Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 2: Financial Market Turbulence and Global Imbalances
John Lipsky1 Achieving the dual goal of sustaining global growth while reducing global imbalances is a central challenge for the International Monetary Fund (IMF), and for its 185 member countries. The existence of record international payments imbalances has been seen by many in recent years as a risk to both global growth and stability. The unexpected post-2001 resilience of the global expansion – and its largely unanticipated ubiquity – has created unprecedented optimism about the prospects for prospective advances in many aspects, including poverty reduction. If strong growth could be sustained, it would help provide the resources for key social goals such as environmental protection, improved medical care and coping with the profound demographic changes that are fast approaching. Thus, the importance of sustaining global growth has become even clearer than in the past. And the prospects of success seem more plausible than at any time in recent decades, following such hopeful developments as the recent gains in real per capita income in sub-Saharan Africa. Nonetheless, the emergence of record international payments imbalances – even in the context of strong and globally balanced GDP growth – has underscored a key vulnerability of the expansion. These imbalances have reﬂected – among other things – signiﬁcant diﬀerences in the pace of domestic demand growth between many key economies. The phenomenon often referred to as the ‘global saving glut’ in fact has been accompanied by weak investment and sluggish consumption gains in many key economies. It has long been recognized that attaining better balance in the...
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