Back Matter

Back Matter

Author(s):
International Monetary Fund. Research Dept.
Published Date:
October 1995
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    Annex Exchange Rate Effects of Fiscal Consolidation

    The connection between fiscal policy and exchange rates is not obvious from the experience of a number of industrial countries. In the United Slates, the increase in the fiscal deficit in the early 1980s was associated with a strong appreciation of the dollar. Similarly, the shift in Germany from a balanced fiscal position in 1989 to a large deficit in the early 1990s in the wake of unification was accompanied by a real appreciation of the deutsche mark. In Japan, the shift from a substantial structural surplus to a deficit in the general government budget between 1990 and 1994 coincided with a large appreciation of the yen. However, in other industrial countries such as Finland. Italy. and Sweden, fiscal deficits in the early 1990s have tended to be associated with depreciating real exchange rates. Fiscal expansions in France in the early 1980s and in Canada in the mid-1980s were also accompanied by exchange rate depreciations. And the significant fiscal consolidation undertaken by the German authorities during the past three years has not been associated with a weakening of the deutsche mark.

    These different experiences suggest that the impact of changes in fiscal policy on nominal and real exchange rates is ambiguous. With a large number of industrial countries undertaking or planning substantial fiscal consolidation, it is useful to explore the factors that may account for this ambiguity. As discussed in the first section of this Annex, the uncertainty regarding the theoretical direction of the effect of fiscal policy on exchange rates relates mainly to the short-run impact. By contrast, the theoretical direction of the longer-run effects of a sustained change in the fiscal position, which are described in the second section, appears to be more clear cut. The third section summarizes some of the empirical evidence.

    The relationship between fiscal policy and exchange rates is mainly addressed from the perspective of industrial countries. Although the framework used in the analysis is applicable to developing and transition countries, they are not discussed because in many cases they share characteristics that are quite different from industrial countries. For example, many developing and transition economies peg their exchange rates to other currencies, enjoy only limited access to international capital markets, and tend to monetize fiscal deficits to a much greater extent than industrial countries.1

    Short-Run Effects of Changes in Government Budgets

    The experiences of the United States, Japan, and Germany noted above are consistent with the predictions of the standard Mundell-Fleming model: a fiscal expansion combined with an unchanged stance of monetary policy leads to a real appreciation of the domestic currency in a world with high capita) mobility. In this model, domestic prices are assumed to be fixed, interest rates are determined in domestic money markets, and expectations are static in the sense that current economic conditions and policies are not expected to change. This last assumption implies that net capital flows are simply a function of the interest rate differential because exchange rates are not expected to change in the future. Finally, the exchange rate floats freely and reserves are unchanged, so the current account is equal to net capital flows.

    A fiscal expansion—either through an increased level of government expenditures or a reduction in taxes—raises domestic demand and, with unchanged money growth, leads to a rise in domestic interest rates. The higher level of demand increases imports, implying a deterioration in the current account, and the higher interest rates generate a capital inflow that finances the change in the current account. The net effect on the exchange rate depends on the degree of capital mobility. In the extreme case of perfect capital mobility, the domestic interest rate cannot differ from that abroad and consequently the fiscal expansion would have no impact on the domestic interest rate. The real exchange rate must therefore appreciate so that the deterioration in net exports matches the demand stimulus from the expansionary fiscal policy, Conversely, with zero capital mobility the exchange rate must depreciate so as to keep net exports unchanged. As capital is highly mobile among the industrial countries and comparable financial instruments (in terms of maturity, tax status, default risk, and so forth) issued in the currencies of these countries appear to be very close substitutes, it is reasonable to assume that the interest rate effect dominates. Consequently the fiscal expansion will tend to produce an appreciation of the nominal exchange rate.2 The real exchange rate will also tend to appreciate if prices respond with a lag to the increase in domestic demand.

    This result is based on a number of assumptions. First, monetary and fiscal policies are independent and the possibility of future monetization of government debt is ignored. If this assumption is not valid and the monetary authorities fully accommodate the fiscal expansion, then the standard result may no longer hold. Second, as noted above, expectations are static: the current level of the exchange rate does not depend on expectations of the future spot exchange rate, or, more precisely, the expected evolution of future policies does not affect the future spot rate. Violation of any of these two assumptions could account for the episodes described above in which fiscal expansions were associated with exchange rate depreciations. Third, the standard Mundell-Fleming model does not allow for a government intertemporal budget constraint, which implies that government bonds are perceived as net wealth by the private sector, and takes no account of the implications of a growing stock of liabilities to foreigners. For this reason, and because the model is static, there is no difference between the short- and long-run effects on the exchange rate of a change in fiscal policy. As described below, these effects are likely to be in different directions.

    Relaxing the last two assumptions does not necessarily overturn the standard result. This can be seen in the simulation reported in Table 16, which shows the effects of an illustrative fiscal contraction in the United States using the Fund’s multicountry macroeconometric model (MULTIMOD), which incorporates intertemporal budget constraints and forward-looking expectations. In this framework, the nominal exchange rate is approximately determined by the uncovered interest parity condition, whereby the interest rate differential is equal to the expected change in the exchange rate. In the scenario reported in Table 16, the public is assumed to know the future path of fiscal policy. Because the government announcement that there will be a permanent reduction in the ratio of government debt to GDP is assumed to be fully credible, the public immediately adjusts its economic actions and plans to take account of the change in policy. Finally, the effects of changes in saving and investment on the capital stock and domestic and foreign wealth are taken into account in a consistent fashion.

    Table 16.United States: Effects of Fiscal Consolidation on the Exchange Rate(Percentage deviation from baseline unless otherwise noted)
    1996199719981999200020012002Long Run1
    Nominal effective exchange rate2-2.72.8-2.8-2.6-2.4-2.2-1.90.4
    Real effective exchange rate2-2.2-2.5-2.6-2.6-2.4-2.2-2.10.3
    Real GDP-0.7-0.20.10.30.30.30.20.2
    Capital Stock0.10.20.30.40.60.70.70.8
    Inflation (GDP deflator)3-0.3-0.4-0.20.00.00.00.00.0
    Long-term interest rate3-03-0.4-0.4-0.4-0.4-0.4-0.4-0.1
    Real long-term interest rate3-0.2-0.3-0.4-0.3-0.3-0.4-0.4-0.1
    General government balance/GDP30.11.11.21.21.21.31.30.5
    Government debi/GDP3-0.5-1.6-2.8-4.0-5.0-6.0-7.0-10.0
    Current account balance/GDP30.20.30.30.40.40.40.40.4
    Net foreign liabilities/GDP3-0.0-0.3-0.6-1.0-1.4-1.8-2.1-7.0
    Contribution to real GDP
    Real consumption3-1.2-1.0-0.9-0.7-0.7-0.7-0.70.2
    Real investment30.10.20.30.30.30.30.30.1
    Real trade balance30.50.60.70.70.70.60.6-0.1

    The estimates for the long run reflect the permanent effects of the shock measured as the difference between the steady-slate solution of the model with and without the shock.

    A negative figure denotes a depreciation of the domestic currency.

    In percentage points.

    In the illustrative scenario reported in Table 16, fiscal policy is tightened to reduce government debt in the United States by 10 percent of baseline GDR3 This is accomplished by increasing the tax rate on household income by 1 percent for a period of ten years beginning in 1996. Thereafter, the tax rate is reduced to stabilize the debt-to-GDP ratio at a level 10 percent below the baseline. This fiscal action, which results in an improvement in the general government balance of about 1 percent, has a short-term contractionary effect on consumption and total demand.4 As the monetary authorities are assumed to keep the monetary aggregates close to their baseline values, the decline in aggregate demand results in a fall in interest rates. The standard Mundell-Fleming result—a short-run nominal and real depreciation—reflects the uncovered interest parity assumption: as interest rates in the United States fall relative to those in the rest of the world, there must be an initial fall in the dollar so that the expected future appreciation of the currency offsets the lower nominal interest rate. The lower real interest rate “crowds in" real domestic investment. Furthermore, the fiscal-induced reduction in domestic demand, combined with the real exchange rate depreciation, improves the current account balance. These two channels more than offset the decline in consumption (relative to baseline) by 1998, and real output and the stock of capital are permanently higher.

    This stylized scenario describes a ceteris paribus result that does not necessarily take account of the initial conditions prevailing at the time of the assumed change in fiscal policy. The depreciation of the U.S. dollar since late 1994, for example, may already reflect the anticipation of fiscal actions in the latter half of 1995 and beyond. In this case, the exchange rate may not depreciate further once these fiscal actions are actually announced or implemented. An alternative way to look at this issue is to note that the recent dollar depreciation is expected to improve the U.S. current account balance substantially from its currently prevailing level. To accommodate this improvement in the current account, there must be a corresponding improvement in the national savings and investment balance. If there were no improvement in public saving (through fiscal consolidation), then either private saving would need to rise (for reasons that are not clear) or investment would need to be curtailed (presumably through a rise in interest rates). Alternatively, excess demand pressures in the U.S. economy, resulting from the combination of continued growth of domestic demand and a highly competitive dollar, might push up U.S. inflation and reverse the recent real depreciation of the U.S. dollar. In other words, the anticipation of further fiscal consolidation (and an improvement in public saving) may already be embodied in the current real exchange rate of the dollar. Thus, despite the theoretical prediction that an anticipated fiscal consolidation will result in an exchange rate depreciation, the ex post link between these two variables may not be apparent.

    Moreover, in applying economic theory to the foreign exchange value of the U.S. dollar (or other national currencies), it is important to remember that the world has more than two important currencies. During the past year and a half, the U.S. dollar has depreciated considerably against the Japanese yen and the deutsche mark and European currencies closely linked to the deutsche mark; it has held steady or appreciated against the currencies of most of the United States’ other leading trading partners.

    Interest Premiums

    The illustrative scenario discussed above also does not allow for the possibility of changes in the perceived riskiness of assets in the country implementing the fiscal consolidation measures. Indeed, countries with large budget deficits and public debts have often experienced an increase in interest rates, downward pressure on exchange rates, and an improvement in the current account. By requiring higher yields on government debt in countries with large deficits and by shifting to investments in other countries, investors have frequently signaled their lack of trust in both fiscal and monetary policies.5 Given that deteriorating actual and prospective fiscal positions and widening interest differentials have at times been associated with depreciating exchange rates, it is possible that the adoption of strong, front-loaded, credible fiscal consolidation measures could narrow interest differentials, appreciate the currency, and—possibly—worsen the current account position.

    Standard intertemporal models such as MULTI-MOD do not incorporate links between fiscal policy and exchange rates stemming from changes in risk premiums. The ways in which fiscal stabilization may raise investors’ demand for domestic assets, and hence appreciate the domestic currency, can be summarized with reference to a log-linear version of the standard covered interest parity condition. This condition states that the interest differential between assets denominated in different currencies and issued on the same terms in a common offshore center is approximately equal to the difference between the (log) spot exchange rate (X) and the (log) forward exchange rate (F) for delivery on the date corresponding to the interest rate.

    where the subscript E denotes Euro- (i.e., offshore) rates, the asterisk denotes foreign variables, and exchange rates are expressed as units of foreign currency per unit of domestic currency.

    The interest parity condition can be rewritten in a form that is useful to discuss a variety of possible determinants of the interest differential, defined as the spread required by international investors to hold domestic assets rather than offshore assets denominated in foreign currency:

    where iD is the interest rate paid domestically on assets with the same maturity as those earning iE offshore, and Xe is the spot exchange rate expected by investors over the same term.

    This expression decomposes the interest differential between domestic assets (issued in domestic currency in the domestic market) and foreign assets (issued in foreign currency in the Euromarket) into three components. It thereby provides a way of accounting for the large gap between domestic interest rates in currencies such as the Italian lira and interest rates on comparable instruments denominated in deutsche mark. The first component, (XeF), is the difference between the expected future spot exchange rate and the forward rate at the same maturity. This is the properly defined measure of the foreign exchange risk premiums: the compensation required by risk-averse investors to hold an asset whose only risk depends on it being issued in a particular currency. Although empirically satisfactory structural models of exchange risk premiums have proven elusive, ad hoc empirical models and insights gained from theoretical models suggest that risk premiums on the currencies of industrial countries are unlikely to exceed 1 percent in absolute terms.6

    The second component of the interest differential, (iD - iE), which has come to be known in the literature as “political risk,” encompasses a variety of factors linked to domestic policies that may drive a wedge between yields on domestic and offshore assets issued in the same currency and with the same maturity and other characteristics. Political risk has traditionally been associated with the possibility of capital controls but may be extended to include “default risk” associated with outright default, debt consolidation, or the possibility of taxation of interest income and financial wealth.

    Empirically, this source of risk is likely to be small, at least in the case of industrial countries. A recent study by Lane and Symansky (1993), for example, estimated political risk in Italy at the height of the ERM crisis in 1992 to be less than 80 basis points (on an annualized basis), with noncrisis values ranging from 5 to 30 basis points. These estimates were obtained by comparing bonds issued by the Italian government in foreign currency with those issued by (presumed) default-free agents, such as the World Bank, for assets with maturities of twenty to thirty years. Political risk on shorter maturities is likely to be even smaller. Similar results were found by Alesina and others (1992), who found a strong correlation between the size of public indebtedness and the spread between public and private rates of return, but very small default premiums of less than 40 basis points in most cases.

