The Business of Macro Imbalances: Comparing ‘Gluts’ in Savings, Money and Profits

William Milberg and Lauren Schmitz

Chapter 5 in Microeconomics, Macroeconomics and Economic Policy, 2011, pp 72-95 from Palgrave Macmillan

Abstract: Abstract The large imbalances in international payments that emerged in the 2000s are widely presumed to have contributed to the financial collapse and worldwide recession that began in 2008. Portes (2010, p. 40) states that the macro imbalances were ‘the fundamental cause of the crisis’.1 Even now, with the immediate threat of financial collapse behind us, there are prominent voices claiming that the return of global imbalances puts the international financial system at great risk of a new collapse. According to Cline and Williamson (2009), ‘[L]arge external imbalances can only aggravate not moderate, fragility in the financial system’.2 The recent IMF effort to broker a USA-China agreement to reduce imbalances by targeted amounts over the next five years gives an indication of the perceived importance of such rebalancing.

Keywords: Housing Price; Current Account; Trade Balance; Trade Deficit; Current Account Deficit (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-31375-0_5

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DOI: 10.1057/9780230313750_5

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