The Next Tsunami? Preparing for a Disorderly Correction of Global Imbalances

Barry Eichengreen

Asian Economic Papers, 2006, vol. 5, issue 2, 1-6

Abstract: This paper makes the case that Asian countries should start preparing now for a disorderly correction of global imbalances. It points to six measures they should take: allowing their currencies to appreciate against the dollar as a way of limiting their dependence on the U.S. market; accelerating regional trade initiatives to support their export sectors; using fiscal policy to sustain domestic demand; developing their financial markets; allowing intraregional exchange rates to move to accommodate differences in the impact of the shock and the scope for offsetting action; and enhancing regional cooperation to address free-rider and firstmover problems that might otherwise discourage these adjustments. (c) 2006 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Date: 2006
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