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The Next Tsunami? Preparing for a Disorderly Correction of Global Imbalances

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  • Barry Eichengreen

    (Department of Economics, University of California, 549 Evans Hall Berkeley, CA 94720-3880, USA)

Abstract

This paper makes the case that Asian countries should start preparing now for a disorderly correction of global imbalances. It points to six measures they should take: allowing their currencies to appreciate against the dollar as a way of limiting their dependence on the U.S. market; accelerating regional trade initiatives to support their export sectors; using fiscal policy to sustain domestic demand; developing their financial markets; allowing intraregional exchange rates to move to accommodate differences in the impact of the shock and the scope for offsetting action; and enhancing regional cooperation to address free-rider and firstmover problems that might otherwise discourage these adjustments. (c) 2006 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Barry Eichengreen, 2006. "The Next Tsunami? Preparing for a Disorderly Correction of Global Imbalances," Asian Economic Papers, MIT Press, vol. 5(2), pages 1-6, Spring/Su.
  • Handle: RePEc:tpr:asiaec:v:5:y:2006:i:2:p:1-6
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