IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Global imbalances: the perspective of the Bank of England

  • King, M.
Registered author(s):

    In 2009, demand in the world’s major economies fell, relative to its pre-crisis trend, by around USD 2.5 trillion or 5 per cent of GDP. The financial crisis damaged virtually every country. Global imbalances helped to fuel the financial crisis. And today they threaten the sustainability of the recovery in global demand. Global imbalances are a reflection of today’s decentralised international monetary and financial system. All the main players around the world are rationally pursuing their own self interest. But the financial crisis has revealed that what makes sense for each player individually does not always make sense in aggregate. These actions had collective consequences. The main lesson from the crisis is the need to find better ways of ensuring the right collective outcome. Improved financial regulation will help to intermediate the flows associated with global imbalances. But the global economy will remain vulnerable to the risks associated with imbalances if they are not tackled at source. Two principles should underpin the way ahead. First, discussions should focus on the underlying disagreement about the right speed of adjustment to the real pattern of spending and hence the reduction in these imbalances. This discussion should be informed by countries’ ability to follow that path in a sustainable way. Second, many policies, in addition to changes in exchange rates, will be needed to reduce imbalances. If agreement is not reached on these two principles, at best there will be a weak world recovery; at worst, the seeds of the next financial crisis will be sown.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.banque-france.fr/fileadmin/user_upload/banque_de_france/publications/Revue_de_la_stabilite_financiere/etude09_rsf_1102.pdf
    Download Restriction: no

    Article provided by Banque de France in its journal Financial Stability Review.

    Volume (Year): (2011)
    Issue (Month): 15 (February)
    Pages: 73-80

    as
    in new window

    Handle: RePEc:bfr:fisrev:2011:15:09
    Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
    Web page: http://www.banque-france.fr/

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
    2. Francis E. Warnock & Veronica Cacdac Warnock, 2006. "International Capital Flows and U.S. Interest Rates," NBER Working Papers 12560, National Bureau of Economic Research, Inc.
    3. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An Equilibrium Model of Global Imbalances and Low Interest Rates," 2006 Meeting Papers 894, Society for Economic Dynamics.
    4. Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
    5. Michael Hutchison & Ilan Noy (Neuberger), 2002. "Sudden stops and the Mexican wave: currency crises, capital flow reversals and output loss in emerging markets," Pacific Basin Working Paper Series 2002-03, Federal Reserve Bank of San Francisco.
    6. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
    7. Carmen M. Reinhart, 2010. "This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises," NBER Working Papers 15815, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bfr:fisrev:2011:15:09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.