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    The End of Chimerica
    16 Dec 2009Working Paper Summaries

    The End of Chimerica

    by Niall Ferguson and Moritz Schularick
    Economic historians Niall Ferguson and Moritz Schularick of Freie Universität Berlin consider the problem of global imbalances and try to set events in a longer-term perspective. First published in 2009.
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    Author Abstract

    For the better part of the past decade, the world economy has been dominated by a world economic order that combined Chinese export-led development with US over-consumption. The financial crisis of 2007-2009 likely marks the beginning of the end of the Chimerican relationship. In this paper we look at this era as economic historians, trying to set events in a longer-term perspective. In some ways China's economic model in the decade 1998-2007 was similar to the one adopted by West Germany and Japan after World War II. Trade surpluses with the U.S. played a major role in propelling growth. But there were two key differences. First, the scale of Chinese currency intervention was without precedent, as were the resulting distortions of the world economy. Second, the Chinese have so far resisted the kind of currency appreciation to which West Germany and Japan consented. We conclude that Chimerica cannot persist for much longer in its present form. As in the 1970s, sizeable changes in exchange rates are needed to rebalance the world economy. A continuation of Chimerica at a time of dollar devaluation would give rise to new and dangerous distortions in the global economy. 31 pages.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: November 2009
    • HBS Working Paper Number: 10-037
    • Faculty Unit(s): Business, Government and International Economy
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