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Global and European Imbalances:A critical review

Listed author(s):
  • Carlos A. Carrasco

    (University of the Basque Country (EHU/UPV))

  • Felipe Serrano

    (University of the Basque Country (EHU/UPV))

In this paper, we survey and analyse the economic literature on global and European imbalances and their connection with the global financial crisis. In the years preceding the crisis, there was increased attention to the existence of large current account imbalances among large economies worldwide. Research and policy papers divided into two positions regarding these imbalances. Some authors viewed global imbalances as part of a new equilibrium in the international financial system. Others urged policy intervention to reduce these imbalances. The Great Recession revived the debate over global imbalances and their influence on the gestation of the crisis. However, more recent work has clarified the relationship between the crisis and global imbalances, emphasising the roots of the crisis in financial liberalisation and the fragility of the international financial system. From this perspective, we highlight the need for deeper analysis of gross capital flows and the need to monitor credit levels as measures to prevent future financial crises.

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Paper provided by Financialisation, Economy, Society & Sustainable Development (FESSUD) Project in its series Working papers with number wpaper42.

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Length: 36 pages
Date of creation: 01 Jul 2014
Handle: RePEc:fes:wpaper:wpaper42
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FESSUD Co-ordinator (Malcolm Sawyer) Leeds University Business School Maurice Keyworth Buidling Leeds LS2 9JT

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