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Global Imbalances and Financial Crisis: Financial Globalization as a Common Cause

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  • Yan Liang
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    Abstract

    Global imbalances and global financial instability are tightly connected and can be traced to a common cause, that is, financial globalization within the current monetary and financial system. The paper argues that financial globalization contributes to global imbalances by impeding real exchange adjustments, inducing export-led growth, and sustaining widening deficits in the financial core country. Meanwhile, financial globalization leads to increasing global financial instability. Without a true international clearing union, the United States is charged with providing global liquidity and managing financial risks; but the failure of the United States to provide these essential banking services ultimately brought about the 2008 global financial crisis.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.

    Volume (Year): 46 (2012)
    Issue (Month): 2 (June)
    Pages: 353-362

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    Handle: RePEc:mes:jeciss:v:46:y:2012:i:2:p:353-362

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    Web page: http://www.mesharpe.com/mall/results1.asp?acr=jei

    Related research

    Keywords: financial crisis; financial globalization; global imbalances;

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    Cited by:
    1. Christian E. Weller & Ghazal Zulfiqar, 2013. "Financial Market Diversity and Macroeconomic Stability," Working Papers wp332, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. David Cayla, 2013. "European Debt Crisis: How a Public Debt Restructuring Can Solve a Private Debt Issue," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 47(2), pages 427-436, June.

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