Working Paper: NBER ID: w19739
Authors: Joshua Aizenman; Yothin Jinjarak; Nancy P. Marion
Abstract: Since the onset of the global financial crisis, China and the U.S. have reduced their current-account imbalances as a share of GDP to less than half their pre-crisis levels. For China, the reduction in its current-account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 countries over 1983-2013 confirm that the relationship between current-account balances and economic variables changed in important ways after the financial crisis. China's rebalancing has been accompanied by a decline in its reserves-to-GDP ratio and greater outward FDI that, in turn, has mitigated reserve hoarding.
Keywords: China; International Reserves; Current Account; Global Imbalances; Financial Crisis
JEL Codes: F3; F31; F32; F36; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial crisis (G01) | structural change in the relationship between current account surpluses and economic indicators (F32) |
| financial crisis (G01) | positive correlation between current account surpluses and increases in international reserves (F32) |
| financial crisis (G01) | correlation between current account surpluses and real GDP growth (F32) |
| financial crisis (G01) | weakened role of the United States as a demander of last resort (F49) |