Theorizing about global imbalances: an inequality perspective

Abstract

Current account imbalances, now manifested as intensified trade wars between countries, have recently received much attention from researchers. This article reviewed this global issue from a new perspective complementary to the existing research. The study proposed a simple economic model and discovered that the current account balance is inversely proportional to the ratio of income to consumption inequality. This ratio combines all consumption smoothing schemes that depend on political interventions that can alleviate increases in income inequality. In the long run, however, current accounts could be consequently affected by a short-sighted policy.

Revisiting the effects of labour, capital and scale-augmenting technological progress on steady-state output

“…Such conditions may be rigorously demonstrated through straightforward methods, or can be validated from the facts. Saving rates have dropped in the US and other OECD countries but have risen in China and other emerging-market economies over lengthy periods of time, according to real-world statistics (Yin and Sheng 2021;. Trade is never generally regarded as balanced in any country, but 𝑁𝑁𝑋𝑋 𝑡𝑡 ≠ 0, and global imbalances are frequently the basis of trade wars and international disagreements (Obstfeld and Rogoff 2009).…”