IMF Working Papers

Global Imbalances and External Adjustment after the Crisis

By Philip R. Lane, Gian M Milesi-Ferretti

August 12, 2014

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Philip R. Lane, and Gian M Milesi-Ferretti. Global Imbalances and External Adjustment after the Crisis, (USA: International Monetary Fund, 2014) accessed December 5, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper has two objectives. First, it reviews the recent dynamics of global imbalances (both “flow” and “stock” imbalances), with a special focus on the shifting position of Latin America in the global distribution. Second, it examines the cross-country variation in external adjustment over 2008-2012. In particular, it shows how pre-crisis external imbalances have strong predictive power for post-crisis macroeconomic outcomes, allowing for variation across different exchange rate regimes. We emphasize that the bulk of external adjustment has taken the form of “expenditure reduction”, with “expenditure switching” only playing a limited role.

Subject: Balance of payments, Current account, Current account balance, Current account imbalances, External position, Financial crises, Foreign assets, Real exchange rates

Keywords: Caribbean, Current account, Current account adjustment, Current account balance, Current account balance, Current account gap, Current account imbalances, Deficit country, Foreign assets, Gap term, Global, Global crisis, WEO current account projection, WP

Publication Details

  • Pages:

    45

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2014/151

  • Stock No:

    WPIEA2014151

  • ISBN:

    9781498339216

  • ISSN:

    1018-5941