The paper “The Paradox of Global Thrift” by Luca Fornaro (CREI, UPF and BSE) and Federica Romei has been published in the American Economic Review.

This paper describes a paradox of global thrift. Prudential policies are effective in individual countries, but it can backfire if they are applied on a global scale because they depress output in countries at the zero lower bound. Due to this effect, noncooperative financial and fiscal policies might lead to a fall in global output and welfare.

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