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Transpacific trade imbalances: causes and cures
About the author
Warwick McKibbin
Professor Warwick McKibbin was a Professorial Fellow at the Lowy Institute for International Policy until October 2012.
Topics
The authors find the fundamental cause of trade imbalance since 1997 is changes in saving-investment gaps, attributed to the surge of the U.S. fiscal deficits and the decline of East Asia's private investment after the 1997 financial crisis.
An appreciation of East Asia exchange rates (including by China) alone will have an impact on economic activity in the appreciating economies, but does little to change the underlying savings and investment patterns and therefore has insignificant impact on the transpacific trade balance.
