Caroline Freund, 27 November 2009

Previous global trade collapses provide insight into why trade has dropped so dramatically this time – and the future of trade and global imbalances. The findings suggest that the real trade drop in 2009 is likely to exceed 15%, but it should rebound very rapidly. Global imbalances have also moderated in crises, but this tends to be temporary unless the downturn alters investment attitudes and/or government policies. Today, governments should use the transition to install policies that will ensure that imbalances do not revert to pre-crisis trends – policies to encourage saving in the US and prevent an overvalued dollar, and policies to stimulate spending in China and other parts of Asia and prevent undervalued currencies

Jeffry Frieden, 27 November 2009

Re-balancing global trade will be difficult, generating substantial protectionist pressures. To manage these pressures, governments must maintain domestic political support for an open world economy. This in turn requires flexible responses to national political pressures. Rigid, unrealistic insistence on exemplary behaviour will be less fruitful than efforts at modest, feasible cooperation on trade policies. Above all, governments singly and jointly need to address the underlying macroeconomic causes of the imbalances to prevent serious trade confrontations.

Richard Baldwin, Daria Taglioni, 14 November 2009

Global imbalances are shrinking at a fabulous rate. This column argues that these improvements are mostly illusory – the transitory side-effect of the greatest trade collapse the world has ever seen. A global recovery will almost surely return the US, Germany, China and others to their old paths.

William Cline, John Williamson, 18 June 2009

Large external imbalances persist and remain a significant concern. This column estimates a set of medium-run “fundamental equilibrium exchange rates” compatible with moderating external imbalances that might guide international policy efforts. It says that the US dollar is overvalued and the Chinese renminbi is undervalued.

Daniel Gros, 11 June 2009

Why should the existence of current account “imbalances” provoke the biggest financial crisis in living history? This column says one has to take into account the way current account deficits are financed and how flow imbalances accumulated into large stock disequilibria. It explains the securitisation leading to the crisis as the product of a maturity mismatch between foreign savers seeking short-term assets and excess supply of long-term US mortgage debt.

Christian Broda , Piero Ghezzi, Eduardo Levy Yeyati, 22 May 2009

In a new financial landscape in which leverage is limited by worldwide regulation and the gradual digestion of toxic assets will weigh on bank’s balance sheets, the US will face tougher terms to finance its external imbalance. Perfectly at odds with the global imbalance premonitions of the early 2000s, the dollar’s weakness will likely be the best gauge of the turnaround of the global crisis.

Jean Imbs, Isabelle Mejean, 23 March 2009

Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data and substantially larger in disaggregated studies. This column reconciles those facts by taking into account the heterogeneity of goods. A better estimate of the aggregate elasticity of substitution is twice the conventional value – suggesting that the US dollar need not depreciate as much as usually thought to reduce the US current account deficit.

Barry Eichengreen, 02 March 2009

The G20 replaced the G7, but it has its own problems of legitimacy, size, and inconsistence with other governance vehicles. This column argues that the G20 membership should be re-jigged and the G20’s four separate work programmes should be merged to foster a “Grand Bargain”. Most of all, the G20 needs a vision.

Gian Maria Milesi-Ferretti, 12 December 2008

This column argues that the current combination of a weak dollar and a large current account deficit is primarily explained by long lags in the relation between US external accounts and the real effective exchange rate, high oil prices, as well as the "return differential” between US holdings of assets overseas and foreign holdings of US assets. An unwinding of the recent dollar appreciation to the level reached by the U.S. currency over the summer of 2008 could be consistent with a significant reduction in the US current account deficit over the next few years.

Roger Ferguson, Philipp Hartmann, Fabio Panetta, Richard Portes, 15 November 2007

The ninth CEPR/ICMB Geneva Report on the World Economy examines the main threats to international financial stability, focusing on the implications of the major changes that have occurred in the global financial system in the past two decades.

Richard Portes, 15 November 2007

The global financial system shows signs of stress – turmoil, not a systemic financial crisis. Risk is being repriced and the unwinding will take some time. Now is the time to think carefully about longer-term reforms needed to improve the stability of the international financial system.

Philip Lane, Gian Maria Milesi-Ferretti, 28 May 2007

Europe is not a major contributor to global macro imbalances but it could be deeply affected by sudden shifts. Today’s imbalances are quite unlike those during the previous episode in the 1980s.


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