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Global Financial Imbalances: The Future Impact of Asian and Middle East Surpluses. Karen Johnson April 24, 2006. Exchange Rates: Chinese RMB. Source: FRB weights. Exchange Rates: Korean Won. Source: FRB weights. Exchange Rates: Japanese Yen. Source: FRB weights. - PowerPoint PPT Presentation
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Global Financial Imbalances: The Future Impact of Asian and Middle East Surpluses
Karen Johnson
April 24, 2006
Exchange Rates: Chinese RMB
Source: FRB weights
0.118
0.120
0.122
0.124
0.126
0.128
1995:1 1996:1 1997:1 1998:1 1999:1 2000:1 2001:1 2002:1 2003:1 2004:1 2005:1 2006:1
US
do
llars
/RM
B
50
60
70
80
90
100
110
120
130
140
150
rea
l eff
ec
tiv
e (
19
95
:Q1
= 1
00
)
US dollars/RMB
real effective RMB
real effective dollar
Exchange Rates: Korean Won
Source: FRB weights
0.0004
0.0006
0.0008
0.0010
0.0012
0.0014
1995:1 1996:1 1997:1 1998:1 1999:1 2000:1 2001:1 2002:1 2003:1 2004:1 2005:1 2006:1
US
do
llars
/wo
n
50
60
70
80
90
100
110
120
130
140
150
rea
l eff
ec
tiv
e (
19
95
:Q1
= 1
00
)
US dollars/won
real effective won
real effective dollar
Exchange Rates: Japanese Yen
Source: FRB weights
0.004
0.006
0.008
0.010
0.012
0.014
1995:1 1996:1 1997:1 1998:1 1999:1 2000:1 2001:1 2002:1 2003:1 2004:1 2005:1 2006:1
US
do
llars
/ye
n
50
60
70
80
90
100
110
120
130
140
150
rea
l eff
ec
tiv
e (
19
95
:Q1
= 1
00
)
US dollars/yen
real effective yen
real effective dollar
Current Account Balance (% of GDP)
Source: IMF WEO
0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005
Pe
rce
nt
of
GD
P
Developing Asia
China
Japan
Current Account Balance (% of GDP)
Source: IMF WEO*Hong Kong, Korea, Singapore, Taiwan
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005
Pe
rce
nt
of
GD
P
Newly industrialized Asian economies*
Korea
Taiwan
Global Oil Prices (WTI)
Source: Commodity Research Bureau
0
20
40
60
80
2000:1 2001:1 2002:1 2003:1 2004:1 2005:1 2006:1
do
llars
/ba
rre
l
Revenue Flows to Fuel Exporters
Source: IMF WEO
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005
$ b
illio
ns
Oil trade balance
Current account balance
Foreign Exchange Reserves
Source: IMF*Indonesia, Malaysia, Philippines, Singapore, Thailand, Hong Kong
OtherAsia*
OtherAsia*
OtherAsia*
OtherAsia*
OtherAsia*
OtherAsia*
KoreaKoreaKorea
Korea Korea Korea
Japan JapanJapan
Japan
Japan Japan
ChinaChina
China
China
China
China
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004 2005
$ b
illio
ns
Foreign Exchange Reserves:Aggregate of Fuel Exporters
Source: IMF*No data available for Turkmenistan, Iran, Iraq, or Syria**2005 data not yet available for Angola, Rep. of Congo, Equatorial Guinea, Gabon, Sudan, Bahrain, UAE, or Yemen
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005**
$ b
illio
ns
Portfolio Inflows to the United States
Source: Treasury International Capital System (www.treas.gov/tic/index.html)*Indonesia, Malaysia, Philippines, Singapore, Thailand, Hong Kong**Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, UAE
Japan Japan
Japan
Japan
Japan
JapanChina
China
China
China
China
China
-100
0
100
200
300
400
500
$ b
illio
ns
ChinaJapanKoreaOther Asia*Middle East**Russia
Inflation: Consumer Prices
Source: IMF WEO
-2
0
2
4
6
8
10
12
14
16
an
nu
al p
erc
en
t c
ha
ng
e
Developing Asia China
Fuel Exporters
Gross Issuance of Chinese Sterilization Bonds
Source: Bloomberg
0
10
20
30
40
50
60
70
Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
$ b
illio
ns
Distortions
Implicit subsidy to exports
Distort allocation of domestic fixed investment
Continue to attract capital inflow
Downside of Reserve Accumulation Complications posed for monetary policy
Distortions on bank behavior
Limits on financial sector development
Price signals altered by the exchange rate
