“…Inverse relationships also hold when we control for the fraction of government foreign debt-to-GDP. The coefficient for foreign public debt-to-GDP is negative and consistent with the predictions inPriftis and Zimic [2018] andBroner et al [2018] However, we only have 19 observations in this specification as there are no data for Belgium, Denmark, France, Germany, Japan, New Zealand, Norway, and Poland.14 Miranda-Pinto et al[2019] lay out a theory of saving-constrained households and demonstrate that in a dynamic setting with incomplete markets, saving-constrained households exist in the stationary equilibrium (they do not fully precautionarily save to avoid the constraint in a calibrated model). The paper shows that the existence of saving-constrained households provides an explanation for puzzling aspects of the microdata.…”