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The Origins of Persistent Current Account Imbalances in the Post-Bretton Woods Era
- Source :
- Comparative Political Studies (2019)
- Publication Year :
- 2019
- Publisher :
- SAGE Publications, 2019.
-
Abstract
- Why do some countries run persistent current account surpluses? Why do others run deficits, often over decades, leading to enduring global imbalances? Such persistent imbalances are the root cause of many financial crises and a major source of international economic conflict. We propose that differences in wage-bargaining institutions explain a large share of imbalances through their effect on the trade balance. In countries with coordinated wage bargaining, wage growth in export industries can be restrained to ensure competitiveness, leading to persistent trade surpluses. We estimate the contribution of these institutions to trade balances in Organisation for Economic Co-operation and Development (OECD) member countries since 1977 and find ample support for our hypothesis. Contrary to much of the literature, the choice of fixed or floating exchange rate regimes has only a small effect on trade or current account balances. In other words, internal adjustment in surplus countries via wage-bargaining institutions trumps external adjustment by deficit countries.
- Subjects :
- Floating exchange rate
medicine.medical_specialty
Sociology and Political Science
Conflict economics
Exchange rates
05 social sciences
1. No poverty
Balance of trade
Global imbalances
International economics
Current account
Root cause
0506 political science
Macroeconomic policy
Wage bargaining institutions
ddc:320
0502 economics and business
8. Economic growth
050602 political science & public administration
medicine
Economics
050207 economics
Wage growth
Wage bargaining
Subjects
Details
- ISSN :
- 15523829 and 00104140
- Volume :
- 53
- Database :
- OpenAIRE
- Journal :
- Comparative Political Studies
- Accession number :
- edsair.doi.dedup.....6241343b480834fa9d5ed67811973ab5