1. 1 Addressing Global Imbalances: The Role for Macroeconomic Policy by Otmar Issing (ECB) Comments by Agnès Bénassy-Quéré (CEPII and Univ. Paris X) International Symposium of the Banque de France Friday 4 th November 2005

2. 2 Main message of the paper Sources of global imbalances: –higher productivity growth in the US; –fall in US real interest rate; –US fiscal deficit; –exchange-rate policies in Asia. What should be done: –raise private savings rate in deficit countries; –lower private savings rate in surplus countries, raise investment; –do not overstate the role of US fiscal deficit and of exchange-rate regimes.

3. 3 1. Saving shifting Orders of magnitude –impact on world growth How? –US interest rate: risk of triggering crises; –US fiscal policy: less risky for other countries; –Chinese saving rate: social protection, pensions, financial system.

4. 4 Orders of magnitude

5. 5 Orders of magnitude (ctd)

6. 6 Orders of magnitude (end)

7. 7 Could South-East Asia compensate for the USA?

8. 8 Could South-East Asia make it for the USA? (end) Assuming unit income elasticities + constant market shares

9. 9 2. Exchange-rate adjustments CEPII (2005): BEER model of the G20 US real effective exchange rate close to equilibrium in 2005 Eurozone, Canada, Japan: REER close to equilibrium too Mexico has adjusted the wrong way Korea far from equilibrium, but low share in US trade Main non-adjuster: China –still pegged on the USD de facto –short-term risks of a float, not only for China –minor impact on US deficit (5.2% of US exports, 11.8% of US imports)

10. 10 Exchange-rate Adjustments

11. 11 Exchange-rate Adjustments 54.9% of US exports, 47.4% of US imports

12. 12 Exchange-rate Non-Adjustments 12.9% of US exports, 21.1% of US imports

13. 13 REER Misalignments in 2004.q3 (panel estimation)