Global imbalances and the financial crisis

Arbeitspapier

Did global imbalances cause the financial crisis? A number of influential figures have argued that inflows of foreign capital into the US due to the current account deficit helped to trigger the crisis. This paper argues that the evidence for this position is weak. The capital inflows into the US associated with the current account deficit were also not the key factor driving foreign purchases of US toxic assets. The so-called global savings glut was not as significant a pattern as is often presented. Macroeconomic policies that reduced global imbalances could have been adopted but these would probably not have prevented the crisis. Global policy efforts to prevent a recurrence of the financial crisis need to focus on improved banking regulation. Reducing global imbalances should be of secondary importance.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: UCD Centre for Economic Research Working Paper Series ; No. WP10/13

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Whelan, Karl
• Event: Veröffentlichung
• (who): University College Dublin, UCD School of Economics
• (where): Dublin
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/71332