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This paper investigates the role played by emerging Asia in the emergence and evolution of the global trade imbalances. Based on simulations in a general equilibrium model of the world economy, we find that a productivity slowdown in the non-tradable sector of these economies in the second half of the 1990s fits regional macroeconomic developments relatively well, but has limited spillover effect to the United States trade balance. In contrast, an increase in the desired level of emerging Asia net foreign assets starting in 2001 not only fits regional developments relatively well, but also has

The volume of world trade in goods and services remained some 6 per cent below its pre-crisis peak in the first quarter of 2010, but has rebounded by nearly 10 per cent since the trough reached in the second quarter of 2009. Figure 8 shows the ratio of world trade to world GDP, which plummeted by 3.2 percentage points at the height of the financial crisis. This unparalleled collapse in world trade reflected a decline in import penetration ratios (the ratio of the volume of imports of goods and services to GDP) in all the major economies, with the sharpest falls in several of the EU's new member states, as well as Hong Kong and some oil exporting economies such as Indonesia.

Maintaining today's global imbalances would help overcome the major disproportion of our times — income gap between developed and developing countries. This gap was widening for 500 years, since the XVI century, and only now, in recent 60 years, there are some signs that this gap is starting to decrease. The chances to close this gap sooner rather than later would be better, if the West goes into debt, allowing developing countries to have trade surpluses that would help them develop faster. Previously, in the XVI—XX centuries, it was the West that developed faster, accumulating surpluses in the trade with "the rest of the world" and using them to buy assets in developing countries, while "the rest of the world" was going into debt. Now it is time for "the rest" to accumulate international assets and for the West to go into debt.

This note is a systematic review of arguments provided by Feldstein (2008) on the necessity for global readjustments, both in the U.S. and in main trading partners. The purpose is to address the main arguments in the scientific and political debate on persistent To date, there has been no publication that challenged the opinions leading to totally wrong forecasts concerning the global imbalance. With a perspective of more than 10 years of post-2008-crisis developments, and together with empirical evidence one can easily see how erroneous were the arguments formulated in 2008. The tasks included a systematic review of all arguments formulated by Martin Feldstein in 2008, and casting them against empirical evidence. The U.S. current account (CA) deficit has continued for many years, since 1982, and has not changed, as foreseen by Feldstein. The primary method is a simple comparative analysis, supported by basic macroeconomic data. They allow to reveal multiple processes leading to further deterioration of the U.S. trade balance. Neither savings rate domestically nor abroad adjusted to give a basis for solving the global imbalance. In the same time, all traditional arguments presented on global imbalances seem undeniable. However, an alternative interpretation of the imbalance does not recognize the CA deficit as "a gift to the U.S. economy". This paper sheds new light on the "global imbalance", suggesting that increasing domestic absorption by China may be an important factor in resolving the U.S. problematic and persistent trade deficit. Disaster-scenarios may be not there in the U.S. to experience. Future developments may be far from those announced, and previously expected by Feldstein in his seminal paper. A careful reader may conclude that all coming changes and adjustments will be slow, gradual, and will not cause any major issues in the global economy. Such conclusions seem most justified by hard data and therefore encouraging. As the topic remains central to open economy empirical macroeconomics, ...

2014 Spring. ; This study assesses the global imbalances across three regions (Chapter I), from Korean economy context (Chapter II), and from the perspective of history of economic thought (Chapter III). Chapter I demonstrates the asymmetry of the international financial arrangement (IFA) by examining contrast adjustments in the triangular pattern of international private capital flows among the center, creditor, and debtor periphery. Based on the asymmetry it concludes that decentralized efforts by individual country have limitations and international coordination is inevitable to minimize the negative externalities of the capital flows in the world economy. Chapter II investigates the implications of global imbalances on the Korean economy by assessing the impact of Korea's foreign reserve accumulation on the macro economy and analyzing the distributional impacts of an exchange rate. Chapter III studies the global imbalances and international capital flows in a broader political-economy context from the history of economic thought. It observes that from the historical perspective challenges for policy makers and economist' philosophical foundation on global imbalances and international capital flows could be a parallel from the past to the present, if not an exact repetition. Using updated data it finds that a J-shaped proposition may be more relevant rather than the conventional U-shaped pattern of financial globalization because after 2000 the stock of assets has shown a drastic upward trend which is not comparable to that of the first era of financial globalization. To explain the changing pattern of financial globalization it suggests an analytical framework by combining 'Trilemma', tension between regulation and financial market, and the role of key currency or hegemonic money. It also identifies two competing views on the financial globalization by introducing the British Currency and Banking School debate in mid-19th century, analyzing their impacts on the theory of money and economic beliefs, and then tracing their trajectories to late economic thoughts such as the Neoclassical Synthesis, Modern monetarists, Modern Austrian School, Keynesian, New-Keynesian, New-Classical and Post-Keynesian economics.