Persistently large external imbalances in the world economy contributed to the outbreak of the recent financial crisis. The current account imbalances were particularly severe among the economies that border on the Pacific - the United States ran large deficits, with offsetting surpluses in East Asia. The depth and breadth of the global recession also demonstrated the need for a coordination of national policies to achieve a sustained recovery.While the magnitude of global-trade disruption led to some reduction in the size of the imbalances, closer examination suggests that the progress may prove temporary. On the other hand, significant changes in the underlying patterns of saving and investment suggest that some of the recent rebalancing may prove to be more permanent. Are such imbalances really a problem? If so, why and for whom? What should be done about them - if anything - and what does the future likely hold for transpacific trade relations? In this timely book, Asian and American economists explore those important questions.
Barry P. Bosworth is a senior fellow in the Economic Studies program at the Brookings Institution, where he holds the Robert V. Roosa Chair. His previous books include Productivity in the U.S. Services Sector: New Sources of Growth (Brookings), which he cowrote with Jack Triplett.Masahiro Kawai is dean of the Asian Development Bank Institute and a former chief economist for the World Bank's East Asia and the Pacific region. He is coeditor of Asian Perspectives on Financial Sector Reforms and Regulation and Financial Market Regulation and Reforms in Emerging Markets, both published by Brookings.