Template-Type: ReDIF-Paper 1.0
Author-Name:  Stefan Avdjiev
Author-X-Name-First: Stefan
Author-X-Name-Last: Avdjiev
Author-Name:  Kristin Forbes
Author-X-Name-First: Kristin
Author-X-Name-Last: Forbes
Author-Name:  Tsvetelina Nenova
Author-X-Name-First: Tsvetelina
Author-X-Name-Last: Nenova
Author-Name:  Marjorie Santos
Author-X-Name-First: Marjorie
Author-X-Name-Last: Santos
Title: This paper analyses the evolution and drivers of the stock of global imbalances in order to assess associated vulnerabilities and potential adjustment scenarios. These imbalances have recently increased sharply, with a deterioration in the US net international investment position (NIIP) mirrored by NIIP improvements in most other major economies. We decompose these NIIP changes into their proximate drivers for a sample of 28 economies and find that financial factors (including valuation changes and investment income flows) are the primary drivers of global imbalances at both short and long horizons, while trade also plays a significant role (especially at long horizons). Valuation gains on international investment positions have supported economic growth in many countries since 2010, while also increasing their vulnerability to financial market adjustments. To assess the implications and potential risks, we simulate the spillovers through this cobweb of global imbalances from: (i) a sharp dollar depreciation, (ii) a repricing of equity markets, (iii) higher interest rates, and (iv) a halving of trade imbalances. These scenarios highlight the large international spillovers that would be associated with any reduction in global imbalances, the heterogeneous impact of various rebalancing mechanisms on individual countries and the limits of popular proposals for reducing these imbalances. The persistence of global imbalances underscores the importance of building resilience to the large spillovers that can occur through this cobweb of international exposures.
Creation-Date: 2026-09
File-URL: https://www.bis.org/publications/working-paper-1379-unraveling-cobweb-global-imbalances-drivers-vulnerabilities-and-adjustment-scenarios.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publications/working-paper-1379-unraveling-cobweb-global-imbalances-drivers-vulnerabilities-and-adjustment-scenarios
File-Format: text/html
Number: 1379
Keywords: global imbalances, net international investment position, spillovers, current account, trade deficit, trade surplus, exorbitant privilege, international debt, dollar depreciation
Classification-JEL: F1, F3, F4, G15
Handle: RePEc:bis:biswps:1379