Working Paper: CEPR ID: DP13066
Authors: Maurice Obstfeld
Abstract: 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?
Keywords: global imbalances; global financial crisis; GFC; current account; IMF; external sector report
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. current account deficit (F32) | global imbalances (F65) |
| U.S. deficit (H62) | global financial crisis (GFC) (F65) |
| U.S. savings and investment behaviors (D14) | U.S. current account deficit (F32) |
| global capital market dynamics (F30) | U.S. current account deficit (F32) |
| rising oil prices (Q31) | U.S. deficit (H62) |
| higher net saving by emerging economies (E21) | U.S. deficit (H62) |
| precautionary saving by Asian economies (E21) | U.S. deficit (H62) |
| increase in gross capital flows (F32) | U.S. deficit (H62) |
| financial innovations (O16) | U.S. deficit (H62) |