The Perils of Divergence

摘要

An important issue facing the global economy and markets in the final quarter of the year is divergence-the widening economic and policy differences among advanced economies as U.S. growth outpaces that of Europe and Japan. The next few months will also shed light on a second crucial issue-how these divergences will ultimately be reconciled. Will the U.S. lose momentum, dragged down by slow global growth and/or a loss of domestic policy momentum at home? Or will Europe and Japan gain speed and converge with the U.S.?These questions raise consequential issues well beyond financial markets, affecting the prospects for trade wars, currency turmoil in emerging economies, the path for orderly normalization of monetary policy in the advanced world, and, in the political realm, the future of anti-establishment movements and polarization.