Global Imbalances

The International Monetary Fund’s tenth annual External Sector Report (ESR, August 2021) shows how current account deficits in the global economy widened in 2020 during the pandemic. On the other hand, the ESR also argues that overall, the misalignment between fundamentals and current account balances has not been exacerbated. The pandemic widened current account imbalances… The sum of absolute values of current account deficits and surpluses went from 2.8% of global GDP in 2019 t ...

First appeared at AMERICAS QUARTERLY A growing global imbalance threatens to further weaken already vulnerable emerging markets. The massive vaccine disparities between advanced and developing economies may exacerbate what the IMF has dubbed “divergent recoveries”—with dire consequences for Latin America. Despite being home to only 8% of the world’s population, the region has already suffered nearly 30% of all global COVID-19 deaths. The pandemic has ...

The International Monetary Fund (IMF) released, on August 4th, its ninth annual External Sector Report, where current account imbalances and asset-liability stocks of 30 systemically large economies are approached. This time the report went beyond looking the previous year and tried to anticipate what will be some of the impacts of the still on-going COVID-19 crisis. The report shows that the global economy entered the COVID-19 crisis with a configuration of external imbalance ...

The concern over global imbalances has become an effort to systematically reduce current account deficits and surpluses, feeding the protectionist narrative. However, global imbalances are driven predominantly by domestic policies and conditions, not external factors. We do not know enough about the determinants of current account balances to set out precise numerical norms. Policy-makers should pay more attention to establishing the conditions that make current account deficits and ...

Discussions around large current account imbalances among systemically relevant economies as a threat to the stability of the global economy faded out in the aftermath of the global financial crisis. More recently, some signs of a possible resurgence of rising imbalances have brought back attention to the issue. We argue here that, while not a threat to global financial stability, the resurgence of these imbalances reveals a sub-par performance of the global economy in terms of fore ...