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Global Imbalances

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Author Info

  • Alessandro Rebucci
  • Nicoletta Batini
  • Pietro Cova
  • Massimiliano Pisani

Abstract

This paper investigates the role played by total factor productivity (TFP) in the tradable and nontradable sectors of the United States, the euro area, and Japan in the emergence and evolution of today''s global trade imbalances. Simulation results based on a dynamic general equilibrium model of the world economy, and using the EU KLEMS database, indicate that TFP developments in these economies can account for a significant fraction of the total deterioration in the U.S. trade balance since 1999, as well as account for some the surpluses in the euro area and Japan. Differences in TFP developments across sectors can also partially explain the evolution of the real effective value of the U.S. dollar during this period.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/63.

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Length: 39
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/63

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Related research

Keywords: Productivity; Exchange rates; Payments imbalances; European Union; Developed countries; Economic models; tradable goods; elasticity of substitution; intermediate goods; terms of trade; world economy; total factor productivity; trade deficit; nontradable goods; imported goods; trade imbalances; investment goods; intermediate inputs; equilibrium model; global trade; domestic consumption; import demand; domestic goods; import price; business cycle; export markets; wholesale price; real business cycle; world demand; merchandise trade; importing country; global merchandise; perfect competition; private consumption; current account balance; domestic market; international trade; factor demand; unit of labor; constant elasticity of substitution; terms of trade improvement; domestic prices; import substitution; gross domestic product; growth rate; price discrimination; export prices; exchange rate regime; aggregate consumption; real gdp; national markets; trade deficits; open economies; aggregate demand; asset market; domestic demand; exporting countries; oil prices;

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References

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  1. International Monetary Fund, 2007. "Oil Shocks and External Balances," IMF Working Papers 07/110, International Monetary Fund.
  2. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," NBER Working Papers 11996, National Bureau of Economic Research, Inc.
  3. Robert J. Gordon, 2004. "Five Puzzles in the Behavior of Productivity, Investment, and Innovation," NBER Working Papers 10660, National Bureau of Economic Research, Inc.
  4. Alessandra Fogli & Fabrizio Perri, 2006. "The "Great Moderation" and the US External Imbalance," Working Papers CAS_RN_2007_5, Laboratory for Macroeconomic Analysis.
  5. Bems, Rudolfs & Dedola, Luca & Smets, Frank, 2007. "US imbalances: the role of technology and policy," Working Paper Series 0719, European Central Bank.
  6. Benjamin Hunt & Alessandro Rebucci, 2005. "The US Dollar and the Trade Deficit: What Accounts for the Late 1990s?," International Finance, Wiley Blackwell, vol. 8(3), pages 399-434, December.
  7. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2005. "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing," NBER Working Papers 11583, National Bureau of Economic Research, Inc.
  8. Corsetti, Giancarlo & Dedola, Luca & Leduc, Sylvain, 2006. "Productivity, External Balance and Exchange Rates: Evidence on the Transmission Mechanism among G7 Countries," CEPR Discussion Papers 5853, C.E.P.R. Discussion Papers.
  9. Reuven Glick & Kenneth Rogoff, 1993. "Global Versus Country-Specific Productivity Shocks and the Current Acocount," Boston University - Institute for Economic Development 31, Boston University, Institute for Economic Development.
  10. Sebastian Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," NBER Working Papers 12904, National Bureau of Economic Research, Inc.
  11. Nicoletta Batini & Papa N'Diaye & Alessandro Rebucci, 2005. "The domestic and global impact of Japan’s policies for growth," Proceedings, Federal Reserve Bank of San Francisco.
  12. Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers.
  13. Sebastián Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," Working Papers Central Bank of Chile 440, Central Bank of Chile.
  14. 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.
  15. Pietro Cova & Massimiliano Pisani & Nicoletta Batini & Alessandro Rebucci, 2008. "Productivity and Global Imbalances: The Role of Nontradable Total Factor Productivity in Advanced Economies," IMF Staff Papers, Palgrave Macmillan, vol. 55(2), pages 312-325, June.
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Citations

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Cited by:
  1. Bénassy-Quéré, Agnès & Carton, Benjamin & Gauvin, Ludovic, 2013. "China and global rebalancing: A two-country approach," China Economic Review, Elsevier, vol. 26(C), pages 118-139.
  2. Gomes, S. & Jacquinot, P. & Pisani, M., 2012. "The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area," Economic Modelling, Elsevier, vol. 29(5), pages 1686-1714.
  3. Coricelli, Fabrizio & Ravasan, Farshad R & Wörgötter, Andreas, 2013. "The origins of the German current account surplus: Unbalanced productivity growth and structural change," CEPR Discussion Papers 9527, C.E.P.R. Discussion Papers.
  4. Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis: A multivariate Markov-switching analysis," Economic Modelling, Elsevier, vol. 29(3), pages 943-973.
  5. Alessandro Barattieri, 2011. "Comparative Advantage, Service Trade, and Global Imbalances," Cahiers de recherche 1134, CIRPEE.
  6. Don Nakornthab & Jittapa Prachuabmoh & Tientip Subhanij & Kessarin Tansuwanarat, 2009. "Challenges in the New Global Macroeconomic and Financial Environment," Working Papers 2009-03, Economic Research Department, Bank of Thailand.
  7. Fabrizio Coricelli & Andreas Wörgötter, 2012. "Structural Change and the Current Account: The Case of Germany," OECD Economics Department Working Papers 940, OECD Publishing.

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