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The Global Imbalances from 1996 to 2009:Diagnosis and Prescriptions
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- Authors
- Issue Date
- 2011-04
- Publisher
- 서울대학교 경제연구소
- Citation
- 경제논집, Vol.50 No.1, pp. 53-99
- Keywords
- Global imbalances ; Current account ; Savings ; Investment ; Exchange rates ; U.S. current account deficit ; Sustainability ; Bretton Woods II ; Demographic change ; Asset shortage ; Global savings glut
- Abstract
- One of the main global economic concerns before the financial crisis in 2007/2008 was
the emergence of widening global imbalances, which refer to the large and persistent current
account deficits experienced in the United States and the corresponding surpluses mainly in
China, emerging Asia, and oil exporting countries. Not only the pattern and magnitude of the
current account imbalances, but also the direction of global capital flows (from emerging to
advanced countries) is peculiar. Many observers have already discussed different causes and
explanations of global imbalances, e.g. the revived Bretton Woods system hypothesis, the
asset shortage hypothesis, or the global savings glut theory. The main focus of recent debates
lies on the sustainability of those imbalances and whether policy measures aiming on the
reduction of imbalances should be adopted. The debate does not seem to have a clear answer
which everyone agrees with. Some view global imbalances as an equilibrium outcome of
asymmetries in financial development or in world asset demand and supply. For others,
global imbalances are an unsustainable phenomenon which needs to be corrected through
current account adjustment, dollar depreciation and reforms of financial institutions.
This paper analyzes and evaluates the different views on the sustainability of global
imbalances and asks whether a rebalancing mechanism is necessary or not. The key points
which I focus on especially in this paper are as follows. First, I review and analyze the
facts on global imbalances from 1996 to 2009. Second, I discuss viewpoints which suggest
different positions — no-rush-to-rebalancing, rebalancing-is-harmful and rebalancing-isnecessary
— and put them into the context of common theories on the roots of imbalances.
Some of the theories try to explain or justify the sustainability of global imbalances. I argue
that the U.S. current account deficit and foreign surpluses will not disappear automatically
(even if the crisis led to an initial reduction of the imbalances). I further argue that the
possible interaction of current account imbalances with domestic and systemic distortions
bears risks of a global recession and that unless countermeasures to rebalance the global
economy are adopted, current account imbalances are likely to return and increase again.
- ISSN
- 1738-1150
- Language
- English
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