European Commission Directorate-General for Economic and Financial Affairs, Economics paper 483
Abstract
The objective of this paper is to examine the possible implications of the adjustment of global and intraEuropean imbalances, particularly in terms of the macroeconomic impacts. We design a series of
macroeconomic scenarios and look at the impact of global and European shocks (corresponding to various
policies aimed at reducing imbalances) on the economies of the biggest world players - the US, China, the oil
exporting countries, and the EU and its individual members. The methodological approach we adopt is based
around a series of simulations using the National Institute’s global macroeconomic model NIGEM. Key
findings suggest that while global imbalances may be adjusted either through policies in the US or in China,
the adjustment on the Chinese side is somewhat less costly for Europe than the adjustment on the US side.
Intra-European imbalances may be reduced through various policies, an appropriate policy mix is probably
required