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The role of China in global external imbalances: Some further evidence

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  • Bagnai, Alberto

Abstract

The large imbalances in the current account positions of the US and the Asian economies are seen by most scholars as the main threat to an orderly development of the global economy. While the opinions on the most likely evolution of these imbalances and on their sustainability do differ across observers, ranging from catastrophic to rather optimistic views, almost all agree that some adjustment will have to take place in the near future, and that this adjustment will involve, among other things, a rebalancing of saving and demand across the globe. As an outcome of this process, China shall increasingly supplement the US in the role of engine of global economic growth. Using a global macroeconometric model, we examine the impact on this adjustment process of a number of shocks originating in the Chinese economy, including an expansionary fiscal shock, a revaluation of the renmimbi, and an expansion of internal demand following an acceleration in the process of rural-urban migration. The analysis focuses on two related points: how will these shocks affect the medium-run evolution of transpacific imbalances, and what will their impact be on global economic growth. The simulations allow us to track the impact of these shocks on the different poles of the world economy, and to assess their relative contribution to the task of reducing global imbalances without interrupting global economic growth.

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Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 20 (2009)
Issue (Month): 3 (September)
Pages: 508-526

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Handle: RePEc:eee:chieco:v:20:y:2009:i:3:p:508-526

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Web page: http://www.elsevier.com/locate/chieco

Related research

Keywords: Current account adjustment Trade simulations Migration Fiscal policy Exchange rate policy;

References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Cesena: Goofy e Qui, Quo e Qua
    by Alberto Bagnai in Goofynomics on 2012-07-04 23:03:00
  2. Facciamo i conti
    by Alberto Bagnai in Goofynomics on 2014-02-25 00:03:00
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Cited by:
  1. Luigi Bonatti & Andrea Fracasso, 2009. "The evolution of the Sino-American Co-dependency: modelling a regime switch in a growth setting," Department of Economics Working Papers 0905, Department of Economics, University of Trento, Italia.
  2. Du, Yuxin & Teixeira, Aurora A.C., 2012. "A bibliometric account of Chinese economics research through the lens of the China Economic Review," China Economic Review, Elsevier, vol. 23(4), pages 743-762.
  3. Agnès Bénassy-Quéré & Benjamin Carton & Ludovic Gauvin, 2011. "Rebalancing Growth in China: An International Perspective," Working Papers 2011-08, CEPII research center.
  4. Gordon Menzies & Xiaolin Xiao, 2012. "Non-traded Factor Appreciation in China," Working Paper Series 2, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

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