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Mapping the foreign financing of household and government debt

21st National Competition for Economic Research Grants (2022)

Economic analysis

Senior Researcher : Björn Richter

Research Centre or Institution : Universidad Pompeu Fabra


In modern economies, savers and borrowers are often located in different countries, but they are linked through the global financial system. A large literature in economics has focused on the determinants and consequences of indebtedness on the borrower side, but we usually know much less about the ultimate savers who hold claims on, e.g., household or government debt. Understanding who ultimately provided capital and why, may, however, help to understand the buildup of indebtedness in the first place and allow to assess the associated vulnerabilities. In the international context it has, e.g., been argued that the savings behavior of German households and the Chinese government were closely linked to buildups of debt in Spain and the U.S. prior to the great financial crisis. Documenting these links is notoriously difficult, as there is no data available on the complex flows of financial capital between ultimate lenders and borrowers.

This project will map the foreign sources of funds behind credit expansions and government indebtedness for OECD economies, and it will investigate how these links matter for real economic outcomes. The results will inform debates about the underlying drivers of increasing financialization and the high levels of indebtedness of private and public entities alike. At the same time, it will be possible to link episodes of growing indebtedness to the supply of capital from specific counterparties in the global financial system.

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