Menzie Chinn, Hiro Ito, 21 November 2019

Global imbalances have reappeared, somewhat transformed, and relocated. Using data from developing and industrialised countries covering 1972-2016, this column shows that fiscal factors, rather than savings glut variables, have accounted for a noticeable share of the recent variation in imbalances, including in the US and Germany. The contribution of demographic factors is large for industrialised countries but not for emerging markets. Net official flows shape global imbalances in both developing and industrialised countries. 

Emine Boz, Nan Li, Hongrui Zhang, 28 February 2019

It is commonly observed that economies specialising in sectors, such as services, that face relatively high trade costs tend to run current account deficits, while those specialising in more easily tradable sectors tend to run surpluses. This column tests the causality of this observation by constructing a measure of effective trade costs. Results show that although higher effective exporting costs are associated with lower current account balances, the impact of those costs is quantitatively limited. The findings suggest that the contribution of trade costs to observed global imbalances has been modest.

Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 27 October 2016

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. 

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