Agnès Bénassy-Quéré: Global imbalances - what's new?

Speech by Ms Agnès Bénassy-Quéré, Second Deputy Governor of the Bank of France, at the CEPR Paris Symposium, Paris, 8 December 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Slides accompanying the speech 

Welcome to the Banque de France. We are extremely happy with our partnership with the CEPR. The symposium is its most visible part, and having it in Paris means a lot to us - we really appreciate this collaboration.

My topic today is global imbalances. I will start with a few stylized facts, first coming back to the old period of the gold standard.

The long history of global imbalances: decline and re-emergence of global imbalances in the XXIst century

Global imbalances are not new: they were already very large during the gold standard period. On my slide [slide 3], the left-hand graph shows countries with current account surpluses up to around 6% of GDP. The right-hand graph shows countries with around 10% of GDP deficits. The price–specie flow mechanism, which should have corrected imbalances under the Gold Standard, was not working properly. Starting in years 1970's, with the introduction of flexible exchange rate regimes, external adjustment would hopefully be facilitated.

[slide 3: Global imbalances have a long history]

The 21st century started off with growing current account imbalances, followed by a contraction of these imbalances after the Global Financial Crisis [slide 4]. Then, after the COVID crisis, global imbalances started to grow again. Several explanations were given for the re-emergence of global imbalances in the 21st century: consumption smoothing, international capital mobility, more efficient allocation of capital, but also the savings glut as well as the exorbitant privilege.