Explaining global imbalances: the role of central-bank intervention and the rise of sovereign wealth funds

2021 ◽  
Vol 9 (1) ◽  
pp. 61-82
Author(s):  
Richard Senner ◽  
◽  
Didier Sornette ◽  
Keyword(s):  
Public Sector ◽  
Current Account ◽  
Central Banks ◽  
Necessary Condition ◽  
Global Imbalances ◽  
Sovereign Wealth Funds ◽  
Goods And Services ◽  
Financial Account ◽  
Foreign Assets

Neoclassical economic theory views current-account imbalances as the result of (individual) decisions to save more than to invest domestically. Monetary analysis in the Keynesian tradition rejects such approaches and emphasizes that a country's net savings are the result, not the cause, of net selling of goods and services to foreigners. The latter, in turn, depends on global demand patterns and absolute advantages between countries. We complement this Keynesian approach, taking a closer look at the financial account of the balance of payments: a necessary condition for countries to net-sell goods and services to foreigners is the willingness of domestic sector(s) to accumulate net foreign assets. While previous analysis of global imbalances has partially discussed the role of central banks' reserve accumulation it has failed to incorporate the macroeconomic role of sovereign wealth funds (SWFs). We analyse eight surplus countries' external positions and find that the public sector typically purchases and manages significant amounts of foreign assets via both central banks and SWFs. This, in turn, supports current-account surpluses. We then consider the particular case of Switzerland where, contrary to other surplus countries, public-sector purchases of foreign assets had been absent for a long time, yet set in massively after 2008.

scholarly journals ESTIMATION OF BALANCE OF PAYMENTS OF UKRAINE

2021 ◽  
Author(s):  
Volodymyr Tyshchenko ◽  
Olena Tyshchenko
Keyword(s):  
Current Account ◽  
The State ◽  
Balance Of Payments ◽  
Current Account Surplus ◽  
Foreign Economic Policy ◽  
Goods And Services ◽  
Financial Account ◽  
Positive Balance ◽  
Main Components ◽  
The Current Account

The article highlights the features of the formation and assessment of the balance of payments in Ukraine. The balance of payments of Ukraine is a functional macroeconomic model that reflects all transactions that are carried out between the subjects of the national economy and the subjects of the economies of other countries of the world. This model allows you to develop and implement a sound foreign economic policy of Ukraine, analyze the state of commodity and financial markets, conduct scientific research of economic processes in the state, etc. Ukraine is actively implementing the methodology of balance of payments formation according to the recommendations of the International Monetary Fund. Ukraine's balance of payments by main components is grouped into two accounts: "capital and financial transactions" and "current transactions": capital transactions cover all transactions related to the receipt or payment of capital transfers and the acquisition or sale of property rights and non-financial assets; current transactions include all transactions between residents and non-residents on real values, as well as transactions on the free provision or receipt of valuables for current use. Like any other "balance of payments" consists of receipts and payments. It is active (surplus) when revenues are greater than payments and passive (deficit) when payments are greater than revenues. Based on the assessment of the balance of payments of Ukraine for 2020, certain conclusions can be drawn: stable external demand for food softened the drop in exports of goods from Ukraine during the COVID-19 pandemic, and the increase in prices contributed to its growth at the end of 2020; despite a slight recovery in domestic demand in the IV quarters of 2020, imports of goods to Ukraine by the results of 2020 decreased significantly; the current account surplus in Ukraine in 2020 was provided by a significant positive balance of trade in services and a record surplus of the primary income account; capital outflow from Ukraine on the financial account stopped at the end of 2020 due to the optimism of investors; despite the crisis and significant payments on external debt, Ukraine's gross reserves increased in 2020, and the financial crisis once again confirmed the importance of both international support and a balanced macroeconomic policy. The current account surplus in Ukraine in 2020 reached one of the largest levels in the history of Ukraine, it was formed due to a significant decrease in imports of goods and services, a reduction in payments on primary income and the relative stability of exports of goods and remittances. The article proposes recommendations for improving approaches to the formation of the balance of payments in Ukraine using certain methods when regulating the balance of payments of the state.

Before the Fall

2017 ◽  
Author(s):  
Martin Sandbu
Keyword(s):  
Interest Rate ◽  
Exchange Rates ◽  
Monetary Union ◽  
Current Account ◽  
Real Exchange Rates ◽  
Central Banks ◽  
Current Account Deficits ◽  
Nominal Exchange Rates ◽  
European Economies

This chapter discusses the role of Europe's monetary union in creating a crisis that first erupted in US mortgages. Because of their monetary union, European economies racked up greater risks in the 2000s boom than they would have done had they kept their individual currencies. The factors invoked to blame the euro include the destabilising effect of a single interest rate for the entire eurozone; the misalignment of real exchange rates when nominal exchange rates could no longer adjust; the ability to run current account deficits that were too large and lasted too long; and, finally, the fact that debt was accumulated in a currency that could not be printed at will by national central banks. The chapter argues that all these factors have been commonly misunderstood.

