Global imbalances: the perspective of the Saudi Arabian Monetary Agency

M. Al-Jasser

Financial Stability Review, 2011, issue 15, 1-11

Abstract: The problem of global imbalances has acquired disconcerting proportions. Surplus and deficit countries must cooperate in a solution. Both emerging and advanced economies need to undertake structural changes. There is no exclusive domestic solution to global imbalances. Work must continue to restore financial stability, involving supervision of global systemically important financial institutions (G-SIFIs); reforming international institutions; dealing with destabilising capital flows into emerging economies; encouraging competition to the dollar in global currencies; and introducing asset targeting and macro prudential policy into the conduct of monetary policy. The current external surpluses of Saudi Arabia are a cyclical issue reflecting its role in supplying oil to the global economy. Countercyclical fiscal policy is used to stabilize the growth path. Foreign exchange reserves act as a buffer and the exchange rate serves as the policy anchor while diversification is pursued through capital investment.

Date: 2011
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