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May/June 2012, 
Vol. 94, No. 3
Posted 2012-05-01

Liquidity Shocks, Real Interest Rates, and Global Imbalances

The author uses a simple neoclassical model to show how liquidity shocks at home and abroad can contribute to trade imbalances and low real interest rates. The author’s interpretation is consistent with Bernanke’s (2005) “global saving glut” hypothesis.