Is the current account or the capital account driving global imbalances?

Today we are fortunate to have a Paul Wachtel (NYU) and Moritz Schularick (Free University of Berlin) as guest contributors.

These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.

The Bank of England's most consistently interesting economist had some bad news today for anyone worried about the problem of global imbalances. He thinks that those current-account imbalances are likely to get bigger, probably a lot bigger, in the next 10 to 20 years - and there may not be very much that anyone can do about it.

Following up on recent posts ([1], [2], [3], [4], [5} [6]) Here's another take on the prospects for resolving global imbalan

Luiz de Mello, Pier Carlo Padoan, 1 August 2010Global imbalances are firmly back on the policy agenda. This column examines evidence from past imbalances that suggests that the current-account reversals can be sizeable and the resulting disruption to capital flows could pose risks for the global recovery. Full Article: Global imbalances: Lessons from historical reversals

Many analysts and observers believe that the global imbalances that characterized the world economy in the years before the 2008 crisis have substantially dissipated. But, while it is true that China’s current-account surpluses and America’s deficits have somewhat moderated since then, have the imbalances really been corrected?

Claudio Borio, Piti Disyatat, 26 July 2011Global imbalances loom large in G20 and IMF discussions, but are they to blame for the global crisis? This column argues that the emphasis on current-account imbalances is unhelpful and diverts attention from the monetary and financial factors that really sowed the seeds of the crisis. Full Article: Did global imbalances cause the financial crisis?

Yves here. This post highlights an issue that gets far too little attention: how the “free trade” agenda has been used to promote a capital mobility agenda, and why that works to the detriment of ordinary citizens.