Global Imbalances: Can Canada avoid sustaining collateral damage? examines the causes of the current large deficits and surpluses among major nations, and indicates that these imbalances pose a serious risk to the world economy. Canada can and should take steps to minimize economic damage that could arise from these imbalances.
Document highlights
The U.S. economy has drifted into a significant external deficit, compounded by recent fiscal deficits. Other major economies, led by Japan and China, have generated large positive external imbalances through trade surpluses and rising foreign exchange reserves. Together, these global imbalances now pose a major, growing risk to the world economy.
Ideally, the members of the G-7 would be treating global imbalances as their top priority and would be implementing plans for concerted macroeconomic action, but they are not doing so. Canada, with its solid macroeconomic foundation, is in a strong negotiating position within the G-7 but may ultimately need to buffer itself from these imbalances.
Is there anything Canada can do to avoid sustaining collateral damage during an economic slowdown related to these global imbalances? It is unlikely that we can completely avoid negative effects, but there are steps that could minimize the potential damage.
There are no reviews yet.