Global Imbalances from a Stock Perspective

73 Pages Posted: 1 Dec 2017

See all articles by Enrique Alberola

Enrique Alberola

Bank of Spain- International Dept; Bank for International Settlements (BIS)

Ángel Estrada

Banco de España

Francesca Viani

Banco de España

Date Written: November 29, 2017

Abstract

After the recent crisis, a reduction was observed in global current account (“flow”) imbalances. Even so, global disequilibria as measured in terms of countries’ net foreign assets (“stock imbalances”) kept increasing. This paper discusses whether stock imbalances have a stabilising or destabilising impact on countries’ accumulation of external wealth. That is, do creditor economies, by virtue of their positive stock of net foreign assets, keep accumulating — everything else equal — external wealth? Do debtor countries, due to their negative net foreign assets position, keep accumulating external debt? Our results show that in debtor economies the existing stock of net debt helps to limit current account deficits, thus halting future debt accumulation. In creditor countries, however, the positive stock of net foreign assets contributes — everything else equal — to increase future current account surpluses, potentially leading to destabilising dynamics in wealth accumulation. This asymmetry between creditors and debtors holds in spite of the stabilising impact that net foreign assets have on the trade balance of creditor countries through real exchange rate fluctuations, and might have major implications for global trade and growth.

Keywords: Global Imbalances, Current Account, International Investment Position, External Debt, Growth

JEL Classification: F1, F32

Suggested Citation

Alberola, Enrique and Estrada, Ángel and Viani, Francesca, Global Imbalances from a Stock Perspective (November 29, 2017). Banco de Espana Working Paper No. 1742, Available at SSRN: https://ssrn.com/abstract=3079572 or http://dx.doi.org/10.2139/ssrn.3079572

Enrique Alberola (Contact Author)

Bank of Spain- International Dept ( email )

Alcala 50
Madrid
Spain

Bank for International Settlements (BIS) ( email )

Ruben Dario 281
Polanco, Miguel Hidalgo
Mexico City, 11580
Mexico

HOME PAGE: http://www.bis.org/author/enrique_alberola-ila.htm

Ángel Estrada

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es/

Francesca Viani

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es

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