DP13066 Twenty Five Years of Global Imbalances

Author(s): Maurice Obstfeld
Publication Date: July 2018
Keyword(s): current account, global financial crisis (GFC), global imbalances, IMF External Sector Report
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13066

As international capital markets expanded in breadth and depth after the middle 1990s, global current account imbalances also expanded markedly. Some have linked the origin of the subsequent Global Financial Crisis (GFC) to these global imbalances. This essay proposes answers to four questions about the recent history of global imbalances. Why did global imbalances expand after the mid-1990s? What circumstances and concomitant factors provide clues about the origins of the GFC? If one accepts that a mono-causal story about the GFC based on global imbalances is inaccurate, how should one view the potential threats from excessive global imbalances today? And finally, what policy implications follow?