    The last component of the interest differential examined here, (X – Xe), is the expectation of currency depreciation. This can reflect a variety of anticipated sources of nominal and real shocks, including changes in equilibrium real exchange rates resulting from demand and productivity shifts or expected changes in economic policies. Based on the general finding that the first two components of the interest differential appear to be fairly small, this third component of the interest differential would therefore appear to be the largest. Direct survey data for exchange rate expectations, such as reported by Consensus Economics. Inc, for example, often indicate significant expected depreciations. Much of the expected depreciation may, of course, simply reflect anticipation of higher inflation than in other countries.

    Based on this taxonomy, one can envisage several channels through which changes in fiscal policy can lead to exchange rate changes, all of them implying that fiscal consolidation may result in a short-run appreciation of the home currency. First, debt reduction may cause a fall in the foreign exchange risk premium by reducing the relative stock of domestically issued liabilities held in the portfolio of both domestic and foreign investors. With assets imperfect substitutes and investors risk averse, the required rate of return on these liabilities declines with a reduction in the relative size of the liabilities issued by the government.

    Debt reduction may also reduce the volatility of future exchange rates around their expected values. A lower debt stock may reduce uncertainty about taxation and other policies undertaken to service debt, reduce the likelihood of a financial crisis, and—most fundamentally—reduce the exposure of the domestic economy to world shocks (e.g., interest rate shocks). If a reduction in macroeconomic uncertainty causes a reduction in the systemic component of exchange rate risks, investors’ demand for the home currency may increase, thus allowing both a fall in domestic interest rates and an appreciation of the currency. These effects are only likely to occur if the fiscal measures are implemented on a durable basis and are viewed as such by investors.

    The second channel is that a lower outstanding stock of debt may lead investors to reduce the perceived likelihood of default, including the imposition of restrictions on capital mobility to prevent capital outflows, or of taxes on interest income and financial wealth. As “default” and “political” risk premiums fall, the domestic currency may appreciate in response to the increase in demand for domestic instruments.

    A lower actual and prospective stock of government debt may also lead investors to lower their expectation of the likelihood of an eventual monetization of debt, thereby mitigating inflation expectations and exchange rate devaluation expectations. In this case, the decline in the interest differential reflects a fall in (X – Xe), that is, a reduction in the expected future spot rate that exceeds the appreciation of the current spot rate. Note that the forward-looking nature of exchange rates does not require monetization to take place over the maturity of the forward contract: an anticipated future change in monetary policy and inflation will affect the whole stream of exchange rates, even spot rates prior to the actual policy change (though with a decreasing intensity that reflects discounting). For there to be a decline in the interest differential and an exchange rate appreciation, the fiscal improvement must be implemented on a sustained basis.

    One way to gauge the potential size of these various types of interest premiums is to look at the current configuration of long-term interest rate differentials of various assets. The low level of U.S. long-term interest rates relative to Germany suggests that there is currently little, if any, interest premium for the U.S. dollar vis-à-vis the deutsche mark. A stronger case could be made for an interest premium on the lira, given the current spread of about 500 basis points between Italian long-term interest rates and comparable German rates and the recent experience whereby exchange rates and, to a lesser extent, interest rates have shown a positive response to renewed commitments to greater fiscal discipline. Long-term interest rates in Sweden and Canada also appear to embody interest premiums.

    As noted above, changes in interest premiums of this kind are not an integral part of most standard open economy macroeconomic models such as MULTI-MOD, Such changes can, however, be introduced into the model as an exogenous shock to gain a sense of the likely effects. Table 17 presents an illustrative MUL-TIMOD scenario of a fiscal contraction combined with a decline in the interest rate differential. This stylized scenario is discussed with reference to Italy, although the size of the fiscal and interest rate shocks are arbitrary, and the actual change in interest differentials associated with fiscal adjustment could be substantially different from that assumed in the simulation. Nevertheless, this scenario demonstrates how the effects of fiscal policy could be substantially different from the standard dynamic Mundell-Fleming result if there are substantial changes in interest premiums, while maintaining the basic underlying theoretical framework.

    Table 17.Italy: Effects of Fiscal Consolidation and a Reduced Interest Premium on the Exchange Rate(Percentage deviation from baseline unless otherwise noted)
    1996199719981999200020012002
    Nominal effective exchange rate19.37.56.66.36.66.97.0
    Real effective exchange rate14.53.12.11.61.11.41.3
    Real GDP-0.40.20.31.01.61.92.0
    Capital stock0.41.32.23.14.04.95.7
    Inflation (GDP deflator)2-1.1-1.1-1.1-0.9-0.5-0.3-0.3
    Long-term interest rate2-2.1-2.4-2.6-2.6-2.4-2.4-2.4
    Real long-term interest rate2-1.3-1.8-2.0-2.1-1.9-1.8-1.9
    General government balance/GDP20.81.93.53.73.53.33.3
    Government debt/GDP21.0-0.4-2.7-6.2-9.5-12.4-14.9
    Current account balance/GDP2-0.2-0.9-0.8-1.2-1.4-1.4-1.3
    Net foreign liahililies/GDP2-0.20.71.32.74.05.26.3
    Contribution to real GDP
    Real consumption2-0.4-0.3-0.70.10.70.90.8
    Real investment21.01.92.22.42.52.52.5
    Real trade balance2-1.0-1.5-1.2-1.5-1.6-1.3-1.3

    A positive figure denotes an appreciation of the domestic currency.

    In percentage points.

    It is assumed in the scenario that the Italian authorities implement fiscal consolidation measures that gradually reduce the debt stock by 30 percent of GDP.7 This is assumed to reduce the premium on Italian lira assets by 250 basis points. In this case, long-term interest rates in Italy fall by about 240 basis points and the nominal effective exchange rate appreciates by an average of about 7 percent. Although there is a negative fiscal impact on domestic demand, the decline in interest rates tends to increase investment and consumption. Combined with the appreciation of the real exchange rate, the external position worsens. Thus, a fiscal contraction combined with a decline in the interest premium can result in an increase in output, an appreciation of the currency, and, in the short run, a deterioration in the current account.

    Thus, in countries where large interest differentials suggest the presence of substantial interest premiums, reductions in the fiscal deficit may, in principle, bring about an immediate appreciation of the domestic currency. This is an exception to the standard theoretical case whereby fiscal consolidation leads, ceteris paribus, to a short-run depreciation of the currency. Comparing the two cases, it is noteworthy that in the standard case, fiscal consolidation and exchange rate depreciation are associated with a short-run improvement in the current account; whereas in the reduced interest premium case, fiscal consolidation and exchange rate appreciation are associated with a short-run deterioration in the current account. Thus, economic theory suggests that, in the short run, it is unlikely that fiscal consolidation would lead, ceteris paribus, to exchange rate appreciation and to improvement in the current account, unless the fiscal consolidation is combined with monetary tightening and with a significant fall in output.

    Long-Term Implications of Fiscal Consolidation

    The standard Mundell-Fleming model does not provide an adequate framework for examining the long-term implications of fiscal consolidation because this model does not account for the dynamic effects of reductions in the stock of government debt. Indeed, as shown below, models that incorporate the dynamic effects of fiscal policy generally indicate that the real exchange rate will appreciate in the long run in response to fiscal consolidation, which brings a permanent reduction in the stock of government debt and a permanent improvement in a country’s net foreign asset position.

    In a long-run steady-state equilibrium, when the ratio of a country’s net foreign assets (or liabilities) to GDP is stable, the country will receive (or pay) net income on its international asset (or liability) position that is a constant fraction of its GDP. The payments received by a net creditor country will finance a steady-state trade deficit with imports exceeding exports. Conversely, payments by net a debtor country to its creditors will require a steady-state trade surplus. This steady-state equilibrium condition can be represented by the following equation.8

    where CA is the current account balance, Y is nominal GDP, NFA is the country’s net foreign asset position, and g is the growth rate (divided by 100) of all nominal variables. For example, if all nominal variables in the economy are growing at 5 percent and net foreign assets are equal to 100 percent of GDP, the current account surplus must be equal to about 5 percent of GDP. Conversely, if the country is a debtor country, it would be running a current account deficit in long-run equilibrium. A country can only remain a debtor or a creditor in the long run if its deficit or surplus grows at the same rate as nominal income.

    The current account can be expressed as the sum of two main components: the net interest payments received from foreigners, r NFAt-1, and the nominal trade balance, TB. Then the current account equation becomes

    because NFA-1 is equal to NFAI/(1 + g). Substituting equation (3) into equation (4) gives

    Under the condition that the real interest rate is greater than the real growth rate of the economy, the term in parentheses in equation 5 will be negative, which implies that countries that have positive net claims on the rest of the world (NFA > 0) will be running a trade deficit, while countries that are debtor countries (NFA < 0) will have trade surpluses.9 In other words, net creditor countries will receive a permanent flow of interest payments from the rest of the world and thus will be able to maintain a level of imports that is consistently higher than exports.

    The discussion above is helpful in shedding light on the long-run results reported in Table 16. The last column shows that a fiscal contraction that reduces the long-run level of government debt to GDP will increase the country’s net foreign asset-to-GDP ratio, or, equivalently, reduce the ratio of its net foreign liabilities to GDP. The increase in net interest receipts means that a higher trade deficit can be sustained in the long run. In the long run, an appreciation of the real exchange rate is required to generate the adjustment in trade flows. As the United States is a net debtor internationally, the rise in total national saving results in a reduction in the ratio of its net foreign liability to income. As can be seen from equation 5 above, this eventually would imply lower net interest payments to foreigners and a smaller trade surplus with the rest of the world. To induce a smaller trade surplus (higher imports or lower exports, or both) with the rest of the world, the real exchange rate must eventually appreciate.

    In the simulation reported in Table 16, the real exchange rate depreciates in the short run, but starts to appreciate by the fifth year. In the long run, the real value of the exchange rate is higher relative to its baseline value by 0.3 percent. As discussed above, this appreciation is necessary to sustain a higher level of net imports; as interest obligations to foreigners are reduced, there will be a larger sustainable net flow of goods to U.S. consumers. And under normal assumptions about demand and supply curves, this can only come about if the relative price of these goods falls.

    The different short- and long-run exchange rate effects of fiscal consolidation reflect the same macro-economic adjustment mechanism at work. The short-run real depreciation arises from the fact that aggregate demand for domestic output is initially below capacity output as a result of the fiscal action, and consequently the relative price of domestic output (the real exchange rate) falls. Over time, however, the increased national saving that results from fiscal consolidation in the absence of full Ricardian equivalence leads to a higher stock of domestic and foreign assets held by domestic residents. This increase in domestic wealth results in higher consumption (relative to baseline) and a rise in overall total demand (in real terms) for domestic output that exceeds capacity output. This excess demand is equilibrated by a rise in the relative price, that is, by a real appreciation.

    Empirical Evidence on the Exchange Rate Effects of Fiscal Policy

    Given the theoretical possibility that changes in fiscal policy could either weaken or strengthen the currency, it is not surprising that empirical studies of the linkages are not uniform in their findings. The empirical results discussed below relate to two major episodes of recent exchange rate changes: the appreciation and subsequent depreciation of the U.S. dollar during the 1980s, and expected changes in the parities of selected ERM currencies. There is also a brief discussion of the experience of developing countries.

    Several studies have found a positive link between fiscal expansion and the exchange value of the U.S. dollar. Throop (1989), for example, used a model in which the short-run real value of the U.S. dollar over the period 1973-88 is explained by real long-term interest rate differentials, and the long-run expected real value is determined by domestic and foreign structural fiscal balances relative to full-employment GNP. He finds that the dollar appreciated in response to a fiscal expansion in the United States or a fiscal contraction abroad. Melvin, Schlagenhauf, and Talu (1989) lake an explicitly forward-looking approach in which today’s real exchange rate is a function of the future discounted value of a number of exogenous variables (relative outputs, money stocks, and budget deficits). Using expected fiscal positions obtained from opinion surveys, they found that over the period 1974^87 higher expected budget deficits caused on average a significant real appreciation of the U.S. dollar against the pound, the deutsche mark, and the yen. Beck (1993) examined the effects of both deficit and government spending announcements on spot and forward U.S. dollar exchange rates. Using daily observations in the proximity of official federal budget announcements during the period from 1980 through July 1990, she found that the dollar appreciated in response to targer-than-expected federal deficits but did not respond to unexpected increases in government spending.

