central role in global economic developments over the last twenty years. The so-called "global imbalances," the recurrent emergence of speculative bubbles (which recently have transited from emerging markets, to the dotcoms, to real estate, to gold...), the historically low real interest rates and associated "interest-rate conundrum," and even the widespread low inflation environment and deflationary episodes in parts of the world, all fall into place once one adopts this asset shortage perspective. Keywords: Asset shortages, high valuations, speculative bubbles, low interest rates, low inflation, monetary policy, lender of last resort. JEL Classifications: E3, E4, E5 F3, F41.
Notes: "November 27, 2006."

Includes bibliographical references (leaves 15-16).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.