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...

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Bibliographic Details
Main Authors:	Servén, Luis, Nguyen, Ha
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADVANCED ECONOMIES ASSET HOLDINGS ASSET PRICE ASSET PRICES ASSETS BANK DEPOSITS BOND MARKETS BONDS BORROWER BUDGET CONSTRAINT CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL GAINS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL LOSSES CAPITAL OUTFLOWS CENTRAL BANKS COMMERCIAL PAPER COMMODITY PRICES COMPETITIVE EXCHANGE RATES CONSUMER CREDIT CONSUMER EXPENDITURE CORPORATE BOND CORPORATE BOND MARKETS CORPORATE DEBT CORPORATE GOVERNANCE CORPORATE SAVING CREDIT GROWTH CREDITOR CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT IMBALANCES CURRENT ACCOUNT POSITION CURRENT ACCOUNT SURPLUS CURRENT ACCOUNT SURPLUSES DEBT INSTRUMENTS DEBTOR DEBTORS DEBTS DEFAULTS DEMAND GROWTH DEPOSITS DEPRECIATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DIRECT INVESTMENT DISTORTIONS DOMESTIC CONSUMPTION DOMESTIC DEMAND DOMESTIC MARKETS ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC STABILITY EMERGING ECONOMIES EMERGING MARKET COUNTRIES EMERGING MARKETS EQUILIBRIUM EQUITIES EQUITY MARKETS EXCHANGE RATE EXCHANGE RATE APPRECIATION EXCHANGE RATE POLICY EXPENDITURES EXPORT MARKET EXPROPRIATION EXPROPRIATION RISKS EXTERNAL ASSET EXTERNAL ASSETS EXTERNAL DEFICIT EXTERNAL DEFICITS EXTERNAL POSITION EXTERNAL POSITIONS EXTERNAL SHOCKS FEDERAL RESERVE FEDERAL RESERVE BANK FEDERAL RESERVE SYSTEM FINANCES FINANCIAL ASSETS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SYSTEMS FISCAL POLICY FISCAL REFORM FOREIGN ASSET FOREIGN ASSET ACCUMULATION FOREIGN ASSET POSITION FOREIGN ASSETS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVES FOREIGN INVESTORS FOREIGN RESERVE GLOBAL BANKS GLOBAL DEMAND GLOBAL ECONOMY GLOBAL FINANCIAL SYSTEM GLOBAL IMBALANCE GLOBAL IMBALANCES GROWTH RATE HOUSEHOLD SAVING IMBALANCE IMPORT IMPORT DEMAND IMPORTS INFLOW OF CAPITAL INSURANCE INTANGIBLE INTANGIBLE ASSETS INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL FLOW INTERNATIONAL CAPITAL FLOWS INTERNATIONAL DIVERSIFICATION INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL INVESTORS INTERNATIONAL MONETARY SYSTEM INTERNATIONAL RESERVES INVESTMENT OPPORTUNITIES INVESTMENT PORTFOLIOS INVESTMENT PROJECTS INVESTMENT RATES INVESTOR AWARENESS LENDER LEVERAGE LIABILITY LIQUIDATION LIQUIDITY MACROECONOMIC POLICIES MACROECONOMIC STABILITY MONETARY ECONOMICS MONETARY POLICY OIL EXPORTERS OIL EXPORTING COUNTRIES OIL PRICE OIL PRICES OIL-EXPORTING COUNTRIES OPEN ECONOMIES OPPORTUNITY COSTS OTHER CURRENCIES PENSION POLICY RESPONSES POLITICAL ECONOMY PORTFOLIO PORTFOLIO DIVERSIFICATION PORTFOLIOS POSSIBILITY OF DEFAULT PRICE CHANGES PRICE MOVEMENTS PRIVATE CAPITAL PRIVATE INFLOWS PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE SAVING PRUDENTIAL REGULATION PUBLIC DEBT PUBLIC DEFICITS PUBLIC SAVING PUBLIC SPENDING REAL DEPRECIATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL EXCHANGE RATES REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES RELATIVE WEIGHT RESERVE ACCUMULATION RESERVE CURRENCY RESERVE HOLDINGS RETURN RETURNS RISK DIVERSIFICATION RISKY ASSETS SAFETY NET SAFETY NETS SECURITIES SHAREHOLDERS SLACK SLOWDOWN SOURCE OF INFLOWS STOCK MARKET STOCK MARKET PRICES STOCKS SURPLUS SURPLUS COUNTRIES SURPLUSES TAX TAX INCENTIVES TRADABLE GOODS TRADE ACCOUNT TRADE BALANCE TRADE SURPLUS TREASURIES TREASURY WEALTH EFFECTS WEALTH TRANSFER WITHDRAWAL WORLD DEVELOPMENT INDICATORS WORLD ECONOMY WORLD INTEREST RATES WORLD MARKETS WORLD TRADE
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

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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.

Global Imbalances Before and After the Global Crisis

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