The role of corporate saving in global rebalancing

Philippe Bacchetta, Kenza Benhima 24 August 2014

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The increase in global imbalances in the last decade posed a theoretical challenge for international macroeconomics. Why did some less-developed countries with a higher need for capital, like China, lend to richer countries? The inconsistency of standard open-economy dynamic models with actual global capital flows had already been stressed before (e.g. by Lucas 1990), but the sensitivity to this issue became more acute with increasing global imbalances. This stimulated the development of several alternative theoretical frameworks.

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Topics:  International finance International trade

Tags:  interest rates, global imbalances, capital flows, saving, global crisis, credit constraints, savings glut, zero lower bound, corporate saving, global rebalancing

TARGET balances, Bretton Woods, and the Great Depression

Michael Bordo 21 March 2014

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During the Eurozone crisis, an analogy was made between the events in Europe between 2007 and 2012 and the collapse of the Bretton Woods System between 1968 and 1971. There has been a build-up of TARGET liabilities since 2007 by some central banks (notably Greece, Ireland, Portugal, and Spain, or the ‘GIPS’), and of TARGET assets by Germany and others.

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Topics:  Economic history International finance

Tags:  ECB, eurozone, euro, global imbalances, Central Banks, financial crisis, Great Depression, Eurosystem, Eurozone crisis, Bretton Woods, TARGET

Tracking the causes of Eurozone external imbalances: New evidence

Jose Luis Diaz Sanchez, Aristomene Varoudakis 06 February 2014

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The Eurozone sovereign debt crisis, triggered by the 2008–09 global financial crisis, exposed macroeconomic imbalances in member countries that had accrued gradually following the advent of the euro in 1999. The growing current-account deficits in the Eurozone periphery and surpluses in the core were a main symptom of these imbalances (Figure 1).1 These patterns of intra-Eurozone current-account imbalances led to the accumulation of large external debts in the Eurozone periphery, matched by growing claims held by commercial banks in the core.

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Topics:  International finance

Tags:  competitiveness, eurozone, global imbalances, global financial crisis, European sovereign debt crisis

China's growth, stability, and use of international reserves

Joshua Aizenman, Yothin Jinjarak, Nancy P. Marion 05 January 2014

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Pre-crisis imbalances

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Topics:  Global crisis

Tags:  US, global imbalances, China, global crisis

Global and Eurozone imbalances: A question of civic capital?

Sascha Bützer, Christina Jordan, Livio Stracca 23 November 2013

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Macroeconomic imbalances have been the subject of much debate in recent years, and are still in the spotlight. Before and during the financial crisis, a lot of attention was devoted to global imbalances – in particular to the persistent current-account deficits of some countries (such as the US) and the persistent surpluses of others (such as China). With the advent of the Eurozone sovereign-debt crisis, the attention has shifted to imbalances within the Eurozone.

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Topics:  Europe's nations and regions International trade

Tags:  eurozone, global imbalances, trust, World Values Survey, civic capital

International cooperation and central banks

Harold James 08 October 2013

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Tackling the aftermath of a major financial crisis, the origins of which lie in ‘global imbalances’ and whose transmission mechanisms are cross-national, seems prima facie to demand more substantial and institutionalised cooperation. However, in the five years since the collapse of Lehman Brothers, visions of what central banks can and should do have changed profoundly. In particular, the demand that they should play a much more vigorous and preemptive role in financial supervision has had made them more nationally focused and in consequence less prone to cooperate.

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Topics:  Global crisis International finance

Tags:  monetary policy, global imbalances, Central Banks, global crisis, policy coordination, Eurozone crisis

Value-added exchange rates

Rudolfs Bems, Robert Johnson 06 December 2012

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Real effective exchange rates (REERs) are widely used to gauge competitiveness. Yet conventional REERs, based on gross trade flows and consumer price indexes (CPIs), are not well suited to that role when imports are used to produce exports – i.e., with vertical specialisation in trade.

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Topics:  Competition policy Global economy International trade

Tags:  competitiveness, Germany, global imbalances, China, globalisation, trade, supply chains, iPhone

Global trade in services: Fear, facts, and offshoring

J. Bradford Jensen 19 November 2012

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Should the US, or indeed the EU, Japan, Canada, or Australia, fear increased trade in services? As the ‘Really Good Friends of Services’ discussions gain momentum in Geneva, it seems an important time to ask1.

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Topics:  International trade

Tags:  global imbalances, WTO, international trade, protectionism

Slow but steady? External adjustment within the Eurozone starts working

Marco Buti, Alessandro Turrini 12 November 2012

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There is a general perception in the policy debate that Eurozone imbalances are not adjusting. Deficit countries are stuck in an unsustainable equilibrium and surplus countries’ growth is mostly based on exports. The most pressing concern is that a symmetric evolution of competitiveness between surplus and deficit countries is needed for rebalancing to be complete and durable. This will be something that is hard to achieve, most notably because the competitive disinflation processes that are required in deficit countries are painful.

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Topics:  EU policies Europe's nations and regions Financial markets Labour markets

Tags:  global imbalances, financial crisis, Greece, Eurozone crisis, banking union

Global Rebalancing 2.0

Linda Lim, Ronald U Mendoza 24 September 2012

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The discussion on global rebalancing is at a crossroads, and much of what will shape policy options moving forward will have to be taken up in roundtables that include more countries than the two usual suspects, China and the US.

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Topics:  Global economy

Tags:  US, global imbalances, China

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