Of course, global imbalances remain a key challenge. The April 2007 World Economic Outlook published by the IMF projects that imbalances are unlikely to fall much over the short term, and therefore continued large cross-border net capital flows will be needed to finance the current account imbalances at their present levels.
As you probably know, prior to the 1997 Asian financial crisis, fixed income markets in the AsiaPacific region were underdeveloped while financial intermediation depended greatly upon shortterm bank borrowings. In such a case, domestic or external shocks that hinder the smooth rollover of loans can lead to a major crisis – something we learned the hard way.