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Friday, April 9, 2010

Trade Imbalances

Trade imbalances are widespread throughout the world and persistent over time.

In order to reduce the gap with rich countries, poor countries have to rise much faster than them, which are usually their main commercial partners. But this leads to trade deficit, which risks to jeopardize growth with alternate phases of "stop-and-go".

Trade balance tend to be strongly anti-cyclical: in boom periods it usually exhibits deficits, whereas in recessions a trade surplus can help inverting the business cycle. The reasons are explained in depth here and here.

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