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Global imbalances and foreign asset expansion by developing-economy central banks

In: Are central bank balance sheets in Asia too large?

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  • Joseph Gagnon

Abstract

Over the past 10 years, central banks and governments throughout the developing world have accumulated foreign exchange reserves and other official assets at an unprecedented rate. This paper shows that this official asset accumulation has driven a substantial portion of the recent large global current account imbalances. These net official capital flows have become large relative to the size of the industrial economies, and they are a significant factor contributing to the weakness of the economic recovery in the major industrial economies.

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This chapter was published in:

  • Bank for International Settlements, 2012. "Are central bank balance sheets in Asia too large?," BIS Papers, Bank for International Settlements, number 66, 6.
    This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 66-10.

    Handle: RePEc:bis:bisbpc:66-10

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    References

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    1. Menzie D. Chinn & Barry Eichengreen & Hiro Ito, 2011. "A Forensic Analysis of Global Imbalances," NBER Working Papers 17513, National Bureau of Economic Research, Inc.
    2. Calista Cheung & Davide Furceri & Elena Rusticelli, 2010. "Structural and Cyclical Factors behind Current-Account Balances," OECD Economics Department Working Papers 775, OECD Publishing.
    3. Philip R. Lane & Gian Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities,1970–2004," The Institute for International Integration Studies Discussion Paper Series iiisdp126, IIIS.
    4. John C. Williams, 2011. "The economic outlook," Speech 84, Federal Reserve Bank of San Francisco.
    5. Joseph E. Gagnon, 2011. "Current Account Imbalances Coming Back," Working Paper Series WP11-1, Peterson Institute for International Economics.
    6. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
    7. International Monetary Fund, 2010. "Fiscal Policy and the Current Account," IMF Working Papers 10/121, International Monetary Fund.
    8. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc.
    9. Menzie D. Chinn & Hiro Ito, 2008. "Global Current Account Imbalances: American Fiscal Policy versus East Asian Savings," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 479-498, 08.
    10. Pietro Cova & Massimiliano Pisani & Alessandro Rebucci, 2009. "Global Imbalances: The Role of Emerging Asia," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 716-733, 09.
    11. David Cook & James Yetman, 2012. "Expanding central bank balance sheets in emerging Asia: a compendium of risk and some evidence," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 30-75 Bank for International Settlements.
    12. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments," IMF Occasional Papers 261, International Monetary Fund.
    13. Jonathan David Ostry & Atish R. Ghosh & Karl Friedrich Habermeier & Marcos Chamon & Mahvash Saeed Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows," IMF Staff Position Notes 2010/04, International Monetary Fund.
    14. Edwin M. Truman, 2011. "Sovereign Wealth Funds: Is Asia Different?," Working Paper Series WP11-12, Peterson Institute for International Economics.
    15. Adams, Charles & Park, Donghyun, 2009. "Causes and Consequences of Global Imbalances: Perspective from Developing Asia," ADB Economics Working Paper Series 157, Asian Development Bank.
    16. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Olivier Jeanne, 2012. "The Dollar and its Discontents," NBER Working Papers 18143, National Bureau of Economic Research, Inc.
    2. Steiner, Andreas, 2014. "Current account balance and dollar standard: Exploring the linkages," Journal of International Money and Finance, Elsevier, vol. 41(C), pages 65-94.
    3. Tamim Bayoumi & Christian Saborowski, 2012. "Accounting for Reserves," IMF Working Papers 12/302, International Monetary Fund.

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