Global Imbalances: False Alarm or Genuine Source of Concern?

Théo Aphecetche, Maria Bianchi and Guergana Stanoeva

No 74, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Global imbalances, as measured by current account surpluses and deficits, had been on a narrowing path for several years, before widening in 2020 and 2021. While there is nothing wrong per se, excessive current account imbalances, if unaddressed, might pose serious risks to the global economy. These Brief analyses the recent dynamics in global imbalances in the context of the COVID-19 pandemic and discusses the possible effects of the ongoing Russia’ war in Ukraine. It notes that while the recent global imbalances widening appears to reflect mostly transitory shocks, uncertainty and downside risks to the global outlook remain exceptionally high. It also underlines that while Emerging Markets Economies’ macroeconomic fundamentals appear more resilient to the current monetary tightening, weaknesses remain. The Brief also considers how climate change as a systemic risk could jeopardise the fragile equilibrium of macroeconomic fundamentals. Finally, the Brief presents possible macroeconomic and structural policy options to reduce excess current account imbalances in a growth-friendly manner and to prevent or cushion possible risks.

Keywords: Global Current Account Imbalances; COVID-19 Pandemic; Russia’s War in Ukraine, Climate Change, Global Economic Governance; International Cooperation; Multilateralism; Economy and Finance, G20, Aphecetche, Bianchi, Stanoeva. (search for similar items in EconPapers)
Pages: 16 pages
Date: 2022-11
New Economics Papers: this item is included in nep-cis, nep-env, nep-int and nep-opm
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