Servén, LuisNguyen, Ha2012-03-192012-03-192010-06-01https://hdl.handle.net/10986/3839This paper surveys the academic and policy debate on the roots of global imbalances, their role in the inception of the global crisis, and their prospects in its aftermath. The conventional view holds that global imbalances result primarily from unsustainably high demand for goods in the United States and other rich countries, and that their impending correction must involve major United States trade adjustment and dollar depreciation -- although recent literature argues that their extent may be dampened by financial adjustment effects. In contrast, an alternative view portrays global imbalances as the equilibrium result of asymmetries in world asset demand and supply. Absent changes in the deep determinants of these, global imbalances can persist. International capital flow patterns before and during the crisis lend support to the equilibrium view. The paper also examines different hypotheses proposed in the literature on the role of global imbalances in the generation and propagation of the financial crisis. On the whole, the evidence suggests that global imbalances were not among the major causes of the crisis. Lastly, the paper assesses alternative scenarios about the future of global imbalances, considering in particular their potential consequences for developing countries, and the policy measures that these might adopt to enhance their growth prospects in a changing global equilibrium.CC BY 3.0 IGOADVANCED ECONOMIESASSET HOLDINGSASSET PRICEASSET PRICESASSETSBANK DEPOSITSBOND MARKETSBONDSBORROWERBUDGET CONSTRAINTCAPITAL ACCOUNTCAPITAL FLOWSCAPITAL GAINSCAPITAL INFLOWCAPITAL INFLOWSCAPITAL LOSSESCAPITAL OUTFLOWSCENTRAL BANKSCOMMERCIAL PAPERCOMMODITY PRICESCOMPETITIVE EXCHANGE RATESCONSUMER CREDITCONSUMER EXPENDITURECORPORATE BONDCORPORATE BOND MARKETSCORPORATE DEBTCORPORATE GOVERNANCECORPORATE SAVINGCREDIT GROWTHCREDITORCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT BALANCESCURRENT ACCOUNT DEFICITCURRENT ACCOUNT DEFICITSCURRENT ACCOUNT IMBALANCESCURRENT ACCOUNT POSITIONCURRENT ACCOUNT SURPLUSCURRENT ACCOUNT SURPLUSESDEBT INSTRUMENTSDEBTORDEBTORSDEBTSDEFAULTSDEMAND GROWTHDEPOSITSDEPRECIATIONDEVELOPING COUNTRIESDEVELOPING COUNTRYDIRECT INVESTMENTDISTORTIONSDOMESTIC CONSUMPTIONDOMESTIC DEMANDDOMESTIC MARKETSECONOMIC GROWTHECONOMIC POLICYECONOMIC STABILITYEMERGING ECONOMIESEMERGING MARKET COUNTRIESEMERGING MARKETSEQUILIBRIUMEQUITIESEQUITY MARKETSEXCHANGE RATEEXCHANGE RATE APPRECIATIONEXCHANGE RATE POLICYEXPENDITURESEXPORT MARKETEXPROPRIATIONEXPROPRIATION RISKSEXTERNAL ASSETEXTERNAL ASSETSEXTERNAL DEFICITEXTERNAL DEFICITSEXTERNAL POSITIONEXTERNAL POSITIONSEXTERNAL SHOCKSFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE SYSTEMFINANCESFINANCIAL ASSETSFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL INTERMEDIATIONFINANCIAL MARKETSFINANCIAL SYSTEMSFISCAL POLICYFISCAL REFORMFOREIGN ASSETFOREIGN ASSET ACCUMULATIONFOREIGN ASSET POSITIONFOREIGN ASSETSFOREIGN CURRENCYFOREIGN EXCHANGEFOREIGN EXCHANGE RESERVESFOREIGN INVESTORSFOREIGN RESERVEGLOBAL BANKSGLOBAL DEMANDGLOBAL ECONOMYGLOBAL FINANCIAL SYSTEMGLOBAL IMBALANCEGLOBAL IMBALANCESGROWTH RATEHOUSEHOLD SAVINGIMBALANCEIMPORTIMPORT DEMANDIMPORTSINFLOW OF CAPITALINSURANCEINTANGIBLEINTANGIBLE ASSETSINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL FLOWINTERNATIONAL CAPITAL FLOWSINTERNATIONAL DIVERSIFICATIONINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL INTEGRATIONINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL INVESTORSINTERNATIONAL MONETARY SYSTEMINTERNATIONAL RESERVESINVESTMENT OPPORTUNITIESINVESTMENT PORTFOLIOSINVESTMENT PROJECTSINVESTMENT RATESINVESTOR AWARENESSLENDERLEVERAGELIABILITYLIQUIDATIONLIQUIDITYMACROECONOMIC POLICIESMACROECONOMIC STABILITYMONETARY ECONOMICSMONETARY POLICYOIL EXPORTERSOIL EXPORTING COUNTRIESOIL PRICEOIL PRICESOIL-EXPORTING COUNTRIESOPEN ECONOMIESOPPORTUNITY COSTSOTHER CURRENCIESPENSIONPOLICY RESPONSESPOLITICAL ECONOMYPORTFOLIOPORTFOLIO DIVERSIFICATIONPORTFOLIOSPOSSIBILITY OF DEFAULTPRICE CHANGESPRICE MOVEMENTSPRIVATE CAPITALPRIVATE INFLOWSPRIVATE INVESTMENTPRIVATE INVESTORSPRIVATE SAVINGPRUDENTIAL REGULATIONPUBLIC DEBTPUBLIC DEFICITSPUBLIC SAVINGPUBLIC SPENDINGREAL DEPRECIATIONREAL EFFECTIVE EXCHANGE RATEREAL EXCHANGE RATEREAL EXCHANGE RATESREAL INTERESTREAL INTEREST RATEREAL INTEREST RATESRELATIVE WEIGHTRESERVE ACCUMULATIONRESERVE CURRENCYRESERVE HOLDINGSRETURNRETURNSRISK DIVERSIFICATIONRISKY ASSETSSAFETY NETSAFETY NETSSECURITIESSHAREHOLDERSSLACKSLOWDOWNSOURCE OF INFLOWSSTOCK MARKETSTOCK MARKET PRICESSTOCKSSURPLUSSURPLUS COUNTRIESSURPLUSESTAXTAX INCENTIVESTRADABLE GOODSTRADE ACCOUNTTRADE BALANCETRADE SURPLUSTREASURIESTREASURYWEALTH EFFECTSWEALTH TRANSFERWITHDRAWALWORLD DEVELOPMENT INDICATORSWORLD ECONOMYWORLD INTEREST RATESWORLD MARKETSWORLD TRADEWorld Bank10.1596/1813-9450-5354