Photo of Charles Wyplosz

Charles Wyplosz is Professor of Economics at the Graduate Institute of International Studies, Director of the International Center for Money and Banking Studies, and Policy Director of the Centre for Economic Policy Research.

Today, much of the world is fixated on current-account imbalances, with surplus countries demonized by deficit countries for supposedly hoarding demand, and deficit countries demonized by surplus countries for their supposed profligacy. But, while the preoccupation with imbalances is justified, the assumptions often underlying it are not.

AUG 11, 2017 3, Project Syndicate

GENEVA – During the early 2000s, there were myriad warnings that the world economy was headed for a crisis, owing to large and persistent external imbalances. The doomsayers turned out to be only half right: the world economy did go into a tailspin, beginning in the summer of 2007, but not because of the imbalances.

Instead, the Great Financial Crisis was rooted primarily in excessive risk-taking by financial intermediaries – a result of the poor regulation and supervision that emerged from earlier financial liberalization. Current-account balances did not even correlate with performance through that crisis.  Den Rest des Beitrags lesen »