Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective

Christopher M. Meissner () and Alan M. Taylor ()

No 5917, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Great attention is now being paid to global imbalances, the growing U.S. current account deficit financed by growing surpluses in the rest of the world. How can the issue be understood in a more historical perspective? We seek a meaningful comparison between the two eras of globalization: “then” (the period 1870 to 1913) and “now” (the period since the 1970s). We look at the two hegemons in each era: Britain then, and the United States now. And adducing historical data to match what we know from the contemporary record, we proceed in the tradition of New Comparative Economic History to see what lessons the past might have for the present. We consider two of the most controversial and pressing questions in the current debate. First, are current imbalances being sustained, at least in part, by return differentials? And if so, is this reassuring? Second, how will adjustment take place? Will it be a hard or soft landing? Pessimistically, we find no historical evidence that return differentials last forever, even for hegemons. Optimistically, we find that adjustments to imbalances in the past have generally been smooth, even under a regime as hard as the gold standard.

Keywords: current account adjustment; exorbitant privilege; global imbalances; return differentials (search for similar items in EconPapers)
JEL-codes: F20 F30 F32 F40 F50 N10 N20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-his
Date: 2006-11
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Related works:
Working Paper: Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective (2006)
Journal Article: Losing our marbles in the new century?: the great rebalancing in historical perspective (2006)
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