    Other studies, however, have not found statistically significant evidence of a positive link between fiscal expansions and the exchange value of the U.S. dollar. Kramer (1995), for example, uses cointegration techniques to estimate the long-run effect on the U.S. real effective exchange rate of the U.S. fiscal balance relative to partner countries. Using annual data over the period 1955-90, and taking account of the effects of other variables (net foreign assets, the terms of trade, and the relative price of traded to nontraded goods), he finds that a reduction in the U.S. fiscal deficit tends to appreciate the real exchange rate in the long run. Evans (1986) uses an ad hoc reduced form model explaining bilateral dollar exchange rates from 1973 to 1984 in terms of unanticipated real federal government deficits and other macroeconomic variables. He found no evidence of a U.S. dollar appreciation in response to higher federal budget deficits, but rather some evidence of a depreciation. McMillin and Koray (1990) used a reduced form approach to assess the impact of unanticipated changes in government debt in the United States relative to Canada on the bilateral real U.S.-Canadian dollar exchange rate. They found that over the period 1963-84 an unanticipated fiscal expansion in the United States that raised U.S. debt relative to that in Canada produced a temporary depreciation on the U.S. dollar. Given the symmetry of their model, this result can be interpreted as implying that a decrease in Canadian government debt (relative to that in the United Slates) caused a real appreciation of the Canadian dollar because it reduced the importance of the Canadian interest premium.10 Finally, Koray and Chan (1991) looked at the deutsche mark-U.S. dollar exchange rate over the period 1975-89. They found that although the real and nominal bilateral rate appreciated in response to anticipated and unanticipated increases in German government spending, the effect was not statistically significant.

    The literature on the link between fiscal policy and exchange rates in the context of the ERM also does not reach unambiguous conclusions. Caramazza (1993) looks at the impact of fiscal variables on realignment expectations and finds fairly strong effects. For example, lower government deficits in France relative to Germany in the post-1987 period are found to reduce the expected devaluation of the French franc against the deutsche mark. By contrast, focusing on the whole EMS history (from 1979 to 1992). Chen and Giovannini (1993) find that fiscal deficits in Italy and in France relative to Germany do not have explanatory power for realignment expectations in the case of the Italian lira and French franc. Thomas (1994) obtains similar results for the same currencies and time period using government debt instead of deficits. Froot and Rogoff (1991) use pooled data for eight EMS countries to test the prediction of a simple intertemporal neoclassical model, according to which higher domestic or lower foreign government spending as a percentage of GDP causes a real appreciation of the domestic currency. Estimation results for the period 1979 to 1989 indicate that higher domestic (or lower foreign) government expenditure is directly and significantly associated with real appreciations of EMS currencies, while government budget deficits are not found to be significantly related to real exchange rates.

    In the developing countries, the many episodes of high inflation and consequent nominal depreciations are generally attributed to a mix of expansionary fiscal and accommodating monetary policies. Rebelo and Végh (1995) document that exchange-rate-based stabilization programs introduced in several developing countries—Chile. Israel, and Mexico in the late 1970s and the 1980s, and Argentina in the 1990s—are characterized by real appreciations and fiscal adjustments. This empirical regularity, however, does not seem to reflect any causal connection since the real appreciation could be the result of inflation inertia in the presence of pegging the nominal exchange rate. Further insights on the causal link between fiscal contractions and movements in real exchange rates can be gauged from the simulation results of the intertemporal general equilibrium model specified and calibrated for the Argentine economy by Rebelo and Végh. The authors show that, in general, a fiscal contraction does not bring about a real appreciation but rather a depreciation. In fact, only in one special case does a contractionary fiscal policy (a reduction of government spending for tradable goods that increases the relative price of tradables) cause an appreciation of the domestic currency. The magnitude of this effect, however, is very small and is not capable of replicating the observed appreciations. These are captured in the simulation experiments only by pegging the nominal exchange rate to anchor the nominal variables.

    * * *

    The existing theoretical literature suggests that under conditions of high international capital mobility, the short-run effect of fiscal consolidation, ceteris paribus, is to depreciate the exchange rate and improve the current account. This result is found across a fairly wide range of models. II, however, fiscal consolidation has substantial effects on confidence and reduces interest premiums, it is possible that it could lead to an appreciation of the exchange rate in the short run and to a deterioration in the current account. There appear to be some countries, with large existing interest premiums apparent in bond yields, for which this latter outcome seems to be a realistic possibility. For the long run, there is a more general presumption that a sustained reduction in the government budget deficit that raises national saving and reduces the ratio of government debt to GDP will eventually lead to a real exchange rate appreciation. This result is intuitively plausible in that a country that saves more than its trading partners will accumulate more foreign assets and ultimately its currency will strengthen relative to other currencies.

    References

      Alesina, Alberto, and others,“Default Risk on Government Debt in OECD Countries,”Economic Policy: A European Forum, No. 15 (October1992), pp. 42863.

      Beck, Stacie E.,“The Ricardian Equivalence Proposition: Evidence from Foreign Exchange Markets,”Journal of International Money and Finance. Vol. 12 (April1993), pp. 15469.

      Blanchard, Olivier Jean, and StanleyFischer,Lectures on Macroeconomics (Cambridge, Massachusetts: MIT Press. 1989).

      Caramazza, Francesco,“French-German Interest Rate Differentials and Time-Varying Realignment Risk,”Staff Papers, International Monetary Fund, Vol. 40 (September1993), pp. 56783.

      Chen, Zhaohui, and AlbertoGiovannini,“The Determinants of Realignment Expectations Under the EMS: Some Empirical Regularities,” CEPR Discussion Paper No. 790 (London: Centre for Economic Policy Research, June1993).

      Evans, Paul,“Is the Dollar High Because of Large Budget Deficits?”Journal of Monetary Economics. No. 18 (November1986). pp. 22749.

      Fleming, J. Marcus,“Domestic Financial Policies Under Fixed and Under Floating Exchange Rates.”Staff Papers, International Monetary Fund, Vol. 9 (November1962), pp. 36980.

      Frankel, Jeffrey A.,“In Search of the Exchange Risk Premium: A Six-Currency Test Assuming Mean-Variance Optimization.”Journal of International Money and Finance. Vol. I (December1982), pp. 25574.

      Frankel, Jeffrey A.,“Recent Estimates of Time-Variation in the Conditional Variance and in the Exchange Risk Premium.”Journal of International Money and Finance, Vol. 7 (March1988). pp. 11525.

      Froot, Kenneth, and KennethRogoff,“The EMS, EMU, and the Transition to a Common Currency.” NBER Macroeconomics Annual, ed. byOlivier JeanBlanchard and StanleyFischer (ed) (Cambridge, Massachusetts: MIT Press, 1991).

      Koray, Faik, and PingfaiChan,“Government Spending and the Exchange Rate,”Applied Economics, Vol. 23 (September1991), pp. 155158.

      Kramer, Charles,“The Real Effective Value of the U.S. Dollar, the Fiscal Deficit, and Long-Run Balance of Payments Equilibrium.”in United States—Background Papers, IMF Staff Country Report No. 95/94 (Washington, 1995).

      Lane, Timothy, and SteveSymansky,“Italy: The Impact of the Crisis on Financial Markets in 1992” (unpublished; Washington: International Monetary Fund, 1993).

      Macklem, R. Tiff, DavidRose, and RobertTetlow,“Government Debt and Deficits in Canada: A Macro Simulation Analysis.”Bank of Canada Working Paper No. 95-4 (Ottawa: Bank of Canada, May1995).

      McMillin, Douglas, and FaikKoray,“Does Government Debt Affect the Exchange Rate’? An Empirical Analysis of the U.S.-Canadian Exchange Rate.”Journal of Economics and Business, Vol. 42 (November1990). pp. 27988.

      Melvin, Michael, DonSchlagenhauf, and AyhanTalu,“The U.S. Budget Deficit and the Foreign Exchange Value of the Dollar.”Review of Economics and Statistics. Vol. 71 (August1989), pp. 50005.

      Mishkin, Frederick S.,“The Real Interest Rate: A Multi-Country Empirical Study,”Canadian Journal of Economics. Vol. 17 (1984), pp. 282311.

      Mundell, Robert A.,“Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates,”Canadian Journal of Economics and Political Science, Vol. 29 (November1963), pp. 41331.

      Rebelo, Sergio, and CarlosVégh,“Real Effects of Exchange-Rate Based Stabilization: An Analysis of Competing Theories,” NBER Macroeconomics Annual (forthcoming).

      Reinhart, Carmen,“Fiscal Policy, the Real Exchange Rate. and Commodity Prices,”Staff Papers, International Monetary Fund, Vol. 38 (September1991), pp. 50624.

      Svensson, Lars E.O.,“The Foreign Exchange Risk Premium in a Target Zone with Devaluation Risk,”Journal of International Economics. Vol. 33 (August1992). pp. 2140.

      Thomas, Alun,“Expected Devaluation and Economic Fundamentals.”Staff Papers, International Monetary Fund, Vol. 41 (June1994). pp. 26285.

      Throop, Adrian W.,“Fiscal Policy, the Dollar and International Trade: A Synthesis of Two Views,” Federal Reserve Bank, of San Francisco Economic Review (Summer1989), pp. 2744.

    Statistical Appendix

    Assumptions

    The statistical tables in this appendix have been compiled on the basis of information available on September 18, 1995. The estimates and projections for 1995 and 1996. as well as the 1997-2000 medium-term scenarios, are based on the following assumptions.

    • For the industrial countries, real effective exchange rates are assumed to remain constant at their average level during August 1-23, 1995, except for the bilateral exchange rates among the ERM currencies, which are assumed to remain constant in nominal terms. For 1995 and 1996, these assumptions imply average U.S. dollar/SDR conversion rates of 1.526 and 1.513, respectively.

    • Established policies of national authorities will be maintained.

    • The price of oil will average $16.67 a barrel in 1995 and $15.51 a barrel in 1996. In the medium term, the oil price is assumed to remain unchanged in real terms.

    • Interest rates, as represented by the London interbank offered rate (LIBOR) on six-month U.S. dollar deposits, will average 6¼ percent in 1995 and 1996: the three-month certificate of deposit rate in Japan will average 1 percent in 1995 and 1996; and the three-month interbank deposit rate in Germany will average 4½ percent in 1995 and slightly less than 5 percent in 1996.

    Data and Conventions

    Data and projections for more than 180 countries form the statistical basis for the World Economic Outlook (the World Economic Outlook data base). The data are maintained jointly by the IMF’s Research Department and area departments, with the latter regularly updating country projections based on consistent global assumptions.

    Although national statistical agencies are the ultimate providers of historical data and definitions, international organizations are also involved in statistical issues, with the objectives of harmonizing differences among national statistical systems, of setting international standards with respect to definitions, and of providing conceptual frameworks for measurement and presentation of economic statistics. The World Economic Outlook data base reflects information from both national source agencies and international organizations.

    The completion of the comprehensive revision of the United Nations’ standardized System of National Accounts (SNA) and the IMF’s Balance of Payments Manual is an important improvement in the standards of economic statistics and analysis.1 The IMF was actively involved in both projects, particularly the new Balance of Payments Manual, which is central to the IMF’s interest in countries’ external positions. Key changes introduced with the new Manual were summarized in Box 13 of the May 1994 World Economic Outlook. The process of adapting country balance of payments data to the definitions of the new Balance of Payments Manual began with the May 1995 World Economic Outlook. However, full concordance with the BPM is ultimately dependent on national statistical compilers providing revised country data, and hence the World Economic Outlook estimates are still only partly adapted to the BPM.

    The focus on world trade in this World Economic Outlook has been broadened to include estimates for international trade in goods and services in addition to the traditional focus on trade in goods. This is in recognition of the fact that trade in services presently accounts for a substantial share of the total value of world trade and is likely to become increasingly important. Estimates of foreign trade volumes for both goods and services are drawn as far as possible from national accounts data. For the relatively few countries lacking national accounts estimates in constant prices, balance of payments data for goods are deflated by trade unit values, and for services by GDP deflators, to generate constant price estimates.

    Composite data for country groups in the World Economic Outlook are either sums or weighted averages of data for individual countries. Arithmetic weighted averages are used for all data except inflation and money growth for nonindustrial country groups, for which geometric averages are used. The following conventions are used.

    • Country group composites for interest rates, exchange rates, and the growth of monetary aggregates are weighted by GDP converted to U.S. dollars at market exchange rates (averaged over the preceding three years) as a shave of world or group GDP.

    • Composites for other data relating to the domestic economy, whether growth rates or ratios, are weighted by GDP valued at purchasing power parities (PPPs) as a share of total world or group GDP2

    • Composite unemployment rates and employment growth are weighted by labor force as a share of group labor force.

    • Composites for data relating to the external economy are sums of individual country data after conversion to U.S. dollars at the average exchange rates in the years indicated for balance of payments, and at end-of-period exchange rates for debt denominated in currencies other than U.S. dollars. Composites of foreign trade volumes and prices, however, are arithmetic averages of percentage changes for individual countries weighted by the U.S. dollar value of exports or imports as a share of total world or group exports or imports (in the preceding year).

    For central and eastern European countries in existence before 1991, external transactions in nonconvertible currencies (through 1990) are converted to U.S. dollars at the implicit U.S. dollar/ruble conversion rates obtained from each country’s national currency exchange rate for the U.S. dollar and for the ruble.

    Unless otherwise indicated, multiyear averages of growth rates are expressed as compound annual rates of change.

