Global Imbalances and External Adjustment after the Crisis
IMF Working Papers, August 12, 2014
Source details
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- Global Imbalances and External Adjustment after the Crisis
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Bibliographic details
- Authors: Philip R. Lane, Gian M Milesi-Ferretti
- Published: August 12, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498339216.001
Objectives and scope
- This paper has two objectives:
- Review 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.
- Examine the cross-country variation in external adjustment over 2008-2012, showing how pre-crisis external imbalances have strong predictive power for post-crisis macroeconomic outcomes, allowing for variation across different exchange rate regimes.
- Emphasis: the bulk of external adjustment has taken the form of “expenditure reduction”, with “expenditure switching” only playing a limited role.
Key findings and analysis
- Pre-crisis external imbalances exhibit strong predictive power for post-crisis macroeconomic outcomes.
- External adjustment during 2008-2012 primarily occurred through “expenditure reduction”.
- “Expenditure switching” played only a limited role in the observed external adjustment.
- The paper reviews both “flow” and “stock” imbalances and highlights a shifting position of Latin America in the global distribution.
Subjects and keywords (as listed)
- 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