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Global Fiscal Adjustment and Trade Rebalancing

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  • Warwick J. McKibbin
  • Andrew B. Stoeckel
  • YingYing Lu

Abstract

type="main" xml:id="twec12185-abs-0001"> The emergence of substantial fiscal deficits and a large build up of government debt in major advanced economies will inevitably lead to a period of fiscal consolidation in coming years. In an earlier paper, Asian Economic Papers, 9, 2010 and 54, explored the effects of this fiscal adjustment in advanced economies on the global economic outlook. This paper focuses on the differences between the impacts of fiscal policy in advanced versus emerging economies. In particular, the need for more fiscal spending on infrastructure in emerging economies and the need for fiscal consolidation in advanced economies leads naturally to the question of what this asymmetric fiscal adjustment might do to global trade balances as well as global economic growth over the coming decades. The adjustment needed in both regions is substantial, and the asymmetry of the adjustment implies important consequences for trade and capital flows between regions as well as asset price adjustments within and between regions.

Suggested Citation

  • Warwick J. McKibbin & Andrew B. Stoeckel & YingYing Lu, 2014. "Global Fiscal Adjustment and Trade Rebalancing," The World Economy, Wiley Blackwell, vol. 37(7), pages 892-922, July.
    • Handle: RePEc:bla:worlde:v:37:y:2014:i:7:p:892-922
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    File URL: http://hdl.handle.net/10.1111/twec.2014.37.issue-7
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    Cited by:

    1. Grace Taylor & Rod Tyers, 2017. "Secular Stagnation: Determinants and Consequences for Australia," The Economic Record, The Economic Society of Australia, vol. 93(303), pages 615-650, December.
    2. Justin Yifu Lin & Doerte Doemeland, 2012. "Beyond Keynesianism: Global Infrastructure Investments In Times Of Crisis," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-29.
    3. Ifrim Mihaela, 2015. "Post-Crisis Fiscal Dilemmas In Romania," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 185-189, August.
    4. Beniamino Moro, 2013. "The Run On Repo and the Liquidity Shortage Problems of the Current Global Financial Crisis: Europe vs. The US," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 2(1), pages 41-77, January.
    5. Roshen Fernando, 2020. "Global impact of loss of confidence in Asian emerging markets," The World Economy, Wiley Blackwell, vol. 43(7), pages 1907-1927, July.
    6. Soyoung Kim & Jong‐Wha Lee & Warwick J. McKibbin, 2018. "Asia's rebalancing and growth," The World Economy, Wiley Blackwell, vol. 41(10), pages 2709-2731, October.
    7. Mansur, Alfan, 2014. "The Impacts of the United States Fiscal Deficit Reduction to the World Economy," MPRA Paper 93967, University Library of Munich, Germany, revised 20 Sep 2014.

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