    Classification of Countries

    Summary of the Country Classification

    The country classification in the World Economic Outlook divides the world into three major groups: industrial countries, developing countries, and countries in transition.3 Rather than being based on strict criteria, economic or otherwise, this classification has evolved over time with the objective of facilitating the analysis by providing a reasonably meaningful organization of data. Each of the three main country groups is further divided into a number of subgroups. Tables A and B provide an overview of these standard groups in the World Economic Outlook, showing the number of countries in each group and the average 1994 shares of groups in aggregate PPP-valued GDP, total exports of goods and services, and total debt outstanding.

    Table A.Industrial Countries: Classification by Standard World Economic Outlook Groups, and Their Shares in Aggregate GDP and Exports of Goods and Services, 19941
    Number of Countries Included in GroupPercentage of
    Total GDP ofTotal exports of goods and services of
    Industrial countriesWorldIndustrial countriesWorld
    Industrial countries23100.054.6100.070.2
    United States38.821.218.813.2
    Japan15.48.412.08.4
    Germany9.25.013.19.2
    France6.63.69.26.5
    Italy6.23.47.55.2
    United Kingdom6.13.37.25.0
    Canada3.41.94.93.4
    Other industrial countries1614.37.827.419.2
    Industrial country groups
    Seven major industrial countries785.746.872.650.9
    European Union1538.621.157.640.4
    Industrial countries except the United States, Japan, and Germany2036.620.056.139.4
    Industrial countries except the United States, the European Union, and Japan11.69.55.216.711.7
    Major European industrial countries428.015.336.925.9

    The GDP shares are based on the purchasing power parity (PPP) valuation of county GDPs.

    Table B.Developing Countries and Countries in Transition: Classification by Standard World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Total Debt Outstanding, 19941
    Number of Countries Included in GroupPercentage of
    Total GDP ofTotal exports of goods and services ofTotal debt of developing countries
    Developing countriesWorldDeveloping countriesWorld
    Developing countries132100.040.1100.026.1100.0
    By region
    Africa508.23.36.71.715.2
    Asia3057.623.163.416.634.6
    Middle East and EuropeIS12.04.815.03.917.4
    Western Hemisphere3422.28.914.93.932.8
    Sub-Saharan Africa453.31.32.30.68.8
    Four newly industrializing
    Asian economies47.73.136.59.55.8
    By predominant export
    Fuel159.43.811.22.911.5
    Nonfuel exports11790.636.388.823.288.5
    Manufactures732.613.147.512.414.4
    Primary products437.02.85.31.416.6
    Agricultural products294.81.93.30.910.9
    Minerals142.20.91.90.55.7
    Services, income, and private transfers373.71.53.91.06.1
    Diversified export base1047.319.032.28.451.5
    By financial criteria
    Net creditor countries75.22.114.93.92.7
    Net debtor countries12594.538.085.122.297.3
    Market borrowers2357.423.063.016.548.5
    Diversified borrowers3325.610.315.54.030.5
    Official borrowers6911.94.86.61.718.3
    Countries with recent debt-servicing difficulties7231.012.421.65.655.1
    Countries without debt-servicing difficulties5363.925.663.516.642.2
    Other groups
    Small low-income economies5010.84.35.01.317.1
    Least developed countries464.11.71.60.48.2
    Countries in transition285.33.7
    Central and eastern EuropeIS2.72.1
    Excluding Belarus and Ukraine162.01.7
    Russia2.11.4
    Transcaucasus and central Asia90.50.2

    The GDP shares are based on the purchasing power parity (PPP) valuation of county GDPs.

    The general features and the compositions of groups in the World Economic Outlook classification are as follows.4

    The group of industrial countries (23 countries) comprises

    AustraliaGreeceNorway
    AustriaIcelandPortugal
    BelgiumIrelandSpain
    CanadaItalySweden
    DenmarkJapanSwitzerland
    FinlandLuxembourgUnited Kingdom
    FranceNetherlandsUnited States
    GermanyNew Zealand

    The seven largest countries in this group in terms of GDP—the United States, Japan, Germany, France, Italy, the United Kingdom, and Canada—are collectively referred to as the major industrial countries.

    The current members of the European Union (15 countries) are also distinguished as a subgroup. They are

    AustriaGermanyNetherlands
    BelgiumGreecePortugal
    DenmarkIrelandSpain
    FinlandItalySweden
    FranceLuxembourgUnited Kingdom

    Composite data shown in the tables under the heading “European Union” cover the current 15 members of the European Union for ail years, even though the membership has changed over time.

    In 1991 and subsequent years, data for Germany refer to west Germany and the new eastern Lander (i.e., the former German Democratic Republic). Before 1991, economic data are not available on a unified basis or in a consistent manner. In general, data on national accounts and domestic economic and financial activity through 1990 cover west Germany only, whereas data for the central government, foreign trade, and balance of payments apply to west Germany through June 1990 and to unified Germany thereafter.

    The group of developing countries (132 countries) includes all countries that are not classified as industrial countries or as countries in transition, together with a few dependent territories for which adequate statistics are available.

    The regional breakdowns of developing countries in the World Economic Outlook conform to the IMF’s International Financial Statistics (IFS) classification, with one important exception. Because all of the developing countries in Europe except Cyprus, Malta, and Turkey are included in the group of countries in transition, the World Economic Outlook classification places these three countries in a combined Middle East and Europe region. It should also be noted that in both classifications, Egypt and the Libyan Arab Jamahiriya are included in this region, not in Africa. Two additional regional groupings are included in the World Economic Outlook because of their analytical significance. These are sub-Saharan Africa5 and four newly industrializing Asian economies.6

    The developing countries are also grouped according to analytical criteria: predominant export, financial, and other groups. The first analytical criterion, by predominant export, distinguishes among five groups: fuel (Standard International Trade Classification—SITC 3): manufactures (SITC 5 to 9, less 68); nonfuel primary products (SITC 0, 1, 2, 4, and 68); services. income, and private transfers (factor and nonfactor service receipts plus workers’ remittances); and diversified export base. A further distinction is made among the exporters of nonfuel primary products on the basis of whether countries’ exports of primary commodities consist primarily of agricultural commodities (SITC 0, 1, 2 except 27, 28, and 4) or minerals (SITC 27, 28, and 68). The export criteria, which have been updated to correspond more closely to the current World Bank classification, are now based on countries’ export composition in 1988-92.

    The financial criterion first distinguishes between net creditor and net debtor countries. Countries in the latter, much larger group are then differentiated on the basis of two additional financial criteria: by predominant type of creditor and by experience with debt servicing. The financial criteria reflect net creditor and debtor positions as of 1987, sources of borrowing as of the end of 1989, and experience with debt servicing during 1986-90.

    The country groups shown under other groups constitute the small low-income economies and the least developed countries.

    The group of countries in transition (28 countries) comprises central and eastern European countries, Russia, non-European states of the former Soviet Union, and Mongolia. A common characteristic of these countries is the transitional state of their economies from a centrally administered system to one based on market principles. The group of countries in transition comprises

    AlbaniaHungaryRussia
    ArmeniaKazakhstanSlovak Republic
    AzerbaijanKyrgyz Republic
    BelarusLatviaSlovenia
    Bosnia and Herzegovina7LithuaniaTajikistan
    BulgariaMacedonia, former Yugoslav Rep. ofTurkmenistan
    CroatiaMoldovaUkraine
    Czech RepublicMongoliaUzbekistan
    EstoniaPolandYugoslavia, Fed. Rep. of (Serbia/Montenegro)7
    GeorgiaRomania

    The countries in transition are classified in three subgroups: central and eastern Europe, Russia, and Transcaucasus and central Asia. The Transcaucasian and central Asian countries include Kazakhstan for purposes of the World Economic Outlook. The countries in central and eastern Europe (18 countries) are

    AlbaniaEstoniaPoland
    BelarusHungaryRomania
    Bosnia and Herzegovina8LatviaSlovak Republic
    LithuaniaSlovenia
    BulgariaMacedonia, former Yugoslav Rep. ofUkraine
    CroatiaYugoslavia, Fed. Rep. of (Serbia/Montenegro)8
    Czech RepublicMoldova

    The countries in the Transcaucasian and central Asian group (9 countries) are

    ArmeniaKazakhstanTajikistan
    AzerbaijanKyrgyz RepublicTurkmenistan
    GeorgiaMongoliaUzbekistan

    Detailed Description of the Developing Country Classification by Analytical Group

    Countries Classified by Predominant Export

    Fuel exporters (15 countries) are countries whose average ratio of fuel exports to total exports in 1988-92 exceeded 50 percent. The group comprises

    AngolaIran, Islamic Rep. ofQatar
    AlgeriaIraqSaudi Arabia
    BahrainLibyaTrinidad and Tobago
    CongoNigeriaUnited Arab Emirates
    GabonOmanVenezuela

    Nonfuel exporters (117 countries) are countries with total exports of goods and services including a substantial share of (a) manufactures, (b) primary products, or (c) services, factor income, and private transfers. However, those countries whose export structure is so diversified that they do not fall clearly into any one of these three groups are assigned to a fourth group, (d) diversified export base.

    (a) Economies whose exports of manufactures accounted for 50 percent or more of their total exports on average in 1988-92 are included in the group of exporters of manufactures (7 countries). This group includes

    ChinaKoreaSingapore
    Hong KongLebanonTaiwan Province of China
    Israel

    (b) The group of exporters of primary products (43 countries) consists of those countries whose exports of agricultural and mineral primary products (SITC 0, 1, 2, 4, and 68) accounted for at least half of their total exports on average in 1988-92. These countries are

    Afghanistan, Islamic State ofGuyanaSão Tomé and Principe
    HondurasSolomon Islands
    ArgentinaLiberiaSomalia
    BoliviaMadagascarSt. Vincent and the Grenadines
    BotswanaMalawi
    BurundiMaliSudan
    ChadMauritaniaSuriname
    ChileMyanmarSwaziland
    Côte d’IvoireNamibiaTanzania
    Equatorial GuineaNicaraguaTogo
    EthiopiaNigerUganda
    GhanaPapua New GuineaVietnam
    GuatemalaParaguayZaïre
    GuineaPeruZambia
    Guinea-BissauRwandaZimbabwe

    Among exporters of primary products, a further distinction is made between exporters of agricultural products and minerals. The group of mineral exporters (14 countries) comprises

    BoliviaLiberiaSuriname
    BotswanaMauritaniaTogo
    ChileNamibiaZaire
    GuineaNigerZambia
    GuyanaPeru

    All other exporters of primary products are classified as agricultural exporters (29 countries).

    (c) The exporters of services and recipients of factor income and private transfers (37 countries) are defined as those countries whose average income from services, factor income, and workers’ remittances accounted for half or more of total average export earnings in 1988-92. This group comprises

    Antigua and BarbudaEgyptMarshall Islands
    ArubaEl SalvadorMicronesia, The Federated Stales of
    Bahamas, TheFiji
    BarbadosGambia, TheNepal
    BelizeGrenadaPanama
    BeninHaitiSeychelles
    BhutanJamaicaSt. Kilts and Nevis
    Burkina FasoJordanSt. Lucia
    CambodiaKiribatiTonga
    Cape VerdeKuwaitVanuatu
    CyprusLesothoWestern Samoa
    DjiboutiMaldivesYemen, Rep. of
    Dominican Rep.Malta

    (d) Countries with a diversified export base (30 countries) are those whose export earnings in 1988–92 were not dominated by any one of the categories mentioned tinder (a) through (c) above. This group comprises

    BangladeshIndonesiaPhilippines
    BrazilKenyaSenegal
    CameroonLao People’s Dem, Rep.Sierra Leone
    Central African Rep.MalaysiaSouth Africa
    ColombiaMauritiusSri Lanka
    ComorosMexicoSyrian Arab Rep.
    Costa RicaMoroccoThailand
    DominicaMozambique, Rep. ofTunisia
    EcuadorNetherlands AntillesTurkey
    IndiaPakistanUruguay

    Countries Classified by Financial Criteria

    Net creditor countries (7 countries) are defined as developing countries that were net external creditors in 1987 or that experienced substantial cumulated current account surpluses (excluding official transfers) between 1967 (the beginning of most balance of payments series in the World Economic Outlook data base) and 1987. The net creditor group consists of the following economies:

    KuwaitQatarTaiwan Province of China
    LibyaSaudi ArabiaUnited Arab Emirates
    Oman

    Net debtor countries (125 countries) are disaggregated according to two criteria: (a) predominant type of creditor and (b) experience with debt servicing.

