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ID:
169158
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| Summary/Abstract |
This paper summarizes global imbalance adjustment after the GFC and analyzes the evolution of balance of payments using a four‐quadrant diagram. We construct the framework of a stock adjustment mechanism to analyze the main driving factors for the imbalance in surplus/deficit countries and debtors/creditors in an attempt to determine the sustainability of imbalance adjustment. We find that imbalances have been reduced to some extent, but most countries have not achieved rebalance after the global financial crisis. Therefore, we propose an ideal path for global imbalance adjustment and summarize the policy practices of representative countries that have followed this route. Based on our analysis, we suggest that China should learn from the Australian experience and adopt a macro‐prudential assessment policy, actively adjust the domestic economic structure and optimize the structure of balance of payments.
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| 2 |
ID:
178483
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| Summary/Abstract |
China's current account surplus declined significantly from its peak of nearly 10 percent of GDP in 2007 to less than 1 percent in 2018. The new pattern offered fresh evidence for our understanding of China's current account dynamics. In this paper, we used flow of funds data to gauge its underlying driving forces. Specifically, by employing index decomposition analysis, we decomposed the current account from the perspective of savings and investment into three sectors: the household, corporate, and government sectors. We found that the decline in China's current account ratio was first driven by cyclical factors, i.e. weak corporate saving growth induced by the economic slump in 2009 as well as the following massive corporate investment bolstered by the government stimulus plan. However, such cyclical factors quickly subsided, and the subsequent current account balance reduction was later supported by structural factors, i.e. household savings declined enduringly and the Chinese government switched to a more expansionary fiscal policy. There are three possible explanations for the structural movement: reduced precautionary saving due to higher social security coverage ratio, lower corporate profits as a result of economic slowdown, and a twin deficit due to the government's more relaxed fiscal stance. The new facts, however, were not consistent with other current account theories focusing on long-term aspects of the saving–investment account puzzle, especially those relating to China's special demographic characteristics.
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