Reflections on World Economic Imbalances

Abstract

The world economy is marked by substantial imbalances and as yet there are no definite signs of a spontaneous return to equilibrium. These imbalances, which derive from both the budgetary policy of the United States and the structural disequilibria in Europe, pose a serious threat to global prosperity to the extent that the latter is dependent on international trade and the stability in the international financial markets. Therefore, to maintain the present level of prosperity a substantial reduction of these imbalances is necessary. However, for several reasons this is not a simple task from both the intellectual and the practical policy perspective.

I am indebted to Mr A. P. Huijser and Mr J. L. Schneider of De Nederlandsche Bank and to Mrs Anne Vleminckx of Generale Bank, Brussels for their comments on an earlier draft. Of course all remaining errors are mine.