    (a) Within the classification by predominant type of creditor (sources of borrowing), three subgroups are identified: market borrowers, official borrowers, and diversified borrowers. Market borrowers (23 countries) are defined as net debtor countries with more than two thirds of their total liabilities outstanding at the end of 1989 owed to commercial creditors. This group comprises

    AlgeriaIran, Islamic Rep. ofPeru
    Antigua and BarbudaIsraelSingapore
    ArgentinaKiribatiSuriname
    Bahamas, TheKoreaThailand
    BrazilMalaysiaTrinidad and Tobago
    ChileMexicoUruguay
    ChinaPanamaVenezuela
    Hong KongPapua New Guinea

    Official borrowers (69 countries) are defined as net debtor countries with more than two thirds of their total liabilities outstanding at the end of 1989 owed to official creditors. This group comprises

    Afghanistan, Islamic State ofGhanaNicaragua
    GrenadaNiger
    ArubaGuineaNigeria
    BangladeshGuinea-BissauPakistan
    BelizeGuyanaRwanda
    BhutanHaitiSão Tomé and Principe
    BoliviaHonduras
    BotswanaJamaicaSomalia
    Burkina FasoLao People’s Dem. Rep.St. Kitts and Nevis
    BurundiSt. Lucia
    CambodiaLesothoSt. Vincent and the Grenadines
    CameroonMadagascar
    Cape VerdeMalawiSudan
    Central African Rep.MaldivesSwaziland
    ChadMaliTanzania
    ComorosMaltaTogo
    DjiboutiMauritaniaTonga
    DominicaMauritiusTunisia
    Dominican Rep.MoroccoUganda
    EgyptMozambique. Rep. ofVietnam
    El SalvadorMyanmarWestern Samoa
    Equatorial GuineaNamibiaYemen. Rep. of
    EthiopiaNepalZaïre
    GabonNetherlands AntillesZambia
    Gambia, The

    Diversified borrowers (33 countries) consist of those net debtor developing countries that are classified neither as market nor as official borrowers.

    (b) Within the classification by experience with debt servicing, a further distinction is made. Countries with recent debt-servicing difficulties (72 countries) are defined as those countries that incurred external payments arrears or entered into official or commercial bank debt-rescheduling agreements during 1986-90. Information on these developments is taken from relevant issues of the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions.

    All other net debtor countries are classified as countries without debt-servicing difficulties (53 countries).

    Other Groups

    The countries classified by the World Bank as small low-income economies (50 countries) are those whose GNP per capita (as estimated by the World Bank) did not exceed the equivalent of $695 in 1993. This group comprises

    Afghanistan, Islamic State ofGuinea-BissauNigeria
    GuyanaPakistan
    BangladeshHaitiRwanda
    BeninHondurasSão Tomé and Principe
    BhutanKenya
    Burkina FasoLao People’s Dem. Rep.Sierra Leone
    BurundiSomalia
    CambodiaLesothoSri Lanka
    Central African Rep.LiberiaSudan
    ChadMadagascarTanzania
    ComorosMalawiTogo
    Côte d’IvoireMaliUganda
    EgyptMauritaniaVietnam
    Equatorial GuineaMozambique, Rep. ofYemen. Rep. of
    EthiopiaMyanmarZaïre
    Gambia, TheNepalZambia
    GhanaNicaraguaZimbabwe
    GuineaNiger

    The countries currently classified by the United Nations as the least developed countries (46 countries) are9

    Afghanistan, Islamic State ofGuineaRwanda
    Guinea-BissauSão Tomé and Principe
    BangladeshHaiti
    BeninKiribatiSierra Leone
    BhutanLao People’s Dem. Rep.Solomon Islands
    BotswanaSomalia
    Burkina FasoLesothoSudan
    BurundiLiberiaTanzania
    CambodiaMadagascarTogo
    Cape VerdeMalawiUganda
    Central African Rep.MaldivesVanuatu
    ChadMaliWestern Samoa
    ComorosMauritaniaYemen. Rep. of
    DjiboutiMozambique. Rep. ofZaïre
    Equatorial GuineaMyanmarZambia
    EthiopiaNepal
    Gambia, TheNiger

    List of Tables

    Output

    Inflation

    Financial Policies

    Foreign Trade

    Current Account Transactions

    Balance of Payments and External Financing

    External Debt and Debt Service

    Flow of Funds

    Medium-Term Baseline Scenario

    Output

    Table A1.Summary of World Output1(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996
    World3.34.04.63.52.41.32.02.53.63.74.1
    Industrial countries2.73.24.43.32.40.81.51.13.12.52.4
    United States2.73.13.92.51.2-0.62.33.14.12.92.0
    European Union2.12.94.23.53.01.11.0-0.62.82.92.8
    Japan4.04.16.24.74.84.31.1-0.20.50.52.2
    Other industrial countries2.73.53.93.11.0-1.20.71.54.02.82.9
    Developing countries4.55.75.24.24.04.95.96.16.26.06.3
    By region
    Africa2.11.63.63.42.11.70.70.82.63.05.2
    Asia6.78.19.16.05.76.48.28.78.58.77.9
    Middle East and Europe2.65.0-0.52.74.83.25.53.60.32.43.2
    Western Hemisphere3.23.41.11.60.63.52.73.34.61.84.0
    By analytical criteria
    Fuel exporters1.01.3-0.53.25.35.13.90.40.11.92.6
    Nonfuel exporters5.16.35.94.43.84.96.16.86.86.56.7
    Net creditor countries2.93.24.26.54.64.56.53.83.03.33.8
    Net debtor countries4.65.95.34.14.04.95.96.36.36.26.4
    Market borrowers5.16.45.53.83.76.57.57.97.97.26.9
    Official borrowers3.44.03.83.63.63.82.72.53.43.65.5
    Countries with recent debt-servicing difficulties3.03.81.82.10.52.52.22.74.12.44.2
    Countries without debt-servicing difficulties5.87.37J5.46.06.27.88.07.48.07.5
    Countries in transition332.54.02.11-3.9-11.6-15.2-9.1-9.5-2.13.4
    Central and eastern Europe-11.1-11.3-6.1-3.80.24.3
    Excluding Belarus and Ukraine-11.9-9.2-1.92.84.04.4
    Russia, Transcaucasus, and central Asia-12.0-18.7-11.8-15.2-4.62.4
    Memorandum
    Median growth rate
    Industrial countries2.63.14.13.82.11.31.1-0.12.82.92.7
    Developing countries3.73.63.53.93.23.13.63.43.54.44.8
    Countries in transition3.62.85.33.0-2.3-11.9-15.5-10.3-1.01.74.6
    Output per capita
    Industrial countries2.02.63.72.51.60.80.52.41.91.8
    Developing countries2.03.54.80.92.23.13.54.34.23.94.4
    Countries in transition2.61.83.41.6-4.5-11.8-15.4-9.3-9.6-2.33.2
    Value of world output in billions of U.S. dollars
    At market exchange rates11,38917.02518.99119.83422.20823,20323,23623.93025,84328,98830,628
    At purchasing power parities13.88620.36922,05423,93525,66026,96928,48229,66231,33533,48535,906

    Real GDP. For most countries included in the group “countries in transition,” local output is measured by real net material product (NMP) or by NMP-based estimates of GDP.

    Table A2.Industrial Countries: Real GDP and Total Domestic Demand(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996Fourth Quarter1
    199419951996
    Real GDP
    Industrial countries2.73.24.43.32.40.81.51.13.12.52.4
    Major industrial countries2.83.24.53.22.40.81.61.33.12.42.33.42.02.5
    United States2.73.13.92.51.2-0.62.33.14.12.92.04.11.92.2
    Japan4.04.16.24.74.84.31.1-0.20.50.52.20.81.42.5
    Germany21.91.53.73.65.72.82.2-1.22.92.62.93.73.02.5
    France2.22.34.44.32.50.81.3-1.52.92.92.74.12.23.0
    Italy2.73.14.12.92.11.20.7-1.22.23.02.82.92.42.8
    United Kingdom32.14.85.02.20.4-2.0-0.52.23.82.72.94.02.23.2
    Canada3.14.25.02.4-0.2-1.80.82.24.62.22.75.40.73.4
    Other industrial countries2.13.23.84.02.70.91.00.22.93.23.0
    Spain1.75.75.24.73.62.20.9-1.22.03.23.2
    Netherlands1.61.22.64.74.12.31.30.42.53.32.4
    Belgium1.22.04.93.53.22.315-1.72.42.52.5
    Sweden1.73.32.12.51.1-1.4-1.4-2.62.22.52.6
    Austria2.01.74.13.84.23.01.8-0.12.72.82.5
    Denmark2.30.31.20.61.41.30.81.54.43.32.5
    Finland3.24.14.95.7-0.1-7.0-3.6-1.63.95.24.6
    Greece42.3-0.54.54.0-1.03.20.8-0.51.51.92.3
    Portugal2.85.15.45.74.12.31.7-1.21.02.83.2
    Ireland3.24.64.37.48.62.95.04.05.26.24.9
    Luxembourg3.14.26.47.84.62.72.82.82.83.03.3
    Switzerland2.02.02.93.92.3-0.3-0.91.21.52.0
    Norway3.82.0-0.50.61.71.63.42.35.15.03.5
    Iceland4.58.6-0.10.31.11.3-3.31.12.83.02.6
    Australia2.94.74.14.41.4-1.52.03.95.43.83.6
    New Zealand1.8-0.73.9-1.4--3.711.55.04.32.23.2
    Memorandum
    European Union2.12.94.23.53.01.11.0-0.62.82.92.8
    Real total domestic demand
    Industrial countries2.63.64.53.32.20.51.50.93.32.62.5
    Major industrial countries2.73.54.53.11.10.51.51.33.32.52.33.62.12.6
    United States3.02.73.01.80.8-1.32.63.94.73.01.84.51.82.1
    Japan3.58.17.65.85.02.90.3-0.91.53.10.92.82.9
    Germany1.62.43.62.95.26.12.8-1.32.82.33.24.02.43.1
    France2.03.34.63.92.80.60.4-2.33.12.52.94.82.42.8
    Italy2.44.24.42.82.51.90.8-5.51.92.72.93.82.72.9
    United Kingdom2.05.37.92.9-0.6-3.10.32.03.32.02.63.41.33.0
    Canada2.95.35.54.3-0.5-1.20.42.03.21.82.32.71.23.2
    Other industrial countries1.73.84.55.02.50.50.7-1.22.93.33.2
    Memorandum
    European Union1.83.95.03.72.91.81.1-1.92.52.63.0

    From fourth quarter of preceding year.

    Data through 1990 apply to west Germany only.

    Average of expenditure, income, and output estimates of GDP at market prices.

    Based on revised national accounts for 1988 onward.

    Table A3.Industrial Countries: Components of Real GDP(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996
    Private consumer expenditure
    Industrial countries2.83.44.02.92.51.12.01.52.62.22.4
    Major industrial countries2.93.54.22.82.40.92.11.82.62.22.3
    United States3.02.83.61.91.5-0.42.83.33.52.61.6
    Japan3.64.25.24.33.92.21.71.02.21.23.0
    Germany11.93.42.72.85.45.42.80.50.91.83.3
    France2.42.93.33.02.71.41.40.21.52.52.7
    Italy3.24.24.23.52.52.71.1-2.51.62.63.2
    United Kingdom2.75.37.53.20.6-2.22.53.02.02.8
    Canada2.94.44.53.41.0-1.61.31.63.01.82.5
    Other industrial countries1.83.33.13.72.72.01.7-0.42.12.52.8
    Memorandum
    European Union2.33.94.13.43.02.31.5-0.11.62.23.0
    Public consumption
    Industrial countries2.62.41.71.72.61.71.2030.60.605
    Major industrial countries2.62.31.61.52.51.51.10.20.50.60.9
    United States2.63.00.62.03.11.2-0.7-0.8-0.7-0.30.5
    Japan3.50.42.22.01.91.62.71.72.83.62.7
    Germany11.91.51.1-1.62.20.65.0-0.51.21.60.7
    France2.72.83.50.42.12.83.43.31.11.81.2
    Italy2.83.42.80.81.21.61.00.7-3.20.1
    United Kingdom1.01.00.71.42.52.60.22.00.50.5
    Canada2.21.74.14.03.22.71.00.5-1.7-0.1-0.4
    Other industrial countries2.93.32.13.33.12.91.70.91.60.91.0
    Memorandum
    European Union2.32.62.11.12.22.22.40.91.10.40.7
    Gross fixed capital formation
    Industrial countries2.73.97.44.61.8-2.41.41.75.96.24.6
    Major industrial countries2.93.67.23.91.8-2.42.12.86.36.04.4
    United States3.9-0.54.20.1-1.7-7.65.511.312.39.94.4
    Japan3.29.611.99.38.83.7-1.1-1.8-2.40.93.2
    Germany11.11.84.46.38.59.83.5-5.64.33.34.3
    France0.44.89.67.92.8-3.1-5.81.63.34.6
    Italy1.35.06.94.33.80.6-1.7-13.11.16.64.0
    United Kingdom1.410.214.06.0-3.5-9.5-1.20.33.72.26.1
    Canada3.910.810.36.1-3.5-2.9-1.50.67.23.47.3
    Other industrial countries1.35.68.88.81.9-2.8-2.4-4.43.97.15.9
    Memorandum
    European Union1.05.68.87.13.80.5-1.0-6.42.34.85.1
    Final domestic demand
    Industrial countries2.73.54.43.22.50.71.61.02.62.62.6
    Major industrial countries2.83.44.43.02.50.61.71.42.72.52.5
    United Suites3.12.33.11.71.3-1.22.53.74.13.31.9
    Japan3.55.47.05.75.32.60.80.10.71.33.1
    Germany11.82.73.02.65.45.43.4-1.11.72.13.0
    France2.03.34.63.62.61.30.8-0.51.42.52.8
    Italy2.74.24.53.32.62.10.5-4.21.02.42.9
    United Kingdom2.15.27.23.40.2-2.6-0.21.62.91.72.9
    Canada2.95.15.64.10.4-1.00.61.12.91.83.0
    Other industrial countries1.83.84.14.82.51.10.8-1.02.43.23.2
    Memorandum
    European Union2.03.94.63.73.01.91.1-1.31.72.43.0
    Stock building2
    Industrial countries-0.10.10.20.1-0.3-0.1-0.1-0.10.6
    Major industrial countries-0.10.10.10.1-0.4-0.1-0.1-0.10.7-0.1
    United States0.4-0.10.2-0.5-0.10.10.30.6-0.3-0.1
    Japan-0.30.60.2-0.30.3-0.5-0.20.20.10.1
    Germany1-0.1-0.20.60.3-0.10.7-0.6-0.21.10.20.2
    France0.10.40.2-0.7-0.4-1.81.70.1
    Italy-0.3-0.4-0.10.3-1.40.80.3
    United Kingdom0.10.7-0.4-0.8-0.50.50.40.40.2-0.3
    Canada0.1-0.10.2-1.0-0.1-0.20.90.30.1-0.7
    Other industrial countries0.10.40.2-0.5-0.1-0.20.40.10.1
    Memorandum
    European Union-0.10.4-0.1-0.1-0.1-0.60.90.2
    Foreign balance2
    Industrial countries-0.4-0.2-0.10.20.30.2-0.2-0.1-0.1
    Major industrial countries-0.1-0.3-0.10.10.20.3-0.3-0.1-0.1
    United States-0.40.30.90.60.40.7-0.30.8-0.7-0.10.2
    Japan0.5-0.9-1.2-1.1-0.2130.8-0.2-0.4-1.0-1.0
    Germany10.3-0.80.30.90.8-3.1-0.60.20.10.2-0.3
    France0.1-1.1-0.30.3-0.30.21.00.8-0.20.3-0.3
    Italy-1.1-0.5-0.5-0.8-0.14.60.30.3
    United Kingdom-0.1-0.5-2.9-0.81.01.3-0.90.20.40.70.3
    Canada0.2-0.9-1.2-1.60.6-0.60.50.31.10.30.3
    Other industrial countries0.3-0.7-0.6-1.30.20.50.31.30.1-0.1-0.2
    Memorandum
    European Union0.2-0.9-0.8-0.30.1-0.6-0.11.40.20.3-0.2

