Global Imbalances Before and After the Global Crisis
This paper surveys the academic and policy debate on the roots of global imbalances, their role in the inception of the global crisis, and their prospects in its aftermath. The conventional view holds that global imbalances result primarily from un...
| Main Authors: | , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100629131919 http://hdl.handle.net/10986/3839 |
| Summary: | This paper surveys the academic and
policy debate on the roots of global imbalances, their role
in the inception of the global crisis, and their prospects
in its aftermath. The conventional view holds that global
imbalances result primarily from unsustainably high demand
for goods in the United States and other rich countries, and
that their impending correction must involve major United
States trade adjustment and dollar depreciation -- although
recent literature argues that their extent may be dampened
by financial adjustment effects. In contrast, an alternative
view portrays global imbalances as the equilibrium result of
asymmetries in world asset demand and supply. Absent changes
in the deep determinants of these, global imbalances can
persist. International capital flow patterns before and
during the crisis lend support to the equilibrium view. The
paper also examines different hypotheses proposed in the
literature on the role of global imbalances in the
generation and propagation of the financial crisis. On the
whole, the evidence suggests that global imbalances were not
among the major causes of the crisis. Lastly, the paper
assesses alternative scenarios about the future of global
imbalances, considering in particular their potential
consequences for developing countries, and the policy
measures that these might adopt to enhance their growth
prospects in a changing global equilibrium. |
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