Global Imbalances: An Overview

BIS Economic Adviser Stephen Cecchetti’s Sep 2011 speech on current accounts and financial flows summarises the key issues on global imbalances. To reduce the risk of disorderly markets, the burden of adjustment falls on nominal exchange rates and structural reforms.

As a warning note on the data, also see the following article on statistical black holes.
Exports to Mars, The Economist, 12 Nov 2011

Further references below:
Saving Imbalances and the Euro Area Sovereign Debt Crisis, FRB New York, Sep 2011
Causes and Consequences of Global Imbalances: Perspective from Developing Asia, Asian Development Review, 2009
The G20 and global imbalances, Barry Eichengreen, VoxEU, Jun 2011
A framework for assessing global imbalances, ECB Occasional Paper No 78, Jan 2008
Global Imbalances and the Financial Crisis: Products of Common Causes, Obstfeld & Rogoff, Nov 2009
Global Imbalances: In Midstream? Blanchard & Milesi-Ferretti, IMF Staff Position Note, Dec 2009

Macroeconomic Imbalance Procedure, European Commission

Greek Debt Crisis: Facts & Debates

For useful sources on the Greek debt crisis perhaps start with the IMF’s overview, especially its FAQs section. Also track the progress of the Greek debt crisis in the Financial Times interactive timeline, which shows key events next to the yield on the 10 year sovereign bond. Find out the global banking system exposure to Greek debt in this August 2011 Cleveland Fed research paper. For thoughts about the pros/cons of sovereign defaults, have a glance at the Economist magazine’s sketch. The Financial Times’ comparison with the 2001 Argentina crisis is worth a look as well as comparisons with the Brady Bond programmes of the 1980s.

A broader perspective, that Greece’s problem is Europe’s problem, is neatly argued by Joe Stiglitz, FT A-List blog, 22 July 2011.

With violence in Athens continuing, and the failure of European leaders to resolve their disagreements over the Greek debt crisis, here are the countries most exposed to Greek debt.

For an in-depth analysis of how history repeats itself, then Reinhart & Rogoff’s “This Time Is Different: Eight Centuries of Financial Folly” is the acknowledged market leader.

The role of capital flows, rather than fiscal irresponsibility, is explored in
Origins of the Euro Crisis, Paul Krugman, 23 Sep 2011 and What Really Caused the Eurozone Crisis?, Kash Mansori, 22 Sep 2011

Eurozone Debt Crisis: Tougher Choices

In the early 1990s EU governments had to choose between defending their exchange rates and the health of their economies. Now they have to choose between disappointing the bond markets and imposing austerity on their voters.

Firefighting: The sovereign-debt crisis has echoes of the ERM debacle“, The Economist, 14 July 2011

Three major uncertainties are rattling the markets:

  • the lack of EMU political leadership as regards (i) co-ordination across countries and with the ECB as well as (ii) a reluctance to push through vital restructuring/austerity packages
  • weak growth prospects that mean a severely reduced ability to repay debt as well as added stress for the banking sector
  • the inadequacy of existing bail-out funds

For a useful overview, see “Europe’s debt crisis: Fudge, the final frontier, The Economist, 10 Sep 2011.