Research On The Applicability Of The Global Imbalance Model To China

Caballero first put forward the "asset shortage" hypothesis in 2006.He believes that the diversify ability to produce safe assets around the world put downward pressure on world real interest rates,the mismatch between the supply and the local demands for safety assets leads to the global imbalance.The outbreak of the financial crisis and the ensuing sovereign debt crisis in Europe since 2008 has reduced the supply of safe assets while households and financial institutions increase the need for safe assets due to reducing leverage.There existed global imbalance since 1990s.there was deficit in the developed countries such as American and surplus in emerging countries,the asset shortage is more serious,global interest rates further down.The liquidity trap risk is approaching.Asset shortage and the emergence of liquidity traps will have a significant impact on the global economy.The article begins with the background of asset shortage and low interest rate,after which we can introduce the global imbalance,which is the subject and the specific issues that need to be addressed in our paper.what's more,we also show the research ideas and methods of this paper.Then,the static analysis of the relationship about liquidity traps,global imbalance and asset shortage are carried out.Then,from the point of view of asset shortage,we constructed the global imbalance model in no liquidity trap and the global model in liquidity traps to dynamic deduce the relationship between the three.Through combining with our country's economic data,we make an empirical test on the applicability of the model of global imbalance in China.Finally,put forward the policy recommendations based on the previous theoretical analysis.The conclusions included:To balance asset market,a liquidity trap has a linkage between the economies.When a country appeared liquidity traps may trigger other economies appeared liquidity traps by influencing the world rate.In no liquidity trap,current account surplus or deficit depends on the gap between world interest rate and domestic self-sufficiency rate.In a liquidity trap,current account surplus or deficit depends on the gap between output of financial integration and its self-sufficient,in order to reduce depression and increase the current account balance of payments,countries may devalue their currencies which may trigger a currency war.The empirical results show that the measure index of a country's asset shortage such as the degree of financial development,public debt issued by the government,the world interest rate,exchange rate and output rate indeed influence the ratio of our country's current account balance to GDP.the theoretical model were tested.