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Global Rebalancing; Implications for Low-Income Countries


  • Yongzheng Yang


While global rebalancing will mainly involve structural realignment among major advanced and emerging market economies, it could have significant impact on low-income countries (LICs). Simulations using a global general equilibrium model show that a more balanced global economy would tend to improve the current account balance in LICs with limited impact on domestic output. However, there could be adverse terms of trade effects on some LICs as the prices of manufactured goods rise. On the other hand, such prices increases could provide an impetus to export diversification in many LICs, raising growth in the long run. The output and terms of trade effects would be significantly amplified if structural adjustment is impeded by factor immobility and other rigidities.

Suggested Citation

  • Yongzheng Yang, 2011. "Global Rebalancing; Implications for Low-Income Countries," IMF Working Papers 11/239, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/239

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    1. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo A. Pesenti, 2007. "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing," NBER Chapters,in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 377-456 National Bureau of Economic Research, Inc.
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    6. Engler, Philipp, 2009. "Global rebalancing in a three-country model," Discussion Papers 2009/1, Free University Berlin, School of Business & Economics.
    7. Lynge Nielsen, 2011. "Classifications of Countries Basedon their Level of Development; How it is Done and How it Could Be Done," IMF Working Papers 11/31, International Monetary Fund.
    8. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    9. Robertson,David (ed.), 1997. "East Asian Trade after the Uruguay Round," Cambridge Books, Cambridge University Press, number 9780521583183, March.
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