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Full-Text Articles in Economic Theory
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
Economics Faculty Publications and Presentations
We investigate the role of budget balances, financial development and openness, in the evolution of global imbalances. Financial development – or the lack thereof – has received considerable attention as a possible contributing factor to the development of persistent and expanding current account imbalances. Several observers have argued that the depth and sophistication of US capital markets have caused capital to flow from relatively underdeveloped East Asian financial markets. In this paper, we extend our previous work by examining the effect of different types and aspects of financial development. Our cross-country analysis, encompassing a sample of 19 industrialized countries and …
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We consider the origins of global current account imbalances. We first discuss how the expansion of the US current account deficit and the decrease in global real interest rates can be reconciled with the widespread view that American expansionary fiscal policy is partly the source of current trends. We then investigate empirically the medium-term determinants of the current account using a model that controls for factors related to institutional development. In addition to the conventional macroeconomic factors, we examine a series of environmental factors, including the degree of financial openness and the extent of legal development. We find that for …