The goal of the present thesis is to analyze the diverging savings and investment behavior among countries. The purpose of this work is to suggest possible explanations for the so called .global imbalances.. In particular, the focus is on the negative asset positions of the US and the positive asset positions of emerging economies. The .rst two chapters study the effects of capital market liberalization among countries with structural differences and in particular different financial market depth. Global imbalances are generated by higher propensity to save as well as lower propensity to invest in financially underdeveloped countries, with respect to countries with better financial institutions. The analysis is able to reproduce medium term net capital flows towards financially advanced economies as a result of financial integration. Moreover, capital liberalization generates welfare losses for emerging economies and a reduction of their capital convergence towards the steady state. The third chapter focuses on one of the most debated aspects of international capital movements, namely sovereign reserve accumulation by emerging countries, as a form of precautionary saving to be employed to face liquidity crises. The analysis investigates the determinants of the opportunity cost of holding reserves, and finds that countries optimally decide to hold a positive amount of reserves. Countries’ lenders set the cost of debt by taking into account countries’ decisions and their economic and financial characteristics.

Jury Members: Prof. Giancarlo Corsetti, University of Cambridge and EUI, Supervisor Prof. Árpád Ábrahám, EUI Prof. Mark Aguiar, University of Rochester Prof. Christopher Carroll, Johns Hopkins University

Defense Date: 13 April 2011