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The immoderate world economy

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  • Obstfeld, Maurice

Abstract

This paper explores the connection between the much-debated global current account imbalances of the past decade and the U.S. financial collapse. It argues that the connection is an intimate one, although nothing so simple as cause and effect. Instead, the imbalances were a primary symptom of forces that led directly to the financial crash. The paper goes on to examine lessons for reforming the global financial architecture. A major lesson is the need to take a systemic view of global financial stability - a view that analyzes the global economy much as one would analyze an integrated domestic economy.

Suggested Citation

  • Obstfeld, Maurice, 2010. "The immoderate world economy," Journal of International Money and Finance, Elsevier, vol. 29(4), pages 603-614, June.
  • Handle: RePEc:eee:jimfin:v:29:y:2010:i:4:p:603-614
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    References listed on IDEAS

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    1. Aizenman, Joshua & Jinjarak, Yothin, 2009. "Current account patterns and national real estate markets," Journal of Urban Economics, Elsevier, vol. 66(2), pages 75-89, September.
    2. Obstfeld, Maurice, 2009. "Lenders of Last Resort in a Globalized World," CEPR Discussion Papers 7355, C.E.P.R. Discussion Papers.
    3. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
    4. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
    5. Maurice Obstfeld, 2009. "2009 International Conference "Financial System and Monetary Policy Implementation," Keynote Speech, Lenders of Last Resort in a Globalized World," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 27(1), pages 35-52, November.
    6. Stephen Morris & Hyun Song Shin, 2008. "Financial Regulation in a System Context," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 229-274.
    7. Francis E. Warnock & Veronica C. Warnock, 2005. "International Capital Flows and U.S. Interest Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp103, IIIS.
    8. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
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    Cited by:

    1. Ray C. Fair, 2014. "Wealth Effects on World Private Financial Saving," Cowles Foundation Discussion Papers 1974, Cowles Foundation for Research in Economics, Yale University.
    2. Benbouzid, Nadia & Mallick, Sushanta K. & Sousa, Ricardo M., 2017. "Do country-level financial structures explain bank-level CDS spreads?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 48(C), pages 135-145.
    3. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2011. "Current Account Imbalances: can Structural Reforms Help to Reduce Them?," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-44.
    4. Òscar Jordà & Moritz Schularick & Alan M Taylor, 2011. "Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(2), pages 340-378, June.
    5. Aizenman, Joshua & Hutchison, Michael, 2010. "Exchange Market Pressure and Absorption by International Reserves: Emerging Markets and Fear of Reserve Loss During the 2008-09 Crisis," Santa Cruz Department of Economics, Working Paper Series qt8g25f4qs, Department of Economics, UC Santa Cruz.
    6. Anni Huang & Narayan Kundan Kishor, 2019. "The rise of dollar credit in emerging market economies and US monetary policy," The World Economy, Wiley Blackwell, vol. 42(2), pages 530-551, February.
    7. Aizenman, Joshua & Hutchison, Michael M., 2012. "Exchange market pressure and absorption by international reserves: Emerging markets and fear of reserve loss during the 2008–2009 crisis," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1076-1091.
    8. Joshua Aizenman & Michael M. Hutchison, 2012. "International Financial Markets and Transmission of the Crisis: Determinants of Exchange Market Pressure and Absorption by International Reserves," Chapters, in: Maurice Obstfeld & Dongchul Cho & Andrew Mason (ed.), Global Economic Crisis, chapter 4, Edward Elgar Publishing.
    9. Mulder, Christian & Perrelli, Roberto & Rocha, Manuel Duarte, 2012. "External vulnerability, balance sheet effects, and the institutional framework — Lessons from the Asian crisis," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 16-28.

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