Global Imbalances: Time for Action

Bruegel, the Korea Institute for International Economic Policy, and the Peterson Institute for International Economics held a joint workshop in Washington on February 8 and 9, 2007, on how to achieve an orderly reduction in global imbalances. Thirty of the world’s leading experts presented analyses and evaluations of the requirements for such an adjustment. The discussions centered on two sets of contributions: (1) country papers that provided a perspective on the underlying factors behind surpluses and deficits and the scope for adjustment in the current account and (2) multicountry simulation papers that produced estimates of the changes in policy variables and the corresponding exchange rate adjustments that are consistent with scenarios for a reduction in current account imbalances. This policy brief, by six experts from the organizations that hosted this workshop, reports on the results and the workshop discussions and outlines an adjustment package that would address the global imbalances. Alan Ahearne has been a research fellow at Bruegel since August 2005. William R. Cline is a senior fellow jointly at the Peterson Institute for International Economics and the Center for Global Development. Kyung Tae Lee is the president of the Korea Institute for International Economic Policy, chair of the APEC Economic Committee, and member of the Presidential Economic Advisory Council. Yung Chul Park is a research professor and director of the Center for International Commerce and Finance at the Graduate School of International Studies, Seoul National University. Jean Pisani-Ferry has been the director of Bruegel since January 2005. John Williamson is a senior fellow at the Peterson Institute for International Economics. The views presented in this policy brief are those of the authors and do not represent the opinions of the other individuals who participated in the workshop or their institutions.