Global Imbalances: Drivers, Risks, and Policy Priorities

Bank of England News

Published March 23rd, 2026

Detected March 23rd, 2026

Summary

The Bank of England has published a staff discussion paper on global imbalances, analyzing their drivers, risks, and policy priorities. The paper finds that domestic macroeconomic factors are primary drivers, but industrial policy can have significant impacts. It recommends orderly rebalancing, reformed multilateral stewardship, and strengthened surveillance.

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What changed

The Bank of England's Staff Discussion Paper, "Rethinking Global Imbalances: Drivers, Risks, and Policy Priorities," analyzes the persistent excess current account imbalances in the global economy. The paper identifies domestic macroeconomic factors as the primary drivers, consistent with existing literature. However, it also highlights the growing impact of industrial policy, noting that its short-to-medium term effects on the current account are significant under certain conditions, with longer-term impacts and spillovers remaining partially understood. Furthermore, the paper points to vulnerabilities in global external balance sheets that could exacerbate financial stability risks during disorderly unwind scenarios.

The paper proposes several policy recommendations aimed at mitigating these risks. These include advocating for an orderly and symmetric rebalancing of global economies to reduce threats to growth and financial stability. It calls for reforms to the multilateral stewardship of imbalances, strengthening surveillance mechanisms, particularly concerning major contributors to these imbalances, and enhancing global governance of trade policy through closer collaboration. The overarching goal is to improve the effectiveness of global economic surveillance and coordination.

What to do next

Review findings on drivers and risks of global imbalances
Consider policy recommendations for rebalancing and surveillance

Source document (simplified)

Rethinking global imbalances: drivers, risks, and policy priorities

Bank of England Staff Discussion Paper

Published on

23 March 2026 By Ambrogio Cesa-Bianchi, Dan Christen, Peter Denton, Aydan Dogan, Will Dison, Ida Hjortsoe, Mark Joy, Jeremy Martin, Daniel Ostry, Roger Vicquery and Simon Whitaker

Persistent excess current account imbalances pose serious risks to the global economy. Anaemic global growth could stall, or worse, if trade tensions, in response to these imbalances, persist.

This paper takes a fresh analytical look at the drivers and consequences of global imbalances. It finds the following: (i) persistent excess imbalances are driven primarily by domestic macroeconomic factors, consistent with the literature; (ii) however, industrial policy, which there has been a resurgence of globally, can have second-order impacts on the current account over the short to medium term under certain conditions; (iii) it may also have impacts over the longer term, but our collective understanding of these impacts, and their spillovers, is partial; (iv) global external balance sheets show vulnerabilities that could interact with other global financial stability risks in disorderly unwind scenarios.

Reflecting on these findings the paper offers the following policy recommendations: (a) an orderly and symmetric rebalancing would reduce risks to growth and financial stability; (b) this would require reform of the multilateral stewardship of imbalances; (c) surveillance in any case needs to be strengthened; (d) closer collaboration on global governance of trade policy will be needed; (e) finally, efforts to improve traction of surveillance will be needed, especially with the largest contributors to global imbalances.

Rethinking global imbalances: drivers, risks, and policy priorities