Global Imbalances in the World Economy

2008 ◽  
pp. 51-61
Author(s):  
A. Apokin
Keyword(s):  
World Economy ◽  
Trade Deficit ◽  
Global Imbalances ◽  
Sovereign Wealth Funds ◽  
The Us ◽  
The World

The paper reviews an evolution of key political and economic hypotheses in the literature from 1993 to 2007 related to emergence, stability and correction mechanisms of the so-called "global imbalances" which are connected to the US trade deficit. The special "counterweighting" role of sovereign wealth funds in possible mechanisms of global imbalances’ correction in medium- and long-term perspective is considered.

scholarly journals The Role of Sovereign Wealth Funds in Promoting the External Stability of the Home Economy

2018 ◽  
Vol 5 (9) ◽  
pp. 96
Author(s):  
Osama El-Baz
Keyword(s):  
Current Account ◽  
Global Economy ◽  
Government Expenditure ◽  
Dynamic Panel Data ◽  
Current Account Balance ◽  
Sovereign Wealth Funds ◽  
Data Set ◽  
External Stability ◽  
The Current Account

<p>Sovereign Wealth Funds (SWFs) are currently playing an important role in the global economy. We investigated the role of SWFs in promoting the external stability of the home economy using a data set spanning 106 countries over the period (1997-2015), whereby Arellano- Bond dynamic panel data models were employed to assess the treatment effect of SWFs on both the level of the current account balance and its volatility. Empirical results revealed that SWFs can play an important role in smoothing the management of the current account balance in the long run. Nonetheless, commodity-based SWFs are expected to outperform non-commodity based SWFs in this respect. Our policy recommendation is that emerging economies should consider the establishment of SWFs to enhance the external stability of their home economies, allocating privatization proceeds to these investment vehicles to protect the rights of future generations in benefiting from them rather than directing such proceeds to finance current government expenditure and budget deficit. Finally, attention should be paid to the implementation of the generally accepted principles and practices when establishing SWFs to ensure their ability to function properly.  </p>

scholarly journals SOVEREIGN WEALTH FUNDS IN THE SYSTEM OF GLOBAL FINANCIAL IMBALANCES: AN ANALYSIS OF BENEFITS AND THREADS FROM THE PERSPECTIVE OF GLOBAL FINANCIAL STABILITY

2018 ◽  
pp. 60-66
Author(s):  
N. Reznikova ◽  
O. Ivashchenko
Keyword(s):  
Financial Market ◽  
Hedge Funds ◽  
Financial Stability ◽  
Private Investment ◽  
Central Banks ◽  
Investment Funds ◽  
Sovereign Wealth Funds ◽  
Current Consumption ◽  
Global Financial System

A new active component has appeared in the contemporary global financial system, Sovereign Wealth Funds, demonstrating the growing investment capacities in some countries. This newly born category of investors reflects a wide array of economic policy intentions in the realities when current consumption or investment of considerable funds resulting from budget surplus and positive payment balance becomes either undesirable or unfeasible. The article’s objective is to analyze operation of Sovereign Wealth Funds as an innovative and leading actor of the global financial market, coming in place of hedge funds and private investment funds and challenging the role of central banks as biggest lenders. The position of Sovereign wealth Funds in the system of global financial imbalances is studied; benefits and threats from their operation are analyzed from the perspective of global financial stability.

At the final stage of the global crisis: Economic tasksin 2017-2019

2018 ◽  
pp. 5-29 ◽  
Author(s):  
V. A. Mau
Keyword(s):  
Economic Growth ◽  
Final Stage ◽  
Government Regulation ◽  
Inflation Targeting ◽  
Social Dynamics ◽  
Growth Stimulation ◽  
Central Banks ◽  
Economic Area ◽  
National Trends

The paper deals with the global and national trends of economic and social development at the final stage of the global structural crisis. Special attention is paid to intellectual challenges economists will face with in the post-crisis world: prospects of growth without inflation, new global currencies and the role of cryptocurrencies, central banks independence and their role in economic growth stimulation, new tasks and patterns of government regulation, inequality and growth. Special features of Russian post-crisis development are also under consideration. Among them: prospects of macroeconomic support of growth, inflation targeting, new fiscal rule, social dynamics and new challenges to welfare state. The paper concludes that the main obstacles for economic growth in Russia are concentrated in the non-economic area.

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