    Data through 1990 apply to west Germany only.

    Changes expressed as percent of GDP in the preceding period.

    Table A4.Industrial Countries: Unemployment, Employment, and Real Per Capita GDP(In percent)
    Average1 1977-861987198819891990199119921993199419951996
    Unemployment rate
    Industrial countries6.77.36.86.26.06.87.78.18.17.67.5
    Major industrial countries6.46.86.25.75.66.47.27.37.26.86.8
    United States27.56.25.55.35.56.77.46.86.15.75.9
    Japan2.42.82.52.32.12.12.22.52.93.13.2
    Germany35.87.97.86.86.26.67.78.89.69.18.7
    France7.610.510.09.48.99.410.311.612.411.711.0
    Italy48.210.210.410.29.18.610.710.411.311.210.5
    United Kingdom7.810.08.06.35.88.19.710.39.38.38.1
    Canada9.38.87.87.58.110.411.311.210.49.74.1
    Other industrial countries7.99.89.58.58.18.910.212.212.511.811.2
    Spain14.520.519.517.316.316.318.422.724.223.122.0
    Netherlands6.68.58.47.77.06.66.77.78.78.68.5
    Belgium9.611.09.88.17.27.17.99.510.39.89.4
    Sweden2.61.91.61.41.52.95.34.58.07.36.9
    Austria3.35.65.33.13.23.53.64.24.44.24.2
    Denmark8.37.88.69.39.610.511.212.312.110.09.7
    Finland5.54.74.53.53.57.613.117.918.416.814.7
    Greece6.57.47.77.57.07.78.79.79.69.59.3
    Portugal8.17.17.05.84.74.14.15.56.87.06.6
    Ireland11.616.716.114.713.414.715.515.714.813.813.5
    Luxembourg1.21.71.51.41.31.41.62.12.83.02.6
    Switzerland0.60.70.60.50.51.12.64.64.34.34.0
    Norway2.32.13.24.95.25.55.96.05.45.04.5
    Iceland0.60.40.61.71.81.53.11.14.84.54.3
    Australia7.38.17.26.27.09.610.810.99.78.47.6
    New Zealand4.34.46.87.38.610.610.39.27.48.56.3
    Memorandum
    European Union7.810.19.68.57.98.49.811.111.611.010.4
    Growth in employment
    Industrial countries1.01.71.91.91.2-0.5-0.3-0.21.111.20.9
    Major industrial countries1.21.72.01.81.1-0.5-0.10.21.21.00.7
    United States2.12.62.32.00.5-0.90.61.53.11.50.7
    Japan1.11.01.71.92.01.91.10.20.10.10.2
    Germany30.40.70.81.53.0-2.2-1.6-1.8-0.90.80.7
    France0.40.91.51.10.2-0.6-1.00.11.71.5
    Italy0.5-0.30.5-0.11.20.8-0.9-2.5-1.71.01.0
    United Kingdom-0.12.34.22.70.4-3.1-2.5-0.60.30.60.6
    Canada2.12.73.22.10.6-1.9-0.61.42.11.71.9
    Other industrial countries0.31.61.72.21.7-0.4-1.3-1.80.31.81.7
    Memorandum
    European Union0.11.11.71.7-1.6-0.9-1.5-1.7-0.41.21.2
    Growth in real per capita GDP
    Industrial countries2.02.63.72.51.60.80.52.41.91.8
    Major industrial countries2.12.63.82.41.50.90.72.41.71.7
    United States1.72.23.01.60.2-1.71.22.03.01.91.0
    Japan3.23.65.84.34.53.90.8-0.50.30.21.9
    Germany32.01.53.12.63.82.01.4-1.92.62.02.3
    France1.71.84.03.82.00.40.9-1.92.52.52.2
    Italy2.53.03.92.82.00.91.10.22.12.92.8
    United Kingdom2.04.54.81.90.1-2.6-0.82.03.62.52.6
    Canada2.02.93.60.7-1.7-3.0-0.41.13.21.11.6
    Other industrial countries1.62.83.53.42.10.30.4-0.52.32.62.4
    Memorandum
    European Union1.92.73.93.12.30.60.7-0.72.52.52.5

    Compound annual rate of change for employment and per capita GDP; arithmetic average for unemployment rate.

    The projections for unemployment have been adjusted to reflect the new survey techniques adopted by the U.S. Bureau of Labor Statistics in January 1994.

    Data through 1990 apply to west Germany only.

    New series starting in 1993, reflecting revisions in the labor force surveys and the definition of unemployment to bring data in line with those of other industrial countries.

