External Imbalances and Financial Crises

December 20, 2013

Preview Citation

Format: Chicago

Alan Taylor. External Imbalances and Financial Crises, (USA: International Monetary Fund, 2013) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Consider two views of the global financial crisis. One view looks across the border: it blames external imbalances, the unprecedented current account deficits and surpluses in recent years. Another view looks within the border: it faults domestic financial systems where risks originated in excessive credit booms. We can use the lens of macroeconomic and financial history to confront these dueling hypotheses with evidence. The credit boom explanation is the most plausible predictor of crises since the late nineteenth century; global imbalances have only a weak correlation with financial distress compared to indicators drawn from the financial system itself.

Subject: Balance of payments, Credit, Credit booms, Current account, Current account imbalances, Financial crises, Money

Keywords: Banking crisis risk, Capital controls, Credit, Credit boom, Credit booms, Current account, Current account imbalances, Economy, Europe, External imbalances, Financial crises, Financial crisis, Financial crisis recession, Financial openness, Global, Macro-financial crisis, Once-in-a-generation financial crisis event, Recession, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/260
Stock No:

WPIEA2013260
ISBN:

9781484322260
ISSN:

1018-5941

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