The Bank for International Settlements published a working paper finding that financial factors, including valuation changes and investment income flows, have become the primary drivers of global imbalances, while trade remains influential over longer horizons. Across 28 economies representing about 85% of global GDP, the absolute value of net international investment positions rose from 11% of global GDP in 1980 to 41% in 2025. The deterioration in the U.S. position to negative 19% of global GDP accounts for almost half of these imbalances and has been mirrored by gains in most other major economies. The paper finds that valuation gains have supported growth in many countries since 2010 but increased their exposure to abrupt financial market corrections. If current trade and investment income trends persist, global imbalances are projected to reach 46% of global GDP by 2030, or 48% if interest rates rise for highly indebted economies. A 20% U.S. dollar depreciation would reduce imbalances only to 38% of global GDP, while halving trade imbalances through 2030 would merely keep them near their 2025 level. A sharp U.S. equity market correction would produce the largest and fastest reduction, but would impose substantial wealth losses and financial spillovers across most economies, supporting a policy focus on resilience to shocks transmitted through international exposures.
2026-09-23Bank for International Settlements
Bank for International Settlements paper finds financial factors are driving widening global imbalances
A Bank for International Settlements working paper finds that financial factors now drive global imbalances, which reached 41% of global GDP in 2025 across the economies studied. Common proposals such as dollar depreciation or lower trade imbalances would have limited effects, while an equity market correction could reduce imbalances sharply but cause substantial international losses. The paper calls for greater resilience to financial shocks transmitted through cross-border exposures.