Global imbalances where are they and do they matter
This presentation is the property of its rightful owner.
Sponsored Links
1 / 14

Global imbalances – where are they and do they matter? PowerPoint PPT Presentation


  • 48 Views
  • Uploaded on
  • Presentation posted in: General

Global imbalances – where are they and do they matter?. William R White Head of the Monetary and Economic Department Bank for International Settlements, Basel Slides prepared for the Chatham House Conference on Global Financial Imbalances New York, 24 April 2006. 1. Four sections.

Download Presentation

Global imbalances – where are they and do they matter?

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Global imbalances where are they and do they matter

Global imbalances – where are they and do they matter?

William R White

Head of the Monetary and Economic Department

Bank for International Settlements, Basel

Slides prepared for the Chatham House Conference on Global Financial Imbalances

New York, 24 April 2006

1


Four sections

Four sections

  • Everything is interrelated

  • The facts

  • What are people worried about?

  • Should they be worried?


Everything is interrelated

Everything is interrelated

  • (S-I) = (X-M) = CF = (M*-X*) = (I*-S*)

  • External imbalances reflect internal imbalances

  • Should they be worried?


The facts

The facts

  • the US trade deficit is huge

  • the trade counterparties are diverse

  • the US also borrows to lend

  • the sources of finance are diverse but changing


What are people worried about

What are people worried about?

  • a smooth adjustment is possible, but not inevitable

  • problems of factor adjustment

  • protectionism

  • impatience in financial markets


Should they be worried

Should they be worried?

  • a current account perspective

  • a currency share perspective

  • a financial problem needing a real solution


No problem from a current account perspective

No problem from a current account perspective?

  • three reasons why strong US productivity growth helps

  • the “savings glut” hypothesis

  • the valuation bonus for the US

  • dark matter


But counterarguments are convincing

But counterarguments are convincing

  • troubling facts and the productivity argument

  • foreign dissaving with the US at full employment

  • the valuation loss for foreigners

  • even less than meets the eye


No problem from a currency share perspective

No problem from a currency share perspective?

  • private sector holdings of dollar liabilities

  • public sector holdings of dollar liabilities

  • former much larger, but influenced by the latter


Private sector holdings not a problem

Private sector holdings not a problem?

  • no dollar overhang

  • home bias is big but declining

  • moderate increases in rates provide adequate support for dollar


But counterarguments are convincing1

But counterarguments are convincing

  • moderate covering could have big effects

  • declining home bias cuts two ways

  • low domestic rates support spending and imports


Public sector holdings not a problem

Public sector holdings not a problem?

  • no dollar overhang (ex Japan)

  • the Bretton Woods II hypothesis

  • the world needs the liquidity


But counterarguments are convincing2

But counterarguments are convincing

  • the dollar “bloc” is getting smaller

  • vendor financing is convenient, not sustainable

  • more global liquidity creates more problems than its cures


Conclusions

Conclusions

  • do global imbalances matter?

  • arguments both ways, BUT

  • mean-reversion is more common than not


  • Login