Economic structure, cost outsourcing and global imbalances

The past few decades have witnessed remarkable rates of technological progress and output growth in many countries affected by economic globalization. However, the recent spectacular expansion of trade has been accompanied by financial crises that have occurred in both developing and developed countries since the 1980s. The most recent crisis exposed the severities and consequences of accumulated global imbalances (Leblang and Pandya 2007; Nesvetailova and Palan 2010; Vermeiren 2013). The world economy has experienced not only actual imbalances in savings/investment and current-account positions-as reflected in net capital flows-but also financial imbalances, large asset bubbles, and rampant speculative activities across borders, occurring without regard for economic fundamentals (Gu and Sheng 2010).