    Table A5.Developing Countries: Real GDP(Annual percent change)
    Average 1977–861987198819891990199119921993199419951996
    Developing countries4.55.75.24.24.04.45.96.16.26.06.3
    By region
    Africa2.11.63.63.42.11.70.70.82.63.05.2
    Asia6.78.19.16.05.76.48.28.78.58.77.9
    Middle East Bud Europe2.65.0-0.52.74.83.25.53.60.32.43.2
    Western Hemisphere3.23.41.11.60.63.52.73.34.61.84.11
    Sub-Saharan Africa2.83.22.52.31.11.60.91.52.15.05.5
    Four newly industrializing Asian economies8.111.99.56.47.17.85.75.97.58.17.0
    By predominant export
    Fuel1.01.3-0.53.25.35.13.90.40.11.92.6
    Nonfuel exports5.16.35.94.43.84.96.16.86.86.56.7
    Manufactures8.611.010.44.54.68.211.011.510.410.58.7
    Primary products1.93.40.3-0.30.74.64.94.35.14.54.9
    Agricultural products1.62.10.2-0.61.04.95.54.34.53.94.6
    Minerals2.56.10.70.5-0.13.93.64.56.45.85.5
    Services, income, and private transfers4.26.61.64.3-0.6-1.25.54.52.52.44.1
    Diversified export base4.44.44.85.04.23.43.44.24.94.25.7
    By financial criteria
    Net creditor countries2.93.24.26.54.64.56.53.83.03.33.8
    Net debtor countries4.65.95.34.14.04.95.96.36.36.26.4
    Market borrowers5.16.45.53.83.76.57.57.97.97.26.9
    Diversified borrowers4.25.75.65.04.62.24.14.54.15.25.9
    Official borrowers3.44.03.83.63.63.82.72.53.43.65.5
    Countries with recent debt-servicing difficulties3.03.81.82.10.52.52.22.74.12.44.2
    Countries without debt-servicing difficulties5.87.37.55.46.06.27.88.07.48.07.5
    Other groups
    Small low-income economies3.34.03.83.73.83.72.72.83.04.45.2
    Least developed countries2.82.62.53.02.52.43.03.33.25.45.3
    Memorandum
    Real per capita GDP
    Developing countries2.03.54.80.92.23.13.54.34.23.94.4
    By region
    Africa-0.5-1.10.70.7-0.8-1.0-1.9-1.8-0.10.42.4
    Asia4.66.210.51.84.04.76.57.06.87.06.2
    Middle East and Europe-1.21.2-3.41.03.22.0-0.31.4-2.4-0.30.2
    Western Hemisphere0.91.3-0.7-0.8-1.41.60.71.32.7-0.92.2
    Table A6.Developing Countries—by Country: Real GDP1(Annual percent change)
    Average 1977-8619871988198919901991199219931994
    Africa2.11.63.63.42.11.70.70.82.6
    Algeria2.5-0.7-1.94.8-1.31.6-2.2-0.2
    Angola9.4-8.44.4-5.3-1.61.3-23.82.7
    Benin40-1.81.1-2.53.14.74.13.23.4
    Botswana10.812.214.19.27.37.62.30.42.8
    Burkina Faso3.6-1.46.60.9-1.510.02.5-0.81.2
    Burundi3.65.55.01.33.55.02.7-5.7-6.7
    Cameroon8.00.5-12.9-3.5-2.5-6.7-4.8-2.2-3.8
    Cape Verde4.67.67.66.92.41.02.94.34.5
    Central African Republicio-5.01.33.41.0-0.6-2.5-2.26.7
    Chad0.9-1.813.85.8-2.313.28.1-12.04.1
    Comoros4.51.62.7-3.22.52.11.61.30.8
    Congo7.10.21.82.90.72.22.4-1.2-6.7
    Côte d’Ivoire2.9-1.6-2.0-1.1-2.1-0.8-0.81.7
    Djibouti0.40.51.2-2.6-0.61.32.4-2.34.5
    Equatorial Guinea1.54.42.7-1.23.3-1.113.07.12.5
    Ethiopia1.69.92.41.2-2.2-1.0-3.2-12.31.3
    Gabon-4.5-15.43.55.05.45.00.73.21.7
    Gambia, The3.52.81.74.35.72.24.42.1
    Ghana1.14.85.65.13.35.33.95.03.8
    Guinea1.83.36.34.04.32.43.04.74.0
    Guinea-Bissau6.55.66.94.53.23.02.82.76.3
    Kenya5.15.96.04.64.81.9-1.5-0.63.2
    Lesotho-0.75.112.911.94.61.72.65.616.7
    Liberia0.51.33.1-10.80.32.91.92.22.2
    Madagascar0.41.23.44.13.1-6.31.12.10.2
    Malawi2.91.63.34.14.87.8-7.910.8-12.4
    Mali1.61.2-0.211.80.4-2.57.8-0.72.4
    Mauritania4.22.93.14.8-1.82.61.74.94.6
    Mauritius3.110.88.75.74.76.34.76.74.7
    Morocco4.2-2.710.42.53.96.9-4.1-1.111.5
    Mozambique, Rep. of-2.314.68.26.50.94.9-0.819.35.4
    Namibia4.30.22.10.36.67.5-1.93.4
    Niger11-3.66.90.9-1.32.5-6.51.44.0
    Nigeria-1.2-0.79.97.28.24.82.92.31.3
    Rwanda3.8-0.33.81.00.40.30.4-10.9
    Sao Tomé and Principe0.5-1.52.03.1-2.21.51.51.31.5
    Senegal2.04.05.1-1.44.50.72.9-2.02.0
    Seychelles3.54.95.310.37.52.76.95.8-1.1
    Sierra Leone0.34.02.52.4-0.10.7-0.81.53.5
    Somalia2.94.1-5.02.4-0.2
    South Africa2.02.14.22.4-0.3-1.0-2.21.12.3
    Sudan1.01.31.41.56.18.67.65.5
    Swaziland3.816.910.03.58.83.83.84.13.5
    Tanzania1.85.14.24.04.85.73.53.73.1
    Togo1.80.56.23.90.1-0.9-3.7-13.510.7
    Tunisia4.56.70.13.77.13.97.82.33.4
    Uganda1.37.66.05.75.13.18.45.510.0
    ZaïreLI2.50.6-1.4-6.6-8.4-10.5-16.2-7.6
    Zambia0.32.81.91.0-0.5-0.2-5.29.21.4
    Zimbabwe2.5-0.57.34.52.24.3-6.22.14.5
    Asia6.78.19.16.05.76.48.28.78.5
    Afghanistan, Islamic State of0.5-10.3-8.3-7.1-2.60.81.0-3.1-3.0
    Bangladesh4.24.33.55.05.14.14.84.94.4
    Bhutan6.917.81.04.76.63.53.75.25.0
    Cambodia9.93.51.27.67.03.95.2
    China9.010.911.34.33.88.213.113.711.5
    Fiji2.1-5.93.513.45.6-0.24.42.73.3
    Hong Kong8.313.08.02.63.45.16.05.85.7
    India4.84.88.77.45.91.73.63.74.9
    Indonesia8.64.95.87.57.26.96.56.57.3
    Kiribati-5.80.310.2-2.2-2.92.85.12.93.5
    Korea7.811.511.36.49.59.15.15.38.4
    Lao P.D. Republic4.9-1.0-2.19.96.74.07.06.18.4
    Malaysia5.85.48.99.29.78.77.88.38.7
    Maldives8.48.98.79.316.27.66.36.26.6
    Marshall Islands15.45.1-1.73.211.10.12.52.0
    Micronesia, Fed. States of9.612.4-1.7-2.14.3-1.25.2-0.4
    Myanmar4.9-3.3-9.5-0.43.00.26.86.76.3
    Nepal3.23.97.23.98.04.62.14.85.1
    Pakistan6.36.44.84.75.68.24.82.53.9
    Papua New Guinea1.52.82.9-1.4-3.09.511.816.63.0
    Philippines2.04.36.86.22.7-0.20.32.14.3
    Singapore6.89.511.19.68.86.76.010.110.1
    Solomon Islands2.58.41.34.31.01.710.50.53.7
    Sri Lanka5.21.52.72.36.24.64.36.95.6
    Taiwan Province of China8.412.37.37.64.97.26.56.16.5
    Thailand6.29.513.312.211.68.47.98.28.5
    Vanuatu3.50.40.64.55.26.50.64.42.0
    Vietnam5.62.55.17.84.96.08.68.18.8
    Western Samoa2.20.5-1.50.4-9.4-1.9-1.35.4-5.5
    Middle East and Europe2.65.0-0.52.74.82.35.53.60.3
    Bahrain4.8-1.210.91.21.34.67.88.22.3
    Cyprus7.07.08.78.07.31.210.31.34.0
    Egypt6.28.73.52.72.31.20.41.51.3
    Iran, Islamic Republic of-0.8-2.2-9.74.511.210.76.12.31.6
    Iraq1.128.3-10.212.0-26.0-61.31.0
    Israel3.06.13.11.35.86.26.63.56.5
    Jordan7.22.9-1.9-13.41.01.816.15.85.7
    Kuwait-2.28.1-10.025.0-25.7-41.076.329.31.1
    Lebanon11.716.7-28.2-42.2-13.438.24.57.08.0
    Libya-2.6-23.6-10.27.25.63.6-3.0-6.1-3.0
    Malta4.34.18.48.26.36.24.74.54.3
    Oman7.7-3.76.13.37.59.26.06.43.5
    Qatar-0.80.94.75.32.7-0.89.7-0.60.2
    Saudi Arabia2.5-1.48.4-0.28.99.73.1-0.5-0.1
    Syrian Arab Republic3.11.913.3-9.07.67.110.53.95.5
    Turkey3.99.61.90.69.30.86.17.5-5.5
    United Arab Emirates-1.25.5-2.613.317.50.22.8-1.51.1
    Yemen Arab Republic, former7.94.46.73.41.7
    Yemen, former P.D. Republic of0.81.41.02.3.0
    Yemen, Republic of4.25.96.0
    Western Hemisphere3.23.41.11.611.53.52.73.34.6
    Antigua and Barbuda6.89.07.76.33.54.41.13.44.2
    Argentina0.52.6-1.9-6.20.18.98.76.07.4
    Aruba15.916.79.111.73.83.83.83.8
    Bahamas, The5.03.72.32.31.2-3.10.12.02.3
    Barbados2.83.83.13.7-3.3-3.9-5.60.43.7
    Belize2.711.69.013.09.34.69.04.21.5
    Bolivia-0.42.63.03.64.44.62.84.14.2
    Brazil3.83.60.33.3-4.41.1-0.94.35.7
    Chile3.76.67.39.93.37.311.06.34.2
    Colombia3.95.44.13.44.32.04.05.35.7
    Costa Rica3.14.83.45.63.62.27.36.03.5
    Dominica3.76.87.4-1.16.32.32.92.11.0
    Dominican Republic3.110.02.24.8-6.00.87.83.04.3
    Ecuador3.7-5.910.40.33.05.03.62.04.0
    El Salvador-0.82.71.61.03.43.55.05.35.8
    Grenada4.57.76.85.06.82.11.01.4
    Guatemala1.53.54.03.93.13.74.83.94.0
    Guyana-2.60.9-2.6-3.3-2.56.17.88.28.5
    Haiti1.4-0.80.81.1-0.1-3.0-14.8-2.6-10.6
    Honduras3.56.14.54.00.13.35.66.0-1.5
    Jamaica1.67.7-4.04.74.10.81.82.03.0
    Mexico3.81.91.23.34.43.62.80.63.5
    Netherlands Antilles1.40.22.63.10.65.85.2-1.83.0
    Nicaragua-2.4-0.7-12.5-1.7-0.1-0.20.4-0.23.2
    Panama4.72.4-15.6-0.44.69.58.65.64.7
    Paraguay5.74.36.45.83.12.51.84.13.5
    Peru1.98.3-8.2-11.8-4.32.8-2.46.512.9
    St. Kitts and Nevis4.87.49.86.73.03.93.04.53.2
    St. Lucia6.61.912.29.14.12.37.12.32.2
    St. Vincent and the Grenadines5.96.38.96.55.43.14.91.41.6
    Suriname0.2-7.38.54.00.12.94.3-6.8-1.0
    Trinidad and Tobago-0.9-4.6-4.0-0.71.52.7-1.7-1.44.6
    Uruguay1.37.91.30.93.27.92.55.1
    Venezuela1.03.65.8-8.66.59.76.1-0.4-3.3

    For many countries, figures for recent years are IMF staff estimates. Data for some countries are for fiscal years.

    Table A7.Countries in Transition: Real GDP1(Annual percent change)
    Average 1977-8619871988198919901991199219931994
    Central and eastern Europe-11.1-11.3-6.1-3.8
    Albania2.6-0.8-1.49.8-10.0-28.0-7.29.69.4
    Belarus-1.2-9.7-10.6-20.2
    Bulgaria4.84.72.4-0.5-9.1-11.7-7.3-2.41.4
    Croatia-3.70.8
    Czech Republic-0.92.6
    Czechoslovakia, former2.72.12.54.5-0.4-15.9-8.5
    Estonia-7.9-21.6-6.66.0
    Hungary2.54.1-0.10.7-3.5-11.9-3.0-0.82.0
    Latvia-11.1-35.2-14.81.9
    Lithuania-13.1-56.6-24.21.7
    Macedonia, former Yugoslav Rep. of-15.5-7.2
    Moldova-18.1-20.6-8.7-22.1
    Poland1.42.04.10.2-11.6-7.02.63.86.0
    Romania4.00.8-0.5-5.8-5.6-12.9-8.81.33.5
    Slovak Republic-4.14.8
    Slovenia1.35.0
    Ukraine-11.9-17.0-16.8-23.7
    Yugoslavia, former3.1-1.0-2.00.8-7.5-17.0-34.0
    Russia-13.0-19.0-12.0-15.0
    Transcaucasus and central Asia-7.7-17.6-11.2-16.2
    Armenia-12.4-52.6-14.15.3
    Azerbaijan-0.7-22.1-23.1-22.0
    Georgia-20.6-42.7-39.215.0
    Kazakhstan-13.0-14.0-12.0-25.0
    Kyrgyz Republic-5.0-19.1-16.0-26.5
    Mongolia6.93.58.34.2-5.6-9.2-9.5-3.02.1
    Tajikistan-7.1-28.9-11.1-21.4
    Turkmenistan-4.7-5.3-10.0-20.0
    Uzbekistan-0.9-11.1-2.4-3.4

    Data for some countries refer to real net material product (NMP) or are estimates based on NMP. For many countries, figures for recent years are IMF staff estimates. The figures should be interpreted only as indicative of broad orders of magnitude because reliable, comparable data are not generally available. In particular, the growth of output of new private enterprises or of the informal economy is not fully reflected in the recent figures.

    Inflation

    Table A8.Summary of Inflation(In percent)
    Average 1977-861987198819891990199119921993199419951996
    GDP deflators
    Industrial countries7.13.23.64.44.34.23.22.51.92.02.5
    United States6.43.13.94.64.33.82.82.22.11.92.8
    European Union9.14.04.34.95.15.64.43.72.73.02.9
    Japan3.10.41.82.22.01.50.90.2-0.10.5
    Other industrial countries7.25.35.35.74.63.61.61.81.42.42.5
    Consumer prices
    Industrial countries7.33.13.44.45.04.53.32.92.32.52.5
    United States6.83.74.14.85.44.23.03.02.63.03.2
    European Union8.93.23.54.75.45.14.53.83.03.12.8
    Japan3.89.10.72.32.83.31.71.10.7-0.20.1
    Other industrial countries7.65.24.85.25.95.12.12.51.22.72.4
    Developing countries26.133.351.259.662.033.535.843.148.119.513.0
    By region
    Africa15.814.017.119.420.125.028.227.932.920.89.3
    Asia7.57.011.511.16.57.67.19.413.512.09.6
    Middle East and Europe20.323.027.122.222.025.925.724.532.325.315.2
    Western Hemisphere69.3120.9233.3340.0438.6129.4152.7212.2226.738.223.3
    By analytical criteria
    Fuel exporters12.214.417.422.619.019.421.024.830.526.720.3
    N on fuel exporters28.836.155.964.767.935.237.645.350.018.812.3
    Market borrowers38.051.987.7108.1112.645.852.568.474.723.015.5
    Official borrowers16.917.322.223.320.126.122.220.423.618.09.7
    Countries with recent debt-servicing difficulties49.583.1144.1195.6239.691.9106.4140.0150.832.518.9
    Countries without debt-servicing difficulties11.710.515.413.910.111.411.213.218.015.011.1
    Countries in transition6.44.413.637.144.195.1722.3675.2301.3147.725.4
    Central and eastern Europe97.2368.4458.8203.2115.825.0
    Excluding Belarus and Ukraine101.2183.2139.287.163.624.8
    Russia92.71,353.0896.0302.0180.825.4
    Transcaucasus and central Asia95.7914.91,241.31,582.7214.227.6
    Memorandum
    Median inflation rate
    Industrial countries7.94.14.64.85.43.63.13.02.32.52.5
    Developing countries10.77.58.29.29.911.79.88.511.58.05.1
    Countries in transition1.01.30.62.05.696.5883.6685.6207.453.120.1
    Table A9.Industrial Countries: GDP Deflators and Consumer Prices(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996Fourth Quarter1
    199419951996
    GDP deflators
    Industrial countries7.13.23.64.44.34.23.22.51.92.02.5
    Major industrial countries6.72.93.44.14.04.03.08.31.71.82.31.72.22.3
    United Slates6.43.13.94.64.33.82.82.22.11.92.82.32.13.1
    Japan3.10.41.82.22.01.511.10.2-0.10.5-0.60.50.3
    Germany23.64.61.62.42.14.95.53.82.32.21.92.12.22.0
    France9.23.02.83.05.13.32.12.51.32.02.21.72.41.9
    Italy14.46.06.76.27.77.74.54.33.65.13.94.05.62.8
    United Kingdom9.65.06.07.16.46.54.33.32.11.93.21.82.43.2
    Canada6.54.74.64.83.12.91.2Id0.62.02.10.42.61.9
    Other industrial countries9.55.15.36.16.15.34.23.53.03.33.3
    Spain14.25.85.77.07.47.06.74.54.15.24.8
    Netherlands3.8-0.51.21.22.32.72.51.62d1.21.6
    Belgium5.32.31.84.83.12.73.44.42.22.42.5
    Sweden8.84.46.77.99.17.91.02.73.03.43.4
    Austria4.924172.93.34.04.25.63.22.72.6
    Denmark7.84.73.44.22.72.22.01.12.02.03.0
    Finland8.34.77.06.15.82.50.72.42.53.12.8
    Greece18.113.514.314.523.918.414.213.610.99.17.2
    Portugal21.711.311.812.012.914.713.16.95.14.43.7
    Ireland11.92.23.14.4-1.71.11.33.65.22.31.7
    Luxembourg6.0-3.1Id0.21.33.83.80.65.22.12.3
    Switzerland3.52.62.44.25.75.52.62.11.81.41.6
    Norway7.37.14.55.94.52.5-1.02.10.52.42.5
    Iceland43.119.522.819.816.87.63.72.22.62.93.0
    Australia8.57.48.47.44.61.91.51.31.22.63.6
    New Zealand14.715.94.98.03.34.32.01.60.94.30.1
    Memorandum
    European Union9.14.04.34.95.15.64.43.72.73.02.9
    Consumer prices
    Industrial countries7.33.13.44.45.04.53.32.32.52.52.5
    Major industrial countries7.02.83.24.34.84.33.22.82.22.42.42.22.42.4
    United States6.83.74.14.85.44.23.03.02.63.03.22.63.13.3
    Japan3.80.10.72.32.83.31.71.30.7-0.20.10.9-0.60.4
    Germany2,33.50.21.32.82.73.6114.52.71.81.72.61.91.7
    France9.33.32.73.53.43.22.42.11.72.12.31.62.61.9
    Italy14.24.75.16.36.56.35.24.54.05.44.03.95.93.3
    United Kingdom49.24.44.05.98.16.84.75.02.42.93.02.23.22.7
    Canada5.54.44.05.04.85.61.51.80.22.12.02.51.9
    Other industrial countries9.14.94.75.66.45.44.2173.23.53.0
    Memorandum
    European Union8.93.23.54.75.45.14.53.83.03.12.8

    From fourth quarter of preceding year.

