Global Fiscal Adjustment and Trade Rebalancing : Global Fiscal Adjustment and Trade Rebalancing

The emergence of substantial fiscal deficits and a large build up of government debt in major advanced economies will inevitably lead to a period of fiscal consolidation in coming years. In an earlier paper, McKibbin and Stoeckel (2010) explored the effects of this fiscal adjustment in advanced economies on the global economic outlook. This paper focuses on the differences between the impacts of fiscal policy in advanced versus emerging economies. In particular, the need for more fiscal spending on infrastructure in emerging economies and the need for fiscal consolidation in advanced economies leads naturally to the question of what this asymmetric fiscal adjustment might do to global trade balances as well as global economic growth over the coming decades. The adjustment needed in both regions is substantial and the asymmetry of the adjustment implies important consequences for trade and capital flows between regions as well as asset price adjustments within and between regions.

Bibliographic Details

Main Authors:	McKibbin, Warwick J., Stoeckel, Andrew B., Lu, YingYing
Language:	English
Published:	World Bank, Washington, DC 2012-04
Subjects:	ACCOUNTING, ADJUSTMENT COSTS, ADVANCED COUNTRIES, ADVANCED COUNTRY, ADVANCED ECONOMIES, ADVANCED ECONOMY, AFFILIATED ORGANIZATIONS, AGGREGATE CONSUMPTION, AGGREGATE DEMAND, AGGREGATE INVESTMENT, AGRICULTURE, ASSET PRICE, ASSET VALUATION, BANK BALANCE SHEETS, BANK POLICY, BENCHMARK, BOND YIELDS, BORROWER, BUDGET SURPLUS, CAPITAL ACCOUNT, CAPITAL ACCUMULATION, CAPITAL FLOWS, CAPITAL INFLOW, CAPITAL INFLOWS, CAPITAL INVESTMENT, CAPITAL OUTFLOW, CAPITAL OUTFLOWS, CAPITAL RETURN, CAPITAL RETURNS, CAPITAL STOCK, CAPITAL STOCKS, CENTRAL BANK, CENTRAL BANKS, CONSOLIDATION, CONSOLIDATIONS, CONSUMERS, CREDIBILITY, CREDIT GROWTH, CURRENCY, CURRENCY REGIME, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICITS, DEBT, DEBT BURDEN, DEBT LEVELS, DEBT RATIOS, DEBT SERVICE, DEBTS, DECLINE IN INVESTMENT, DEPRECIATION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIMINISHING RETURNS, DISPOSABLE INCOME, DURABLES, ECONOMIC CONDITIONS, ECONOMIC CONTRACTION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC OUTCOMES, ECONOMIC OUTLOOK, ECONOMIC POLICY, ECONOMIC RESEARCH, ELASTICITY, EMERGING ECONOMIES, EQUILIBRIUM, EURO ZONE, EXCHANGE RATE, EXCHANGE RATE APPRECIATION, EXCHANGE RATE POLICY, EXCHANGE RATES, EXPANSIONARY MONETARY POLICY, EXPECTED RETURNS, EXPENDITURE, EXPENDITURE INCREASE, EXPORTERS, EXPORTS, FEDERAL RESERVE, FINANCIAL ASSETS, FINANCIAL CAPITAL, FINANCIAL CRISIS, FINANCIAL FLOW, FISCAL BALANCE, FISCAL BALANCES, FISCAL CONSOLIDATION, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL POLICY, FISCAL POSITION, FOREIGN EXCHANGE, FREE BOND, GDP, GENERAL EQUILIBRIUM, GENERAL EQUILIBRIUM MODEL, GLOBAL ECONOMY, GLOBAL TRADE, GOVERNMENT BORROWING, GOVERNMENT DEBT, GOVERNMENT DEFICIT, GOVERNMENT DEFICITS, GOVERNMENT EXPENDITURE, GOVERNMENT INVESTMENT, GOVERNMENT SPENDING, GROSS DEBT, HOLDING, HUMAN CAPITAL, IMBALANCE, IMBALANCES, IMPORTS, INCOME LEVELS, INFLATION, INFLOW OF CAPITAL, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE INVESTMENTS, INITIAL DEBT, INTEREST PAYMENTS, INTEREST RATE CHANGES, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL MACROECONOMICS, LENDER, LEVEL OF DEBT, LONG BOND, LOOSE MONETARY POLICY, MACROECONOMIC ANALYSIS, MACROECONOMIC EFFECTS, MACROECONOMICS, MARGINAL PRODUCT, MARKET FAILURE, MARKET FORCES, MARKET VALUATION, MONETARY ECONOMICS, MONETARY FUND, MONETARY POLICY, MONETARY POLICY INDEPENDENCE, MULTIPLIERS, NATIONAL CURRENCY, NET CAPITAL, NET EXPORTS, NOMINAL EXCHANGE RATE, NOMINAL INTEREST RATE, NOMINAL INTEREST RATES, NOMINAL WAGE, OPTIMIZATION, OTHER CURRENCIES, OUTPUT, OUTPUT LOSSES, PEG, POLITICAL ECONOMY, POPULATION GROWTH, POSITIVE SPILLOVER, PRIVATE CAPITAL, PRIVATE INVESTMENT, PRIVATE RETURNS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PUBLIC BORROWING, PUBLIC DEBT, PUBLIC DEFICITS, PUBLIC EXPENDITURE, RATE OF RETURN, RATES OF RETURN, REAL EXCHANGE RATES, REAL GDP, REAL INTEREST, REAL INTEREST RATES, RECESSION, RETURN, RISK PREMIUMS, SAVINGS, SHORT INTEREST, SOVEREIGN BOND, SOVEREIGN RISK, STEADY STATE, STOCK CHANGE, STOCK DATA, TAX, TAX LIABILITIES, TELECOMMUNICATIONS, TRADE BALANCE, TRADE BALANCES, TRADE BARRIER, TRADE DEFICIT, TRADE PATTERNS, TRADE PROTECTION, TRADE SURPLUSES, TRUSTEES, UNEMPLOYMENT, VALUE ADDED, WEALTH, WORLD ECONOMY,
Online Access:	http://documents.worldbank.org/curated/en/2012/04/16235041/global-fiscal-adjustment-trade-rebalancing-global-fiscal-adjustment-trade-rebalancing https://hdl.handle.net/10986/6047
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