The G20 and Global Imbalances
The G20 has continued to make global imbalances and their correction a focus of its deliberations. The language they have used to address this is an interesting combination of the overly specific and overly vague that is typical of international agreements. This is clearly designed to limit the discretion that can be exercised by the IMF when it undertakes the exercise. It is designed to similarly limit the ability of the countries that are the subjects of the exercise to dispute Fund’s first-round findings. How the IMF will proceed at this second stage may have been left deliberately vague because identifying the causes of imbalances and the policy measures needed to correct them is even more difficult analytically and contentious politically than simply determining when an imbalance is large. As the G20 process is unlikely to protect us from the risk posed by the current constellation of global imbalances and their disorderly unwinding, members need to take other steps to prepare themselves for this eventuality.