The expression “global imbalances” refers to saving-investment imbalances within – and external imbalances among – a number of systemically relevant countries, which were unsustainable over a medium- to long-term perspective. Conceptually, it is helpful to separate the drivers of global imbalances into structural and cyclical components. 3 Structural issues have been at play in the development of imbalances in advanced economies.
My second point concerns the conduct of monetary policy after a bubble bursts. Monetary easing can affect the economy either through bringing forward future demand or bringing in overseas demand. In the former case, available future demand gradually decreases as monetary easing is prolonged.