{
  "title": "Global Imbalances: Avoiding a Tragedy of the Commons",
  "publication": "IMF Blog, July 28, 2017",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2017/07/28/global-imbalances-avoiding-a-tragedy-of-the-commons",
  "canonical": "https://www.imf.org/en/blogs/articles/2017/07/28/global-imbalances-avoiding-a-tragedy-of-the-commons",
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  "summary": "Authors: Gustavo Adler, Luis Cubeddu",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Gustavo Adler, Luis Cubeddu  \n- Date: July 28, 2017  \n- The IMF released assessments of external positions for the 29 largest economies.\n- Excess current account imbalances in 2016 were broadly unchanged and \"represented about one-third of total actual surpluses and deficits, with only small shifts in 2016.\"\n- Since 2013 there has been a rotation of excess imbalances toward advanced economies."
    },
    {
      "heading": "Key findings",
      "content": "- Excess imbalances:\n  - Were broadly unchanged in 2016.\n  - Represented about one-third of total actual surpluses and deficits.\n  - Have rotated since 2013 toward advanced economies, creating new risks and policy challenges.\n- Emerging market developments:\n  - Excess imbalances narrowed in key emerging market economies.\n  - Narrowing was led by a smaller excess surplus in China and smaller excess deficits in Brazil, Indonesia, South Africa, and Turkey.\n  - Adjustment in these emerging markets was supported as prospects of U.S. monetary policy normalization became more evident and external financing conditions tightened.\n- Advanced economy developments:\n  - Excess imbalances widened in several advanced economies.\n  - Large and persistent excess surpluses continued in Germany, Korea, the Netherlands, Singapore, and Sweden.\n  - Historical analysis indicates these large and persistent surpluses (outside oil-exporting countries and financial centers) are a fairly recent phenomenon; when reversals occurred, policy actions on multiple fronts played a role.\n- Risks from current constellation:\n  - Weak automatic adjustment mechanisms: prices and saving and investment decisions are not adjusting fast enough.\n  - Rigid currency arrangements and structural features (for example, inadequate social safety nets and barriers to investment) contribute to undesirable saving and investment levels.\n  - Concentration of excess deficits in a few advanced economies (mainly the United States and United Kingdom) could:\n    - Reduce deficit-financing risks in the near term.\n    - Raise the likelihood of protectionist measures.\n    - Risk derailing the global recovery if continued reliance on debtor-country demand persists, increasing the chances of a disruptive adjustment later."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Shared responsibility: Addressing external imbalances in a way that supports global growth requires recalibration of the policy mix in both deficit and surplus economies.\n- For excess deficit countries:\n  - Move forward with fiscal consolidation.\n  - Gradually normalize monetary policy in tandem with inflation developments.\n  - Implement policies directed at improving external competitiveness and overall saving.\n  - Emphasize reforms that boost education outcomes and strengthen the business climate.\n- For excess surplus countries:\n  - If there is fiscal space, reduce reliance on easy monetary policy and allow for greater fiscal stimulus.\n  - Focus structural policies on lifting distortions that constrain domestic demand or limit trade competition and investment.\n- For countries where monetary policy is constrained (for example, individual euro area members):\n  - Use fiscal and structural policies to facilitate relative price adjustments.\n- Exchange rate policy:\n  - Allow exchange rates to move in line with fundamental levels.\n  - Limit interventions to addressing disorderly market conditions (consistent with recent practice for most countries).\n- Structural policy emphasis:\n  - Excess surplus countries: lift distortions that constrain domestic demand or limit trade competition.\n  - Excess deficit countries: improve external competitiveness and overall saving, with emphasis on education and the business climate.\n- Protectionism:\n  - Protectionist policies should be avoided because they are unlikely to meaningfully address external imbalances and would be detrimental to domestic and global growth."
