; hypothesis), (ii) preference shocks (quot;savings glutquot; hypothesis), and (iii) investment shocks (quot;investment droughtquot … regions with widening imbalances, the United States and emerging Asia, using sign restrictions that are compatible with … part of the variation in imbalances and financial market prices. We find that savings shocks and investment shocks explain …

) preference shocks ("savings glutʺ hypothesis), and (iii) investment shocks ("investment droughtʺ hypothesis). In order to … imbalances, the United States and emerging Asia, using sign restrictions that are compatible with standard New Keynesian and Real … imbalances and financial market prices. We find that savings shocks and investment shocks explain less of the variation. Hence, a …