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Will global imbalances decrease or even increase?

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  • Boysen-Hogrefe, Jens
  • Gern, Klaus-Jürgen
  • Jannsen, Nils

Abstract

Assessing the quantitative impact of the fiscal packages which have been adopted in the current financial crisis is extremely difficult. The studies which are presented in this paper show wide differences, both for short-term and for medium-term multipliers. Moreover, multipliers which are derived from past experience may not apply in the current financial crisis. There are three main reasons: the zero-bound for monetary policy which played almost no role in the past has become binding in many countries; the standard procedure of calculating multipliers on the assumption of being in an initial equilibrium position is hardly appropriate in the current deep recession; and the standard procedure of linearizing models is questionable as currently there is a substantial deviation from the equilibrium.

Suggested Citation

  • Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Jannsen, Nils, 2009. "Will global imbalances decrease or even increase?," Open Access Publications from Kiel Institute for the World Economy 32967, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkie:32967
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    11. Dovern, Jonas & Meier, Carsten-Patrick & Scheide, Joachim, 2006. "Das hohe Leistungsbilanzdefizit der Vereinigten Staaten: Ein Risiko für die Weltwirtschaft und für die wirtschaftliche Entwicklung in Deutschland?," Kiel Discussion Papers 432/433, Kiel Institute for the World Economy (IfW).
    12. Ronald McKinnon & Gunther Schnabl, 2009. "The Case for Stabilizing China's Exchange Rate: Setting the Stage for Fiscal Expansion," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 1-32, January.
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