Global Imbalances and Financial Stability (original) (raw)

Global imbalances and the financial crisis: products of common causes

2009

This Discussion Paper is issued under the auspices of the Centre's research programme in INTERNATIONAL MACROECONOMICS. Any opinions expressed here are those of the author(s) and not those of the Centre for Economic Policy Research. Research disseminated by CEPR may ...

Global Imbalances, the International Crisis and the Role of the Dollar

2011

The paper investigates the links between international global imbalances and the recent international financial crisis. It also focuses on the asymmetries of the dollar standard exchange rate regime. Global imbalances preceded the crisis but were one of the ingredients that led to the financial crash of 2007-2008. The paper rejects the ‘saving glut' explanation of the US trade deficit and

The New Global Balance

SSRN Electronic Journal

We present a unified framework in order to help understand how the current crisis would reshape the global financial balance. We believe that as risk appetite slowly returns, the negative risk premium that benefited US Treasuries and the dollar will rapidly reverse. As the Fed is likely to err on the side of growth for a long time, the dollar could test its 2008 lows within the next 12 months. Despite an expected fall in global imbalances, we believe a more stringent financial landscape and scarcer global savings justify a weak dollar in the medium term.

The resolution of global imbalances: Soft landing in the North, sudden stop in emerging markets?

Journal of Policy Modeling, 2006

The paper shows that the increase in the US current account deficit since 1997 was financed by Emerging Market economies, EMs. Since 2001 a large share of the funding was carried out by the official sector, taking mostly the form of accumulation of international reserves. The paper argues that (1) if official funding is stopped or reversed, the private sector in EMs is likely to provide offsetting funds, preventing the US to go through a Sudden Stop episode; and (2) in the unlikely event that global saving collapses, the brunt of the adjustment is likely to be borne by EMs, e.g., through Sudden Stops, and flight to quality likely to ensure the US a smooth transition, i.e., a soft landing.

Global imbalances: an old challenge on the rise?

2018

Current account and financial imbalances in the global economy have returned to the spotlight of the policy debate. Imbalances that reached a peak in the run up to the global economic and financial crisis have been reduced since then and nowadays show different patterns. This section explores the main drivers of current account and financial imbalances in the US, China and the euro area. Our main findings point to some potentially problematic trends in saving - investment and stock accumulation. Valuation effects might also be important in this regard. We also consider various policy scenarios, including a recalibration of the US policy mix, the introduction of protectionist measures, or a disorderly adjustment in the Chinese financial sector, in order to identify possible short and medium term risks that could lead to the widening or disorderly adjustment of global imbalances. The section concludes with some implications for domestic policy and international cooperation to rebalanc...

Financial Imbalances in the World Economy

Economic and Political Weekly, 2005

far and away the largest that the world has ever seen. If that money figure is hard to calibrate, consider that U.S. export income covers only 65% of spending on imports-35% is imported on credit. The gap is equivalent to about 7% of U.S. national income and nearly 2% of world income. Residents of other countries are financing this deficit by heavy investment in the U.S. Is it a problem? The U.S. deficit may not be a new phenomenon but it does have disturbing features: 2 • the deficit has been increasing over the past ten years and despite a real dollar depreciation of about 15% 1 This article is based on research by the Cambridge Endowment for Research in Finance (CERF) and Alphametrics Ltd., with support from the G24 and the UNDP. The project will provide analytical tools, historical data and 10year scenarios of income, trade, investment and financial conditions for countries and regions of the world.