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Transpacific Rebalancing

Transpacific Rebalancing: Implications for Trade and Economic Growth

Copyright Date: 2015
Pages: 268
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  • Book Info
    Transpacific Rebalancing
    Book Description:

    Persistently large external imbalances in the world economy contributed to the outbreak of the recent financial crisis. The current account imbalances were particularly severe among the economies that border on the Pacific-the United States ran large deficits, with offsetting surpluses in East Asia. The depth and breadth of the global recession also demonstrated the need for a coordination of national policies to achieve a sustained recovery.

    While the magnitude of global-trade disruption led to some reduction in the size of the imbalances, closer examination suggests that the progress may prove temporary. On the other hand, significant changes in the underlying patterns of saving and investment suggest that some of the recent rebalancing may prove to be more permanent. Are such imbalances really a problem? If so, why and for whom? What should be done about them-if anything-and what does the future likely hold for transpacific trade relations? In this timely book, Asian and American economists explore those important questions.

    Copublished with the Asian Development Bank Institute, Transpacific Rebalancing is coedited by Barry Bosworth-long one of the Brookings Institution's leading economic analysts-and Masahiro Kawai, dean of the ADBI. They brought together leading economists from either side of the Pacific to analyze such issues as:

    • The impact of exchange rates

    • The policy choices facing the "Asian tigers"

    • The specifics and effects of trade imbalances in specific countries including the United States, South Korea, Thailand, India, and China

    Contributors include Hwee Kwan Chow, Susan M. Collins, Barry Eichengreen, Joonkyung Ha, Yping Huang, Ginalyn Komoto, Jong-Wha Lee, Rajiv Kumar, Deunden Nikomborirak, Gisela Rua, Lea Sumulong, Chalongphob Sussankam, Kunyu Tao, Willem Thorbecke, and Pankaj Vashisht.

    eISBN: 978-0-8157-2261-8
    Subjects: Finance, Political Science, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-xii)
  4. 1 Overview of Issues, Challenges, and Policy Directions
    (pp. 1-25)

    The global financial crisis has provided vivid evidence of an interconnected world economy. A financial meltdown that began in the United States quickly spread to Europe, and both regions entered into a severe economic downturn. The disruption ultimately radiated throughout the rest of the world through its repressive effects on trade flows. The magnitude and breadth of the recession demonstrated the strength of the global linkages and the need for a coordination of national policies to achieve a complete recovery.

    The world economy is emerging from that recession, but the pace of recovery varies greatly across the major regions. Most...

  5. 2 Exchange Rates and Global Rebalancing
    (pp. 26-59)

    We all agree that global rebalancing is needed. We just do not agree on what it entails. American commentators talk about the need for increases in consumption spending in Asia without equal emphasis on the need for more saving in the United States. Asian commentators emphasize the need to raise savings in the United States without acknowledging that increased saving in one region needs to be accompanied by increased spending in other regions to avoid a shortfall in global demand. Some point to the need for the United States to produce additional traded goods but neglect the need for other...

  6. 3 The Effect of Exchange-Rate Changes on Transpacific Rebalancing
    (pp. 60-83)

    The U.S. current account deficit as a share of GDP grew from 2 percent in 1997 to 4 percent in 2002 to 6 percent before the financial crisis that began in October 2008. The United States ran large trade deficits with East Asia, oil-producing countries, and the rest of the world. Since the crisis began, however, America’s deficit with most regions has fallen while its deficit with the People’s Republic of China (PRC) has remained intransigent.

    Table 3-1 shows exports, imports, and the trade balance between the United States and the rest of the world before and after the Lehman...

  7. 4 Rebalancing the U.S. Economy in a Postcrisis World
    (pp. 84-118)

    The United States has had a substantial current account deficit since the mid-1990s. For most of that period, the deficit increased steadily, reaching a peak of $800 billion, or 6.7 percent of national income, in 2006. There has been widespread agreement that deficits of that magnitude cannot be sustained. Before the financial crisis the deficit was associated with a pervasive fear that the economy might be heading toward a hard landing, with an abrupt collapse of the dollar and severe economic disruptions both domestically and globally.

    For a brief period, it appeared that a relatively benign adjustment might be under...

  8. 5 Japan’s Current Account Rebalancing
    (pp. 119-147)

    F or more than three decades, Japan’s current account balance has been in surplus in the range of 1.5 to 4 percent of GDP, with a few exceptions. Before the People’s Republic of China’s current account surplus expanded remarkably in the 2000s, Japan’s current account surplus was one of the largest in the world—particularly during 1984–88—and the United States had the largest current account deficit globally. Japan’s surplus and the U.S. deficit were at the core of the global imbalances of the 1980s and 1990s. Even later—particularly between 2003 and 2008—Japan’s current account surplus was...

  9. 6 The Role of Factor Market Distortion in the People’s Republic of China’s External Imbalances
    (pp. 148-182)

    The current account surplus of the People’s Republic of China (PRC) and the high growth rate of its gross domestic product have been at the center of numerous international economic policy debates in recent years. Some Western politicians have blamed the PRC for its huge current account surpluses, which they claim have contributed to its undervalued currency. This external pressure has principally advocated for the appreciation of the yuan; this emphasis has worsened trade relations between the PRC and countries with large current account deficits, especially the United States, which has seen a widening of current account imbalances with the...

  10. 7 The Asian Tiger Economies’ Choices
    (pp. 183-210)

    The 2008–09 global economic crisis hit the Asian Tiger economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China hard, despite their strong macroeconomic fundamentals and sound financial systems. Following the 1997 Asian financial crisis, these economies had strengthened current accounts and had significant expansion in foreign reserves. Meanwhile, their financial systems had become more resilient, with the restructuring of balance sheets and the enhancement of surveillance. Nevertheless, each Tiger economy experienced a collapse in exports and an attendant sharp contraction of GDP in the second half of 2008 as global demand faltered. The GDP for...

  11. 8 ASEAN’s Need to Rebalance: More Regional than Global?
    (pp. 211-230)

    The Association of Southeast Asian Nations (ASEAN) is facing a large current account surplus.1 To address the problem, member nations need to rebalance their economies not only to be in line with the goal of lowering the current imbalances in the global economy but, more important, for the region’s own interests. What ultimately matters is the welfare of each country’s population, and as has been observed in many countries, positive achievements in macro indicators, irrespective of the imbalances, do not guarantee a real welfare improvement. The relatively good macroeconomic performance of ASEAN has been accompanied by some undesirable trends, such...

  12. 9 Crisis, Imbalances, and India
    (pp. 231-256)

    After a year of sharp contraction, advanced economies have shown some signs of economic revival. A boom in United States retail sales in late 2009 and strong growth in the fourth quarter of 2009 and the first quarter of 2010, coupled with positive gross domestic product growth in Japan, Germany, and France in the second half of 2009, suggests that the crisis has bottomed out and recovery is on its way. These positive developments have provided great relief to policymakers across the globe who implemented the largest coordinated fiscal stimulus in history and a liquidity infusion to prevent the recession...

  13. Contributors
    (pp. 257-258)
  14. Index
    (pp. 259-268)
  15. Back Matter
    (pp. 269-270)