Sustaining Imbalance: Growth Models and Global Finance

Lucio Baccaro and Benjamin Braun

How do national growth models interact with the global financial system? Comparative political economy offers surprisingly few answers to this question. Most notably, the growth model literature has had relatively little to say about what makes current account imbalance sustainable over extended period time. The central proposition of the research project is that the presence of deep and liquid financial markets is key to sustaining current account deficits, while their absence is key to sustaining surpluses. Drawing on international political economy, it presents a framework for the analysis of the interaction between capital flows, financial systems, and current account positions. The argument is illustrated via a discussion of the US and Germany, which epitomize the consumption-led and the export-led growth model, respectively. Project duration: April 2021 to August 2024.