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Global Imbalances

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  • Massimiliano Pisani
  • Pietro Cova
  • Alessandro Rebucci

Abstract

This paper investigates the role played by emerging Asia in the emergence and evolution of the global trade imbalances. Based on simulations in a general equilibrium model of the world economy, we find that a productivity slowdown in the non-tradable sector of these economies in the second half of the 1990s fits regional macroeconomic developments relatively well, but has limited spillover effect to the United States trade balance. In contrast, an increase in the desired level of emerging Asia net foreign assets starting in 2001 not only fits regional developments relatively well, but also has a significant spillover effect to the United States.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/64.

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Length: 40
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/64

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Keywords: Productivity; Payments imbalances; Emerging markets; Balance of payments deficits; Foreign exchange reserves; Economic models; exchange rate; tradable goods; intermediate goods; terms of trade; elasticity of substitution; world economy; real exchange rate; effective exchange rate; domestic firms; exchange rates; real effective exchange rate; trade imbalances; nontradable goods; imported goods; investment goods; domestic goods; trade deficit; foreign exchange; current account balance; domestic consumption; intermediate inputs; import price; global trade; international trade; equilibrium model; wholesale price; perfect competition; export markets; global merchandise; net exports; merchandise trade; current account deficit; domestic demand; bilateral real exchange rate; import demand; exchange rate regime; importing country; import substitution; domestic market; external position; domestic prices; constant elasticity of substitution; unit of labor; trading partners; transmission of technology; effective exchange rates; investment flows; exchange rate adjustments; exporting countries; real exchange rates; exchange rate changes; exchange reserves; price discrimination; national markets; real exchange rate depreciation; balance of payments; global scale; world output; exchange rate appreciation; asset market; exchange rate depreciation; open economies;

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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. 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.
  3. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2005. "Smooth landing or crash? model based scenarios of global current account rebalancing," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  4. Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers.
  5. Reuven Glick & Kenneth Rogoff, 1992. "Global versus country-specific productivity shocks and the current account," Working Papers in Applied Economic Theory 92-06, Federal Reserve Bank of San Francisco.
  6. Fogli, Alessandra & Perri, Fabrizio, 2006. "The 'Great Moderation' and the US External Imbalance," CEPR Discussion Papers 6010, C.E.P.R. Discussion Papers.
  7. Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2006. "Productivity, external balance and exchange rates: evidence on the transmission mechanism among G7 countries," Economics Working Papers ECO2006/39, European University Institute.
  8. Ricardo J Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An equilibrum model of "global imbalances" and low interest rates," BIS Working Papers 222, Bank for International Settlements.
  9. Bems, Rudolfs & Dedola, Luca & Smets, Frank, 2007. "US Imbalances: The Role of Technology and Policy," CEPR Discussion Papers 6110, C.E.P.R. Discussion Papers.
  10. 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.
  11. Sebastian Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," NBER Working Papers 12904, National Bureau of Economic Research, Inc.
  12. Sebastián Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," Working Papers Central Bank of Chile 440, Central Bank of Chile.
  13. Gordon, Robert J, 2004. "Five Puzzles in the Behaviour of Productivity, Investment and Innovation," CEPR Discussion Papers 4414, C.E.P.R. Discussion Papers.
  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. Gomes, Sandra & Jacquinot, Pascal & Pisani, Massimiliano, 2010. "The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area," Working Paper Series 1195, European Central Bank.
  2. Fabrizio Coricelli & Andreas Wörgötter, 2012. "Structural Change and the Current Account: The Case of Germany," OECD Economics Department Working Papers 940, OECD Publishing.
  3. Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis : a multivariate Markov-Switching analysis," Economics Papers from University Paris Dauphine 123456789/8773, Paris Dauphine University.
  4. Agnès Bénassy-Quéré & Benjamin Carton & Ludovic Gauvin, 2011. "Rebalancing Growth in China: An International Perspective," Working Papers 2011-08, CEPII research center.
  5. 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.
  6. 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.
  7. Alessandro Barattieri, 2011. "Comparative Advantage, Service Trade, and Global Imbalances," Cahiers de recherche 1134, CIRPEE.

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