Rebalancing a Lopsided Global Economy

47 Pages Posted: 7 Jun 2020

See all articles by Adam Triggs

Adam Triggs

Australian National University (ANU) - Crawford School of Public Policy

Date Written: November 2019


The growth in global current account imbalances has produced a lopsided global economy, characterised by large lenders and large borrowers, large savers and large consumers, and large exporters and large importers. For many years, the G20 has committed to reducing these imbalances. But has it been successful? Are the G20's policy prescriptions for reducing these imbalances the right ones? And have countries altered their policies because of the discussions and commitments in the G20 or not? The paper assesses whether the G20 has achieved its goal of reducing global current account imbalances. It then uses the G‐Cubed (G20) model — a multi‐country, multi‐sector, intertemporal general equilibrium model — to assess the impacts of the G20's proposed policy agenda. It shows that the G20's policy prescriptions — reducing the fiscal deficit in the United States, increasing public infrastructure investment in Germany and increasing domestic consumption in China — are not necessarily effective in reducing current account imbalances and, when imbalances are reduced, it often comes at the cost of the real economy. Finally, the paper uses the results from in‐depth interviews with 61 policymakers from across all G20 countries — including Janet Yellen, Kevin Rudd, Ben Bernanke, Haruhiko Kuroda, Jack Lew, Mark Carney and 55 others — to explore whether the G20's focus on current account imbalances influences domestic policies. It finds that, while the G20's influence has been marginal, there are ways in which it could be strengthened. The paper concludes with a discussion on how the G20's agenda could be reformed to help reduce current account imbalances in the future.

Keywords: computable general equilibrium models, econometric modelling, fiscal policy, international trade and finance, intertemporal choice, macroeconomics, mathematical methods, structural reform

Suggested Citation

Triggs, Adam, Rebalancing a Lopsided Global Economy (November 2019). The World Economy, Vol. 42, Issue 11, pp. 3188-3234, 2019, Available at SSRN: or

Adam Triggs (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200

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