Institutional Allocation of Bank Regulation A Review

"The global imbalances (current-account of BOP) refers to the large current account deficits of developed economies such as the United States and the large surpluses of developing economies such as China and oil rich economies of the Middle East and Russia. In other words, global imbalances are inevitably viewed as the surplus net savings of the developing economies financing the consumption/investment of deficit developed economies. Against the backdrop of the recent Global Financial Crisis (GFC), persistent large global imbalances were seen as one of the triggering factors for causing the crisis. The argument is that before the crisis, the flows of savings from emerging to developed economies eased financial constraints in deficit economies, thereby lowering global interest rates resulting in the credit boom and excessive risk taking."--Abstract.