    },
    {
      "heading": "Purpose and mandate",
      "content": "- Assessing countries’ external positions is a core IMF mandate.\n- These assessments are an analytical tool to determine, on a multilaterally-consistent basis, when external imbalances are appropriate or signal risks.\n- Imbalances can be appropriate: developing economies that need to invest should generally run deficits; aging countries (for example, Japan and Germany) may need to run surpluses to meet future obligations.\n- The focus of the exercise is identifying the undesirable portion of imbalances and discussing policies to address them.\n- Goal: avoid a tragedy of the commons in which countries acting independently in their own self-interest undermine the common good of supporting global growth and stability.\n\nIMF Blog — \"Global Imbalances: Avoiding a Tragedy of the Commons\", Gustavo Adler and Luis Cubeddu, July 28, 2017.\n\n---\n\n\n References\n\n- https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-GERMANY-ESR-cranes-over-trailors-Caro-Oberhaeuser-Newscom-carophotos138589.jpg\n- External Sector Report\n- https://www.imf.org/wp-content/uploads/2017/07/ENGJul27ESR1-4-002.jpg\n- https://www.imf.org/wp-content/uploads/2017/07/ENGJul27ESR2-6-002.jpg\n- assessments are an analytical tool\n\nSource: https://www.imf.org/en/blogs/articles/2017/07/28/global-imbalances-avoiding-a-tragedy-of-the-commons"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2017/07/28/global-imbalances-avoiding-a-tragedy-of-the-commons/index.md)",
    "[Structured JSON version](/en/blogs/articles/2017/07/28/global-imbalances-avoiding-a-tragedy-of-the-commons/index.json)",
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    "Authors: Gustavo Adler, Luis Cubeddu",
    "Published: July 28, 2017",
    "Authors: Gustavo Adler, Luis Cubeddu",
    "Date: July 28, 2017",
    "The IMF released assessments of external positions for the 29 largest economies.",
    "Excess current account imbalances in 2016 were broadly unchanged and \"represented about one-third of total actual surpluses and deficits, with only small shifts in 2016.\"",
    "Since 2013 there has been a rotation of excess imbalances toward advanced economies.",
    "Excess imbalances:",
    "Emerging market developments:",
    "Advanced economy developments:",
    "Risks from current constellation:",
    "Shared responsibility: Addressing external imbalances in a way that supports global growth requires recalibration of the policy mix in both deficit and surplus economies.",
    "For excess deficit countries:",
    "For excess surplus countries:",
    "For countries where monetary policy is constrained (for example, individual euro area members):",
    "Exchange rate policy:",
    "Structural policy emphasis:",
    "Protectionism:",
    "Assessing countries’ external positions is a core IMF mandate.",
    "These assessments are an analytical tool to determine, on a multilaterally-consistent basis, when external imbalances are appropriate or signal risks.",
    "Imbalances can be appropriate: developing economies that need to invest should generally run deficits; aging countries (for example, Japan and Germany) may need to run surpluses to meet future obligations.",
    "The focus of the exercise is identifying the undesirable portion of imbalances and discussing policies to address them.",
    "Goal: avoid a tragedy of the commons in which countries acting independently in their own self-interest undermine the common good of supporting global growth and stability.",
    "[https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-GERMANY-ESR-cranes-over-trailors-Caro-Oberhaeuser-Newscom-carophotos138589.jpg](https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-GERMANY-ESR-cranes-over-trailors-Caro-Oberhaeuser-Newscom-carophotos138589.jpg)",
    "[External Sector Report](http://www.imf.org/en/Publications/Policy-Papers/Issues/2017/07/27/2017-external-sector-report)",
    "[https://www.imf.org/wp-content/uploads/2017/07/ENG_Jul_27_ESR_1-4-002.jpg](https://www.imf.org/wp-content/uploads/2017/07/ENG_Jul_27_ESR_1-4-002.jpg)",
    "[https://www.imf.org/wp-content/uploads/2017/07/ENG_Jul_27_ESR_2-6-002.jpg](https://www.imf.org/wp-content/uploads/2017/07/ENG_Jul_27_ESR_2-6-002.jpg)",
    "[assessments are an analytical tool](https://blogs.imf.org/2017/06/26/assessing-global-imbalances-the-nuts-and-bolts/)"
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