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Global Imbalances, the Financial Crisis and the International Monetary System

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  • Ignazio Visco

Abstract

Even though the proximate causes of the crisis lie in previous financial excesses, the extent to which these have developed owes much to fundamental sources of vulnerability present in the global macroeconomic environment. However, imbalances and asset price misalignments went on basically unchecked, reflecting a climate of general macroeconomic optimism and the confidence in the ability of policymakers to cope with critical conditions in financial markets. The limits of the existing policy set-up, the main challenges ahead and the importance of rebalancing global demand in order to achieve a more sustainable pattern of economic growth at the world level are examined in this article. The risks of disorderly exchange rate movements and possible implications for the international monetary system are considered, and the exit from the exceptional monetary and fiscal stimulus currently in place are discussed, with the view that while supporting the recovery care should be taken not to create new sources of financial instability.

Suggested Citation

  • Ignazio Visco, 2010. "Global Imbalances, the Financial Crisis and the International Monetary System," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(1), pages 69-82, January.
  • Handle: RePEc:wej:wldecn:405
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    Cited by:

    1. Catte, Pietro & Cova, Pietro & Pagano, Patrizio & Visco, Ignazio, 2011. "The role of macroeconomic policies in the global crisis," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 787-803.
    2. Yap, Josef T., 2011. "The Political Economy of Reducing the US Dollar’s Role as a Global Reserve Currency," ADBI Working Papers 302, Asian Development Bank Institute.
    3. Dariusz Urban, 2011. "Macroeconomic Considerations and Motives of Sovereign Wealth Funds Activity," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(2), June.
    4. Pietro Catte & Pietro Cova & Patrizio Pagano & Ignazio Visco, 2011. "Macroeconomic Policies and the Roots of the Global Crisis," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.

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