Global imbalances: an old challenge on the rise?

Current account and financial imbalances in the global economy have returned to the spotlight of the policy debate. Imbalances that reached a peak in the run up to the global economic and financial crisis have been reduced since then and nowadays show different patterns. This section explores the main drivers of current account and financial imbalances in the US, China and the euro area. Our main findings point to some potentially problematic trends in saving - investment and stock accumulation. Valuation effects might also be important in this regard. We also consider various policy scenarios, including a recalibration of the US policy mix, the introduction of protectionist measures, or a disorderly adjustment in the Chinese financial sector, in order to identify possible short and medium term risks that could lead to the widening or disorderly adjustment of global imbalances. The section concludes with some implications for domestic policy and international cooperation to rebalance the global economy in a sustainable way. In particular, continued vigilance and comprehensive, well-sequenced and coordinated policy efforts are important to avoid the rebalancing resulting in lower or less inclusive growth in the medium term.