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The coming unwinding of global imbalances and what it means for India

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  • Vivekanand Jayakumar

Abstract

Large US current account deficits, financed mainly by East Asian countries and some OPEC members, gave rise to significant global imbalances in recent years. This paper argues that such imbalances are unsustainable going forward. Faced with lower asset valuations and tighter credit access, Americans are likely to curtail consumption and increase personal saving. The resulting decline in US imports will significantly impact export-driven Asian countries. Diminished foreign desire to finance excessive American borrowing, along with rising concerns over dollar's reserve status, will also affect global imbalances. The paper highlights the relevance of the evolving global economic landscape to India.

Suggested Citation

  • Vivekanand Jayakumar, 2010. "The coming unwinding of global imbalances and what it means for India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(2), pages 189-212.
    • Handle: RePEc:taf:macfem:v:3:y:2010:i:2:p:189-212
    DOI: 10.1080/17520843.2010.498132
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    References listed on IDEAS

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