Global imbalances: common problem to solve for both advanced and emerging market economies

The recent crisis has shown that in order to enhance financial stability the international community should not only remove deficiencies in the regulation of financial institutions and markets, but also find a durable solution to the problem of global imbalances. The initial result of the financial crisis and economic recession was the lessening of global imbalances, including the reduction of the current account deficits and surpluses in the leading trading nations and moderate growth in the savings rate in advanced economies. In the future, however, unless productive measures are taken, the post-crisis global economy with unprecedentedly big public debt in many systemically important countries may again face the perils of global imbalances such as currency wars, protectionist pressures and financial instability. Solutions to this problem are as varied as its causes and call for coordinated actions by both the developed and developing countries. In addition to the adjustment of the macroeconomic and exchange rate policies, there is a need to proceed with structural reforms aimed at raising the savings rate in the advanced economies and stimulating domestically driven growth in the emerging market countries. Taking into account the persisting precautionary motives for many developing economies with volatile capital account to hold sizeable international reserves, the development of a fair global financial safety net within the reform of the international financial infrastructure alongside with the strengthening of the national financial systems will play an important role in restoring balanced global growth.