Summary According to David Hume, the specie flow mechanism allows a stabilisation effect in the case of diverging current account imbalances in a gold standard system. Likewise in EMU, trade deficits and capital flight in GIPS countries generate a transfer of euro reserves into surplus...

This paper surveys the academic and policy debate on the origins of global imbalances, their prospects after the global crisis, and their policy implications. A conventional view of global imbalances considers them to primarily result from macroeconomic policies and cyclical forces that cause...