Causes and Consequences of Global Imbalances: Perspective from Developing Asia

Global current account imbalances are one of the key macroeconomic imbalances that underlie the global financial crisis. The central objective of this paper is to analyze the causes and consequences of global imbalances from the perspective of developing Asia. More specifically, the paper examines the root causes of the large and persistent current account surpluses that have emerged in the region since the Asian crisis. The paper also explores the consequences of global imbalances for the region, in terms of welfare and economic growth. Based on the analysis, a number of concrete policy directions are recommended that will help Asia rebalance its demand and growth toward domestic sources.