The expression ‘global imbalances’ has become somewhat fashionable of late. But what exactly are these imbalances, and why are they important. The IMF in its most recent World Economic Outlook draws attention to two of them:

The (current) expansion has become less balanced. Growth has been stronger than expected in the United States, where the ?soft spot? proved more moderate than previously thought; in China, where activity remains buoyant despite tightening measures; and in most emerging market and developing countries. In contrast, growth in Europe and Japan has been disappointing, reflecting?to different extents? faltering exports and weak final domestic demand.

Global current account imbalances have widened. The U.S. current account deficit is estimated at a record 5.7 percent of GDP in 2004, with the effects of the depreciation of the U.S. dollar to date offset by continued strong domestic
demand relative to its trading partners and higher oil prices. This is matched by current account surpluses in emerging Asia, Japan, the oil-producing countries in the Middle East and the Commonwealth of Independent States (CIS), and?to a much lesser extent? the euro area.

Well here we have two of the more obvious of those famed ‘imbalances’ – imbalances in growth and in trade accounts – but are there more of them?