Trade imbalances are not the problem

Continued fiscal stimulus, restrictions on capital flows and declining global imbalances will define the world economic order, according to the (mostly) shared view of economists Jagdish Bhagwati and YV Reddy.
With roads like this, surpluses won't last long
With roads like this, surpluses won't last long

With economic liberalisation, free capital flows and the efficiency of financial markets under increasing scrutiny, critics are asking whether the recipe used by policymakers during the past three decades is sustainable.

Against this uncertain background, two eminent economists discussed whether trade imbalances and currency disputes could derail global growth at the 14th annual Credit Suisse Asian Investment Conference in Hong Kong yesterday.

“The good news is that the world economy has not gone into freefall as doomsters predicted the bad news is that it remains vulnerable,” said Jagdish Bhagwati, professor of economics and law at Columbia University and senior fellow for international economics at the Council on...

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