Jenny Corbett, Takatoshi Ito, 30 April 2010

Amongst other reasons, Chinese authorities hesitate to let the renminbi appreciate because they believe that a prime cause of Japan’s 20-year stagnation was its caving in to US demand for an appreciation of the yen. This column, which first appeared in Vox's latest eBook, argues that it was not caving to US pressure but resisting it that made Japanese monetary policy too lax and contributed to its asset bubble.

Patrick Messerlin, 16 April 2010

If the US government does brand China as a “currency manipulator”, should the EU follow suit? This column argues that EU officials are likely to be low key on the issue. There are far too many imbalances within the EU, notably Germany’s trade deficit, so that any complaints about China are doomed to degenerate into intra-EU discord.

Shaun Breslin, 16 April 2010

The global crisis has intensified calls for Western governments to pressure China to liberalise its economy – particular its exchange-rate policy. This column argues that the power of China’s policymakers should not be overestimated – just like elsewhere, they must bow to public sentiment. An outside call for the country to change its policies might actually make the change more difficult.

Helmut Reisen, 16 April 2010

Many economists cite the undervalued renminbi as a major cause of global imbalances and a contributing factor to the global crisis. This column says the undervaluation results mainly from the Balassa-Samuelson effect and that a rebalancing of the world economy will need reforms in China’s social, pension and family policies rather than currency appreciation.

Charles Wyplosz, 31 March 2010

Should Germany increase its spending on other Eurozone exports to help ease the region’s imbalances? This column argues that telling Germany to reduce its current account surplus is unwarranted. With an ageing population, Germany would be well-advised to save for a couple of decades – as would the rest of Europe.

Johanna Mollerstrom, 27 March 2010

Global imbalances are seen by some as contributing to the global crisis – but what caused the imbalances themselves? This column argues that the popular savings glut hypothesis appears to be at odds with the data. Instead a behavioural explanation based around asset-price bubbles is a much better match for the key facts.

Yiping Huang, 26 March 2010

Should the US follow Paul Krugman’s advice and use protectionist policies against China’s exports to encourage a revaluation of its currency? This column argues against this idea. Far from saving jobs, a revaluation of the Chinese currency might even cut global economic growth by 1.5%.

Robert Clark, Nicolas Vincent, Jean Boivin, 06 March 2010

How much of a change in exchange rates is required to redress global imbalances? This column presents new evidence from online bookstores suggesting that neither shoppers nor retailers react to price differences across borders. This implies that realignment of cross-country consumption levels may require large and persistent exchange rate changes.

Ari Aisen, Dalibor Eterovic, 26 February 2010

What will happen to the global imbalances that many argue caused the global financial crisis? This column suggests that, while both surplus and deficits countries may make adjustments, emerging markets that have so far been on the sidelines of the action and outside the core discussion of global imbalances could start to absorb the excess liquidity.

Richard Olsen, 19 February 2010

Many economists have pointed to China’s exchange rate policy as a cause for global economic instability. This column argues that an offshore market for the renminbi will provide a dynamic and objective benchmark from which to assess the value of China’s currency and to exert pressure to float its exchange rate.

Mohamed Ariff, 19 February 2010

China’s exchange rate policy has implications for global trade and particularly other East Asian nations. This column argues that, given China’s fixation on the dollar peg, countries such as Thailand and Malaysia may have no choice but to peg their currencies to China’s yuan.

Ashoka Mody, Franziska Ohnsorge, 17 February 2010

Just how important is consumption for growth? This column suggests that consumption trends in the G7 economies have significant short-term and long-term implications for global growth and global imbalances. For sustained rebalancing of the global economy, however, investment behaviour may be more important.

Arvind Subramanian, 11 February 2010

What is the consequence of China’s exchange rate policy? This column argues that focusing on global imbalances clouds the real costs, and that China’s exchange rate regime is a mercantilist trade policy whose costs are mainly borne by other developing and emerging market countries.

Shang-Jin Wei, 06 February 2010

What is the connection between China’s one-child policy and its savings glut? This column provides a pioneering explanation. China’s surplus of men has produced a highly competitive marriage market, driving up China’s savings rate and, therefore, global imbalances.

Ricardo Caballero, 14 January 2010

Global imbalances have been suggested as the root cause of the global crisis. This column argues that another imbalance is the guilty party. The entire world had an insatiable demand for safe debt instruments that put an enormous pressure on the US financial system and its incentives. This structural problem can be alleviated if governments around the world explicitly absorb a larger share of the systemic risk.

Dani Rodrik, 17 December 2009

Policymakers blame the undervalued RMB for the global imbalances. Here one of the world’s leading development economists argues that the undervalued currency boosts China’s growth, and this, in turn, is good for the world’s recovery and the alleviation of poverty. China could maintain its growth without trade imbalances if it could introduce industrial subsidies to offset a rising yuan. It is better to subsidise tradables directly than to subsidise them indirectly through the exchange rate. This may run afoul of WTO rules, but that doesn’t diminish the economic case for the policy.

Helmut Reisen, 17 December 2009

Must China let its exchange rate appreciate to reduce global imbalances? This column says the appropriate yardstick to measure currency undervaluation is based on the Balassa-Samuelson effect. That measure says the renminbi is undervalued by only 12%. A gradual renminbi appreciation will be sustained only if Chinese corporate and public savings are lowered.

Eduardo Borensztein, Olivier Jeanne, Damiano Sandri, 15 December 2009

Accumulating large foreign exchange reserves is a costly insurance strategy for developing countries. This column says that commodity-exporting countries might do better by hedging their risk with financial instruments, thereby reducing the need to hold precautionary reserves. Yet few do so.

Richard Baldwin, Daria Taglioni, 27 November 2009

The global crisis has been accompanied by an unprecedented collapse in world trade driven by an unusual and globally synchronised drop in demand. That decline has rapidly improved global imbalances, since the gap between exports and imports ineluctably falls at the same pace as the underlying export and import flows. As import and export growth resume, large global imbalances will return unless both surplus and deficit economies undergo structural changes.

Leonardo Iacovone, Veronika Zavacka, 27 November 2009

Was the global credit crunch a cause of the great trade collapse? This chapter addresses this question by drawing on evidence from 23 historical banking crises. It shows that export growth was particularly slow in sectors that were particularly reliant on external finance (e.g. electric machinery). The findings suggest how credit problems may have played a role in today’s global crisis. The historical findings show that negative demand shocks have amplified negative effects on exports when teamed with a banking crisis, with this interaction being especially important in durable goods industries. The same combination of factors (financial constraints coupled with a demand slump) – but this time it is operating on a vastly larger scale – may have been central to the great trade collapse.


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