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Global Rebalancing


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  • Yongzheng Yang
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    While global rebalancing will mainly involve structural realignment among major advanced and emerging market economies, it could have significant impact on low-income countries (LICs). Simulations using a global general equilibrium model show that a more balanced global economy would tend to improve the current account balance in LICs with limited impact on domestic output. However, there could be adverse terms of trade effects on some LICs as the prices of manufactured goods rise. On the other hand, such prices increases could provide an impetus to export diversification in many LICs, raising growth in the long run. The output and terms of trade effects would be significantly amplified if structural adjustment is impeded by factor immobility and other rigidities.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/239.

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    Length: 31
    Date of creation: 01 Oct 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/239

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    Keywords: Consumer goods; Current account balances; Export competitiveness; Export growth; Low-income developing countries; Manufacturing; Price increases; Terms of trade; commodity exporters; manufactured exports; exporters; export expansion; oil exporters; export diversification; commodity prices; trade flows; trading partners; global trade; exchange rate movements; real effective exchange rate; mineral exports; unskilled labor; world market; domestic investment; global trade analysis; labor-intensive exports; current account deficit; bilateral trade; trade deficit; trade effects; terms of trade effects; intermediate inputs; world prices; expansion of exports; export markets; intensive exports; equilibrium model; increased exports; export industries; external shocks; domestic demand; trade effect; net exports; exporting countries; factor markets; bilateral trade flows; export market; exports of minerals; terms of trade improvement; current account balance; oil exporting countries; world economy; commodity exports; import demand; export demand; trade deficits; clothing exports; export opportunities; export patterns; global supply; product differentiation; trade theory; positive externalities; countries ? exports; trade surplus; domestic reforms; trade expansion; employment growth; competitive pressure; constant elasticity of substitution; domestic prices; trade intensity; world price; trade models; elasticity of substitution; increasing trade; economic cooperation; skilled labor; aggregate demand; global welfare; terms of trade shocks; exchange rate regime; fuel exporters; skilled workers; perfect competition; oil exporting; trade shock; foreign trade; import side; real exports; external trade; trade shocks; trade patterns; total exports; trade in services; factor accumulation; dynamic benefits; unskilled workers; increased export; return on capital; regulatory framework; international trade; capital flows;

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    1. Robertson,David (ed.), 1997. "East Asian Trade after the Uruguay Round," Cambridge Books, Cambridge University Press, number 9780521583183, October.
    2. Andrea Goldstein & Nicolas Pinaud & Helmut Reisen, 2006. "The Rise of China and India: What's in it for Africa?," OECD Development Centre Policy Insights 19, OECD Publishing.
    3. Julia Darby & Rodolphe Desbordes & Ian Wooton, 2010. "Does Public Governance always Matter? How Experience of Poor Institutional Quality Influences FDI to the South," CESifo Working Paper Series 3290, CESifo Group Munich.
    4. Engler, Philipp, 2009. "Global rebalancing in a three-country model," Discussion Papers 2009/1, Free University Berlin, School of Business & Economics.
    5. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, October.
    6. Lynge Nielsen, 2011. "Classifications of Countries Basedon their Level of Development," IMF Working Papers 11/31, International Monetary Fund.
    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. Ianchovichina, Elena & Ivanic, Maros & Martin, Will, 2009. "Implications of the growth of China and India for the other Asian giant : Russia," Policy Research Working Paper Series 5075, The World Bank.
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