A forensic analysis of global imbalances
By: Menzie D. Chinn, Barry Eichengreen, Hiro Ito
Contributors: Eichengreen, Barry J.; Ito, Hiro; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17513; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17513.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We examine whether the behavior of current account balances changed in the years preceding the global crisis of 2008-09, and assess the prospects for global imbalances in the post-crisis period.  Changes in the budget balance are an important factor affecting current account balances for deficit countries such as the U.S.  and the U.K.  The effect of the "saving glut variables" on current account balances has been relatively stable for emerging market countries, suggesting that those factors cannot explain the bulk of their recent current account movements.  We also find the 2006-08 period to constitute a structural break for emerging market countries, and to a lesser extent, for industrialized countries.  We attribute the anomalous behavior of pre-crisis current account balances to stock market performance and real housing appreciation; fiscal procyclicality and the stance of monetary policy do not matter as much.  Household leverage also appears to explain some of the standard model's prediction errors.  Looking forward, U.S., fiscal consolidation alone cannot induce significant deficit reduction.  For China, financial development might help shrink its current account surplus, but only when it is coupled with financial liberalization.  These findings suggest that unless countries implement substantially more policy change, global imbalances are unlikely to disappear"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 1/3/2012.

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