Global Rebalancing: Implications for Low-Income Countries

32 Pages Posted: 8 Nov 2011

See all articles by Yongzheng Yang

Yongzheng Yang

International Monetary Fund (IMF) - African Department

Date Written: October 2011

Abstract

While global rebalancing will mainly involve structural realignment among major advanced and emerging market economies, it could have significant impact on low-income countries (LICs). Simulations using a global general equilibrium model show that a more balanced global economy would tend to improve the current account balance in LICs with limited impact on domestic output. However, there could be adverse terms of trade effects on some LICs as the prices of manufactured goods rise. On the other hand, such prices increases could provide an impetus to export diversification in many LICs, raising growth in the long run. The output and terms of trade effects would be significantly amplified if structural adjustment is impeded by factor immobility and other rigidities.

Keywords: Consumer goods, Current account balances, Demand, Export competitiveness, Export growth, Low-income developing countries, Manufacturing, Price increases, Terms of trade

Suggested Citation

Yang, Yongzheng, Global Rebalancing: Implications for Low-Income Countries (October 2011). IMF Working Papers, Vol. , pp. 1-31, 2011. Available at SSRN: https://ssrn.com/abstract=1956386

Yongzheng Yang (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States
202-623-4339 (Phone)
202-623-4237 (Fax)

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