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The 'Other' Imbalance and the Financial Crisis
Social Science Research Network
One of the main economic villains before the crisis was the presence of large "global imbalances." The concern was that the U.S. would experience a sudden stop of capital flows, which unavoidably would drag the world economy into a deep recession. However, when the crisis finally did come, the mechanism did not at all resemble the feared sudden stop. Quite the opposite, during the crisis net capital inflows to the U.S. were a stabilizing rather than a destabilizing source. I argue instead thatdoi:10.2139/ssrn.1529764 fatcat:2h2nkvomyvgjrmvqq2atavczqa