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Macroeconomic Management

Global Imbalances and Adjustment Scenarios

Yan Wang's picture

How will global external imbalances adjust? Economists have vastly diverse views. The IMF presented two adjustment scenarios using its Global Economic Model, a benign baseline and a more abrupt adjustment. Depending on views regarding the probabilities of various adjustment scenarios, proposed policy responses differ. This note provides a survey of recent literature and summarizes diverse views on various assessment of the probability of a hard landing, and the proposed policy responses.

The Sources of Global External Imbalances

Yan Wang's picture

Although the world economy has been growing at a decent rate in the last three years, the global current account imbalances have reached unprecedented levels.  On one hand, the US current account deficit rose from $665 billion in 2004, to $820 billion or 6 percent of GDP in 2005, and is expected to reach $900 billion in 2006.

The "Dutch Disease": Theory and Evidence

Ignacio Hernandez's picture

The term “Dutch Disease” originated in the Netherlands during the 1960s, when the high revenue generated by its natural gas discovery led to a sharp decline in the competitiveness of its other, non-booming tradable sector. Despite the revenue windfall the new discovery brought, the Netherlands experienced a drastic decline in economic growth.