The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses.
Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 27 October 2016
Pasquale Della Corte, Steven Riddiough, Lucio Sarno, 29 February 2016
The world’s savings and investments are imbalanced. While some countries persistently borrow over time, others act like bankers to the world – lending year in and year out. This column argues that these imbalances matter for asset pricing in financial markets, and are key to understanding excess returns in currency markets.
Giuseppe Bertola, Anna Lo Prete, 28 February 2015
The large international imbalances accumulated in the Eurozone have proven difficult to unwind during the recent Crisis. This column argues that market reforms had a role in generating current account imbalances, and that patterns of relative labour market regulation could be equally important in the aftermath of the Crisis.
Philippe Bacchetta, Kenza Benhima, 24 August 2014
Among the various explanations behind global imbalances, the role of corporate saving has received relatively little attention. This column argues that corporate saving is quantitatively relevant, and proposes a theory that is consistent with the stylised facts and useful for understanding the current phase of global rebalancing. The theory implies that, while the economic contraction originating in developed countries has pushed interest rates towards the zero lower bound, the recent growth slowdown in emerging countries could push them out of it.
Michael Bordo, 21 March 2014
Since 2007, there has been a buildup of TARGET imbalances within the Eurosystem – growing liabilities of national central banks in the periphery matched by growing claims of central banks in the core. This column argues that, rather than signalling the collapse of the monetary system – as was the case for Bretton Woods between 1968 and 1971 – these TARGET imbalances represent a successful institutional innovation that prevented a repeat of the US payments crisis of 1933.
Jose Luis Dias Sanchez, Aristomene Varoudakis, 06 February 2014
External imbalances within the Eurozone grew substantially between the introduction of the euro in 1999 and the global financial crisis of 2008–09. Using new empirical evidence, this column argues that imbalances in the Eurozone periphery were mainly driven by a domestic demand boom, triggered by greater financial integration, with changes in the periphery’s competitiveness playing only a minor role. Internal devaluation may thus have been of limited effectiveness in restoring external balances, although better external competitiveness may eventually boost medium-term growth.
Joshua Aizenman, Yothin Jinjarak, Nancy Marion, 05 January 2014
Before the financial crisis, the world economy was characterised by large and growing current account imbalances. Since the onset of the crisis, the current account imbalances of the US and China have decreased to half their pre-crisis levels. This column highlights the implications of the reduction in the current account surplus for China, and gives policy recommendations. A restructuring of the economy is needed, and reversing of policies that depress consumption and prevent real appreciation.
Sascha Bützer, Christina Jordan, Livio Stracca, 23 November 2013
Since the advent of the Eurozone sovereign-debt crisis, economic commentators have drawn attention to macroeconomic imbalances within the Eurozone. This column presents evidence on the link between macroeconomic imbalances and differences in culture – or more specifically, interpersonal trust. A conservative estimatation suggests that a one standard-deviation increase in trust reduces macroeconomic imbalances by about a quarter of a standard deviation. Moreover, differences in interpersonal trust can explain a fifth of the variation in intra-Eurozone imbalances.
Harold James, 08 October 2013
The global nature of the recent financial crisis required a coordinated response from central banks. After the fall of Lehman Brothers, several of them simultaneously reduced their policy rates, and the Fed extended dollar swap lines to its overseas counterparts. However, the second phase of the crisis has put increasing strain on international cooperation. This column presents two explanations. First, the Eurozone crisis threatens the solvency of governments, thus creating conflict over who will pay the costs of maintaining financial stability. Second, unconventional monetary policy has had spillover effects in developing countries.
Rudolfs Bems, Robert Johnson, 06 December 2012
With the rise of complex, globalised supply chains is the real effective exchange rate (REER), the most commonly used measure of competitiveness, now outdated? If it is, what should replace it? This column presents a ‘Value-Added REER’ and shows that it differs substantially from the conventional REER. Because it is possible to construct a new Value-Added REER from existing data, policymakers interested in improving their understanding of competitiveness might well consider including it in their toolbox.
J. Bradford Jensen, 19 November 2012
Should developed countries fear trade in services? Won’t high skilled jobs be lost to cheaper, developing country service workers? This column argues that trade in services represents a profitable opportunity as long as international trade in services is liberalised. The US and other developed countries should aggressively pursue fairer and thus more favourable terms under the WTO’s Government Procurement Agreement.
Marco Buti, Alessandro Turrini, 12 November 2012
Why aren’t Eurozone imbalances adjusting? This column argues that there is heartening evidence that they are. Labour markets are beginning to be reformed across Europe, thereby increasing countries’ competitiveness. However, the road ahead will surely long and hard; for external adjustment to really work, it is crucial that financial markets start to take a lead supportive role.
Linda Lim, Ronald Mendoza, 24 September 2012
There has been much talk among economists of ‘global rebalancing’, with the focus on China and the US rebalancing their current accounts. But this column argues that the type of rebalancing that will bring real gains to the global economy is one that will be shaped by many countries, both industrial and developing.
Raman Ahmed, Heleen Mees, 28 August 2012
China’s huge savings are met with both awe and suspicion. This column asks what explains the high savings rate. It uses data from 1960 to 2009 – including the periods with the most significant economic reforms.
Françoise Lemoine, Deniz Ünal, 19 July 2012
Since 2008 China’s trade surplus has fallen sharply. This column argues that China has since become a major source of international demand, thanks to its strong economic growth. China’s import demand has been aimed at resource-rich countries and at its Asian neighbours, but also at European exporters, especially in high-end consumer goods.
Marco Annunziata, 21 April 2012
According to its latest projections, the IMF no longer sees China as the main source of imbalances in the global economy. This column argues that fears of a stalling Chinese economy are exaggerated, and that sustained and more balanced Chinese growth will actually be a rare nugget of good news for the global economy.
Charles Yuji Horioka, Akiko Terada-Hagiwara, 28 November 2011
Emerging Asia's economies have contributed to both global imbalances and the global saving glut with current-account surpluses caused by buoyant saving and stagnant investment. This column examines the cause of these trends and argues that in Asia as a whole the situation may remain the same in the next 20 years unless governments promote financial-sector development and improvements in social safety nets, both of which will reduce the need for precautionary saving.
Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych, 29 October 2011
With all the focus on Europe, it is easy to ignore the argument that global imbalances remain a drag on economic recovery. This column decomposes international capital flows into public and private components and claims that upstream flows from emerging to advanced economies and global imbalances in general are the result of the same underlying factor.
Heleen Mees, 08 August 2011
As fears mount of another phase in the global crisis, this column points out that despite the growing uncertainty, US Treasury and German Bund yields have actually declined in recent weeks. The reason, it argues, is the global saving glut theory.
Claudio Borio, Piti Disyatat, 26 July 2011
Global imbalances loom large in G20 and IMF discussions, but are they to blame for the global crisis? This column argues that the emphasis on current-account imbalances is unhelpful and diverts attention from the monetary and financial factors that really sowed the seeds of the crisis.