Working Paper: CEPR ID: DP8611
Authors: Maurice Obstfeld
Abstract: In this lecture I document the proliferation of gross international asset and liability positions and discuss some of the consequences for individual countries? external adjustment processes and for global financial stability. In light of the rapid growth of gross global financial flows and the serious risks associated with them, one might wonder about the continuing relevance of the net financial flow measured by the current account balance. I argue that global current account imbalances remain an essential target for policy scrutiny, for financial as well as macroeconomic reasons. Nonetheless, it is critically important for policymakers to monitor as well the rapidly evolving structure of global gross assets and liabilities.
Keywords: current account balance; financial instability; global imbalances; international asset positions; international financial flows
JEL Codes: F32; F34; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| gross international asset and liability positions (F30) | transmission of economic shocks (F42) |
| growth in gross international asset and liability positions (F30) | effects of financial crises (G01) |
| significant gross liabilities (G32) | greater risks of insolvency (G33) |
| dynamics of asset swapping (G19) | systemic risks (F65) |