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Global Imbalances: Avoiding a Tragedy of the Commons

Posted July 31, 2017

(Gustavo Adler & Luis Cubeddu – International Monetary Fund)

We have just released our latest assessments of external positions for the 29 largest economies. As discussed in this year’s External Sector Report, excess current account imbalances—that is, those beyond the levels warranted by country fundamentals—were broadly unchanged in 2016. They represented about one-third of total actual surpluses and deficits, with only small shifts in 2016.

Since 2013, however, there has been a rotation of these excess imbalances toward advanced economies, posing new risks and policy challenges.

On the bright side, excess imbalances narrowed in key emerging market economies, led by a smaller excess surplus in China and smaller excess deficits in others key economies (such as Brazil, Indonesia, South Africa, and Turkey), where policies supported external adjustment as prospects of U.S. monetary policy normalization became more evident and external financing conditions tightened. Click here to read more.