Research On Global Imbalances

Over the last couple of years, global imbalances have led a significant concern around the world. The problems of global imbalances have been the subject of wildly different interpretations. Further study is still needed.There are five parts in this paper. The first part (introduction) discusses why I chose this topic. Firstly, a look at some related things and data on economy and trade of the US and China will give us a sense of importance of this topic. Secondly, I introduces of the main researches and analysis on global imbalances. The study on this issue began with persistence of the US current account deficit. Recently the researches focus the evolvement of global economy in long term, the risks of the changes and adjustments of global economy, and the cooperation of the policies of related countries. The summary of the theories is separated into the domestic study and foreign investigation. The most prominent are the deficient U.S. savings view, the new economy view, the global savings glut view, and the Sino-American codependency view, and integration of the four views. The domestic researches have similar frameworks and pay more attention to the structure of the economy. Thirdly, a guide of the paper is arranged .Then I also give the improvement and the limits of this paper.Then I turn to phenomena of the global imbalances. Firstly, the current account deficit of the global economy concentrates in the US, and the surplus of that pool in some countries in East Asia. These countries have different ratio of the current account to GDP. The ratio in China and newly industrialized Asian economies is larger than that in Japan. Secondly, the major part that finances the US capital and finance account is foreign official investment in the US. At the same time the foreign exchange reserve of China, Japan and other countries in East Asia is roaring.The third part argues the reason of global current account imbalances is due to comparative advantage and the structure of the industries. The factors that the U.S. has comparative advantages are intensive in nontrade sectors. Counterparts in East Asia are in trade sectors. As a result, the factor and merchandise flow to America and America could not offer alternative flow-out. Yet most countries in East Asia have two disadvantages——noninternationalized money and immature financial markets. So America offers internationalized money, a mature financial market and gets finance at low level of interest——foreign exchange reserve of East Asia. East Asia supplies the merchandise and gets assurance of the two disadvantages. But the system has many risks and uncertainties.The fourth part discusses the adjustments of global imbalances in long run and the risks of adjustments in short run. On the U.S. side, the new force of economy growth will be necessary. Also the policies of the U.S. to stimulate the economy should be restricted. On the East Asia side, the development of the area market demand and the cooperation on monetary and financial markets will be helpful. It also covers the effect of lately adjustments and changes on global economy——the change of exchange rate, interest rate and the oil price.The final part analyzes the China's strategies of dealing with global imbalances. Firstly, previous studies are summarized .Then I give further analysis of the global imbalances strategies. Secondly, policy recommendations of risks of the adjustments are discussed.