Humpty Dumpty and Global Financial Imbalances

A viable international financial system requires a mechanism to keep imbalances in check.

The adverse effects of financial repression in China are reflected primarily in its economic imbalances.

The tremendous growth in global current account imbalances magnified problems that led to the financial crisis.

Global imbalances

There will be no less than three different, partially overlapping, European procedures for budgets, macroeconomic imbalances, and financial stability.

First, stronger eurozone wide supervision should reinforce financial integration, mitigate macroeconomic imbalances, and improve the conduct of monetary policy.

21.31 During the 1980s, most developing countries faced mounting domestic and external financial imbalances that resulted in unsustainable fiscal deficits and reduced public and private financial flows.

And it will reconcile recovery in the US with the need to prevent global imbalances from again threatening financial stability.

Balancing the World s Imbalances

Global Imbalances without Tears

Will Global Imbalances Return?

Over the past several years, much attention has focused on the role of China s trade surplus in creating today s global financial imbalances.

The imbalances were reduced temporarily as the global financial crisis caused private demand to drop in the US, the UK, and elsewhere.

Out goes the fusty old inflation targeting regime, with its fixation on the consumer price index and disregard for financial sector imbalances.

Furthermore, exchange rate movements are essentially determined by financial flows and may have no effects in terms of correcting global trade imbalances.

Emerging markets are leading the recovery, but a number of them must contend with the risks of overheating and growing financial imbalances.

Participants deplored the continued net transfer of financial resources from developing to developed countries and called for efforts to reduce global imbalances.

It was necessary to provide larger margins of safety to deal with financial imbalances, which built up during cyclical upswings and downturns.

A Requiem for Global Imbalances

In Praise of Global Imbalances

In effect, China is fostering new imbalances at a time when countries are struggling with the demand shortfall caused by the financial crisis.

But can this apparently benign pattern of global growth be sustained, particularly since growth has been accompanied by ever widening global financial imbalances?

We need reform of the international monetary and financial institutions, as well as to set right other systemic imbalances, to ensure equitable development.

Such reform would need to address the root causes of debt, international macroeconomic imbalances and market failures in the current international financial system.

This calls for the introduction of a modified, system wide approach to prudential regulation which takes into account the macroeconomic consequences of financial imbalances and the inherent pro cyclicality of financial markets.

In other words, we should leverage imbalances of one kind to redress imbalances of the other kind.

But the way housing finance is organized differs enormously from country to country, and these differences explain the recent global imbalances and financial crashes.

But maintaining stability involves not only keeping inflation low, but also, and crucially, avoiding large swings in economic activity, external imbalances, and financial crises.

But looking after the stability of the global financial system, including the assessment of exchange rate policies and global payment imbalances, is a different responsibility.

Several ministers pointed out that the risk of international financial instability persisted and that it was necessary to correct global imbalances to reduce that risk.

In other words, said Singh, we should leverage imbalances of one kind to redress imbalances of the other kind.

A Balanced Look at Sino American Imbalances

But China s economic imbalances are also stupendous.

From Global Imbalances to Effective Global Governance

Third, global imbalances led to cheap money.

They can cause imbalances and other disturbances.

In 2003, the structural reform of the National Health System was completed with a view to correcting the five financial imbalances of the Mexican health system.

But it must also assume greater responsibility for global imbalances, economic and financial stability, and governance, as well as represent the interests of less powerful developing countries.

With advanced economies struggling to avoid financial collapse, escape recession, reduce unemployment, and restore growth, central banks are being called upon to address, sometimes simultaneously, growing imbalances.

The first concerns the growing imbalances in the monetary and financial systems that expose the global economy to shocks that are beyond any national capacity to control.

The prevailing imbalances compounded by high oil prices also had negative consequences for their fragile economies, which were highly susceptible to the volatility of external financial flows.

It will encourage the reemergence of global imbalances.

One priority is to reduce global payments imbalances.

Even the eurozone s macroeconomic imbalances largely went unnoticed.