Global Imbalances, Under-Consumption and Over-Borrowing: The State of the World Economy and Future Policies
This paper addresses the question of whether growth convergence can be sustained in the global economy without compromising welfare and without causing major crises. It employs a simplified stock-flow analytical framework to examine the proposition that the pace and pattern of global growth is conditioned by 'under-consumption' in some regions of the world and 'over-borrowing' in other regions. A baseline projection using the Cambridge-Alphametrics model (CAM) illustrates consequences of resumed global imbalances after the 2008-2009 crisis. An alternative scenario exemplifies the case in which China and India shift towards internal income redistribution and domestic demand orientated policies and suggests that this will not be sufficient to correct global imbalances or induce improved growth rates in other developing regions. Finally a more ambitious development perspective is simulated. Such a scenario requires internationally-coordinated policy efforts, with greater role for governments in the management of demand, income distribution and environmental sustainability, as well as measures to reduce instability of exchange rate and commodity markets.
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.:
- Codrina Rada & Lance Taylor, 2004. "Empty Sources of Growth Accounting, and Empirical Replacements à la Kaldor with Some Beef," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 5(3), pages 45-74.
- Claudio H. Dos Santos & Gennaro Zezza, 2007. "A Simplified 'Benchmark” Stock-flow Consistent (SFC) Post-Keynesian Growth Model," Economics Working Paper Archive wp_503, Levy Economics Institute.
- Harcourt,G. C., 1972.
"Some Cambridge Controversies in the Theory of Capital,"
Cambridge University Press, number 9780521096720, December.
- Harcourt, G C, 1969. "Some Cambridge Controversies in the Theory of Capital," Journal of Economic Literature, American Economic Association, vol. 7(2), pages 369-405, June.
- Robert A. Blecker, 1998. "International Capital Mobility, Macroeconomic Imbalances, and the Risk of Global Contraction," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1998-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School, revised Nov 2000.
- Paul Davidson, 1996. "Reality and Economic Theory," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 479-508, July.
- Robinson,Joan, 1979. "Aspects of Development and Underdevelopment," Cambridge Books, Cambridge University Press, number 9780521295895, December.
- von Arnim, Rudiger, 2009. "Recession and rebalancing: How the housing and credit crises will impact US real activity," Journal of Policy Modeling, Elsevier, vol. 31(3), pages 309-324, May.
- Nelson Barbosa-Filho & Codrina Rada & Lance Taylor & Luca Zamparelli, 2006. "Fiscal, Foreign, And Private Net Borrowing: Widely Accepted Theories Don’T Closely Fit The Facts," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 177, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Edwin M. Truman, 2005. "Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances," Working Paper Series WP05-6, Peterson Institute for International Economics. Full references (including those not matched with items on IDEAS)