Problem

Imbalance in economic relationships among countries

Other Names:
Divergences in national macroeconomic policies
Uncoordinated macroeconomic policies of governments
Mismatch of domestic macroeconomic policies
Incidence:
During much of the 1980s, the macroeconomic policies of the USA were expansionary whilst those of Japan and European countries were contractionary. Low tax revenues and high public spending caused USA general and federal budget deficits and negative saving-investment balance reflected in the current account deficit. Japan and (the then) Germany FR followed more restrictive fiscal policies which led to current account surpluses. The outcomes were characterized by the USA federal budget deficit (associated with the current account deficit and high interest rates), the disproportionately low level of domestic demand in Japan and Germany, and the high level of current account surpluses maintained by the newly industrialized countries of east Asia.
Problem Type:
C: Cross-sectoral problems
Date of last update
02.12.1999 – 00:00 CET