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A global model of recovery and rebalancing

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  • Rudiger von Arnim
  • Steve Bannister
  • Nathan Perry

Abstract

This paper presents an investigation of global recovery from the Great Recession and the rebalancing of global external imbalances, using a global model of 16 countries and composite regions. The model applies to the short term and only to the real side. Key features are demand-driven output determination, pro-cyclical aggregate labour productivity, imperfect competition in product markets and simple bargaining in non-clearing labour markets, which together determine the functional distribution of income. Trade is modelled in a bilateral import matrix; particular attention is paid to international adjustment. Simulation results suggest that early exit from fiscal support threatens a fragile recovery. Further, domestic demand expansion and revaluation in real terms in surplus countries are necessary for rebalancing, and a variety of measures can be employed to achieve these goals. Copyright , Oxford University Press.

Suggested Citation

  • Rudiger von Arnim & Steve Bannister & Nathan Perry, 2013. "A global model of recovery and rebalancing," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(4), pages 889-920.
    • Handle: RePEc:oup:cambje:v:37:y:2013:i:4:p:889-920
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    File URL: http://hdl.handle.net/10.1093/cje/bes043
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    Cited by:

    1. Hiroaki Sasaki & Shinya Fujita, 2015. "Demand and Income Distribution in a Two-Country Kaleckian Model," Discussion papers e-14-017, Graduate School of Economics Project Center, Kyoto University.
    2. Rudiger von Arnim & K.P. Prabheesh, 2013. "Rebalancing through expenditure and price changes," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(4), pages 531-556, July.
    3. Codrina Rada & Rudiger von Arnim, 2011. "Structural Transformation in China and India: The Role of Macroeconomic Policies," Working Paper Series, Department of Economics, University of Utah 2011_05, University of Utah, Department of Economics.
    4. Rada, Codrina & von Arnim, Rudiger, 2014. "India's structural transformation and role in the world economy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 1-23.
    5. Rada, Codrina & von Arnim, Rudiger, 2012. "Structural transformation in China and India: A note on macroeconomic policies," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 264-275.

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