    Data through 1990 apply to west Germany only.

    Based on the revised consumer price index for united Germany introduced in September 1995.

    Retail price index excluding mortgage interest.

    Table A10.Industrial Countries: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996
    Hourly earnings
    Industrial countries8.53.84.65.56.36.45.33.62.63.23.5
    Major industrial countries8.13.44.45.46.06.35.23.52.43.13.3
    United States7.12.24.03.95.25.54.12.81.82.32.9
    Japan4.91.03.26.76.55.94.62.62.72.72.1
    Germany15.95.23.94.25.87.28.76.82.44.84.7
    France11.64.63.94.84.85.45.22.72.13.23.7
    Italy16.17.67.59.78.69.47.34.63.94.55.9
    United Kingdom11.87.47.99.09.69.36.45.44.35.84.8
    Canada7.63.43.95.35.24.73.52.11.60.91.8
    Other industrial countries11.06.76.16.27.87.46.04.33.93.94.4
    Memorandum
    European Union11.06.35.86.67.37.87.05.13.54.54.7
    Productivity
    Industrial countries2.54.64.12.42.02.01.92.65.33.02.2
    Major industrial countries2.55.14.22.42.22.11.91.85.43.02.2
    United States1.76.42.40.61.72.51.93.74.62.32.2
    Japan3.34.17.44.52.81.5-3.7-1.63.54.51.4
    Germany12.91.94.23.43.62.84.44.79.86.13.4
    France4.05.01.35.11.51.35.00.18.81.81.6
    Italy3.65.35.72.91.61.84.31.96.82.01.8
    United Kingdom2.94.95.14.42.22.24.44.54.63.84.3
    Canada2.02.50.40.53.40.94.43.13.2-0.60.2
    Other industrial countries4.22.03.92.40.91.62.33.35.22.72.0
    Memorandum
    European Union3.73.65.13.61.92.04.03.27.33.52.6
    Unit labor costs
    Industrial countries5.6-0.70.63.14.24.33.41.0-2.60.21.3
    Major industrial countries5.3-1.6033.03.84.13.31.0-2.80.11.1
    United States5.3-3.91.63.33.43.02.1-0.9-2.70.6
    Japan1.5-3.0-3.92.03.54.38.64.3-0.7-1.70.7
    German12.93.3-0.20.82.14.34.111-6.7-1.21.2
    France7.3-0.4-3.2-0.33.34.00.12.7-6.11.32.0
    Italy12.22.11.76.66.97.42.92.7-2.82.54.1
    United Kingdom8.62.52.74.47.37.01.90.8-0.22.00.5
    Canada5.50.83.44.81.73.8-0.9-1.01.51.51.6
    Other industrial countries6.64.72.33.86.85.83.71.1-1.21.22.4
    Memorandum
    European Union7.12.70.72.95.35.73.01.9-3.50.92.0

    Data through 1990 apply to west Germany only.

    Table A11.Developing Countries: Consumer Prices(Annual percent change)
    Average 1977-861987198819891990199119921993199419951996
    Developing countries26.133.351.259.662.033.535.843.148.119.513.0
    By region
    Africa15.814.017.119.420.125.028.227.932.920.89.3
    Asia7.57.011.511.16.57.67.19.413.512.09.6
    Middle East and Europe20.323.027.122.222.025.925.724.532.325.315.2
    Western Hemisphere69.3120.9233.3340.0438.6129.4152.7212.2226.738.223.3
    Sub-Saharan Africa20.720.723.322.322.037.440.634.652.125.49.3
    Four newly industrializing
    Asian economies8.42.55.05.87.07.55.94.65.65.04.6
    By predominant export
    Fuel12.214.417.422.619.019.421.024.830.526.720.3
    Nonfuel exports28.836.155.964.767.935.237.645.350.018.812.3
    Manufactures8.07.515.314.94.04.56.110.917.414.610.9
    Primary products70.858.9129.7306.6310.8100.336.726.426.614.77.4
    Agricultural products79.264.8125.7325.4291.287.325.619.017.312.76.6
    Minerals54.047.1138.3270.2355.1131.064.144.149.018.99.1
    Services, income, and private transfers12.012.213.816.216.519.714.811.611.99.06.9
    Diversified export base32.752.077.080.899.149.563.580.186.323.414.5
    By financial criteria
    Net creditor countries5.60.71.62.93.55.33.43.04.24.94.1
    Net debtor countries27.535.554.563.466.035.337.945.750.920.313.5
    Market borrowers38.051.987.7108.1112.645.852.568.474.723.015.5
    Diversified borrowers15.115.717.915.218.119.818.116.419.315.510.8
    Official borrowers16.917.322.223.320.126.122.220.423.618.09.7
    Countries with recent debt-servicing difficulties49.583.1144.1195.6239.691.9106.4140.0150.832.518.9
    Countries without debt- servicing difficulties11.710.515.413.910.111.111.213.218.015.011.1
    Other groups
    Small low-income economies16.018.823.924.821.327.825.023.526.518.710.2
    Least developed countries17.120.923.125.425.739.337.728.938.619.910.5
    Memorandum
    Median
    Developing countries10.77.58.29.29.911.79.88.511.58.05.1
    By region
    Africa11.47.07.69.78.99.510.09.124.810.24.9
    Asia8.36.98.47.28.69.68.87.08.57.35.6
    Middle East and Europe9.05.05.86.99.510.48.97.96.86.04.4
    Western Hemisphere12.613.512.114.321.822.712.110.78.88.05.6
    Table A12.Developing Countries—by Country: Consumer Prices1(Annual percent change)
    Average
    1977-86
    19871988198919901991199219931994
    Africa15.814.017.119.420.125.028.227.932.9
    Algeria11.05.95.99.246.931.720.529.022.5
    Angola80.1299.01,379.0950.0
    Benin9.33.04.30.91.12.15.90.538.6
    Botswana11.99.88.011.611.412.615.014.211.1
    Burkina Faso8.3-2.94.2-0.3-0.82.5-2.00.624.7
    Burundi10.07.04.511.57.18.75.09.714.7
    Cameroon11.02.81.71.61.5-0.61.0-3.712.7
    Cape Verde14.24.03.76.96.67.05.24.44.6
    Central African Republic11.6-7.0-3.90.6-0.2-2.8-0.8-2.924.5
    Chad6.7-2.714.9-4.90.54.0-3.8-7.041.3
    Comoros7.44.01.15.71.61.7-1.41.925.0
    Congo9.8-1.04.44.02.61.52.00.356.9
    Côle d’Ivoire11.07.06.91.0-0.71.64.22.126.0
    Djibouti8.94.26.43.07.86.85.05.84.0
    Equatorial Guinea18.3-9.0-3.45.22.7-0.90.91.640.6
    Ethiopia9.5-9.52.29.65.220.921.010.01.5
    Gabon10.0-1.0-9.86.66.03.3-10.80.636.1
    Gambia, The13.046.212.410.810.29.112.05.94.0
    Ghana58.239.831.425.237.218.010.125.024.9
    Guinea25.636.727.428.319.419.616.67.14.1
    Guinea-Bissau30.286.860.380.833.057.669.648.115.2
    Kenya12.45.18.39.915.719.627.346.028.8
    Lesotho14.411.614.914.415.814.018.812.09.5
    Liberia5.95.09.725.310.010.010.010.010.0
    Madagascar15.715.526.39.011.88.515.39.239.1
    Malawi12.026.828.07.514.08.323.022.834.6
    Mali11.4-15.08.5-0.21.61.5-4.20.933.8
    Mauritania4.48.26.313.06.45.610.19.34.1
    Mauritius12.30.71.516.010.712.82.98.99.4
    Morocco9.82.7243.17.08.05.75.25.1
    Mozambique. Rep. of15.0164.158.542.143.733.345.142.363.1
    Namibia12.612.515.512.011.917.78.510.8
    Niger8.7-6.60.6-0.8-2.0-1.8-1.6-0.535.6
    Nigeria15.810.234.550.57.413.044.657.257.0
    Rwanda8.04.13.01.04.219.69.512.564.0
    São Tomé and Principe5.723.841.244.840.536.127.421.837.7
    Senegal9.8-4.1-1.80.40.3-1.8-0.732.0
    Seychelles7.22.61.81.63.92.03.21.31.0
    Sierra Leone36.9178.732.762.8111.0102.765.517.618.4
    Somalia35.528.182.0111.0216.8
    South Africa13.916.212.714.714.415.313.99.79.0
    Sudan27.921.562.965.356.0111.0106.5111.5102.0
    Swaziland15.413.212.212.913.513.09.08.08.0
    Tanzania24.729.931.225.819.722.322.226.129.0
    Togo8.00.10.2-1.21.00.43.7-3.641.4
    Tunisia8.38.27.27.76.58.25.84.04.7
    Uganda89.7166.7130.845.424.542.228.36.56.1
    Zaïre52.590.482.7104.181.32,154.44,129.21,893.123,759.7
    Zambia22.247.054.0128.3109.693.4191.3187.353.0
    Zimbabwe12.511.97.111.615.523.942.725.423.2
    Asia7.57.011.511.16.57.67.19.413.5
    Afghanistan, Islamic Slate of10.918.229.289.8157.8166.058.234.020.0
    Bangladesh12.310.99.68.79.16.93.21.63.2
    Bhutan5.911.17.96.46.76.711.49.08.0
    Cambodia90.5152.387.9176.831.026.0
    China3.41.318.517.82.12.75.413.021.7
    Fiji7.15.711.98.18.16.54.95.21.5
    Hong Kong8.65.57.510.19.711.69.38.58.0
    India8.49.08.96.59.913.010.78.110.2
    Indonesia11.39.38.16.47.89.47.59.78.5
    Kiribati7.46.53.15.33.85.74.06.54.0
    Korea10.83.17.15.78.69.36.24.86.3
    Lao P.D. Republic55.96.114.859.735.713.49.86.36.8
    Malaysia4.40.82.52.83.14.44.73.63.7
    Maldives10.511.76.57.23.614.716.820.216.5
    Marshall Islands-0.62.62.20.74.010.35.02.8
    Micronesia, Fed, States of-3.13.74.53.54.05.06.05.0
    Myanmar3.323.317.327.517.632.321.931.722.2
    Nepal10.313.311.08.19.79.820.88.07.0
    Pakistan7.64.93.37.29.711.09.210.512.8
    Papua New Guinea6.63.35.44.57.07.04.35.02.9
    Philippines15.33.89.110.612.718.78.97.69.1
    Singapore3.60.51.62.33.53.42.32.23.1
    Solomon Islands10.311.516.814.98.615.210.79.213.7
    Sri Lanka11.47.714.011.621.512.211.411.78.4
    Taiwan Province of China6.10.51.34.44.13.64.52.94.1
    Thailand7.12.53.95.56.05.74.13.35.0
    Vanuatu7.214.78.47.55.06.45.11.73.5
    Vietnam62.8316.7394.035.067.068.117.55.214.5
    Western Samoa14.04.78.56.415.2-1.38.51.718.4
    Middle East and Europe20.323.027.122.222.025.925.724.532.3
    Bahrain5.5-1.70.21.2130.8-0.22.50.9
    Cyprus7.22.83.43.84.55.06.54.94.7
    Egypt14.718.818.019.316.719.813.612.08.1
    Iran, Islamic Republic of17.127.728.917.49.020.724.422.935.2
    Iraq16.018.015.015.050.050.050.075.060.0
    Israel121.119.916.320.217.219.011.910.912.3
    Jordan73-0.26.725.616.28.24.05.33.6
    Kuwait4.70.61.53.32.117.40.4-1.24.7
    Lebanon30.5487.2155.072.268.851.5120.029.18.3
    Libya10.94.43.11.38.611.715.020.030.0
    Malta5.40.41.00.93.02.61.64.15.4
    Oman3.22.51.61.310.04.61.01.1-0.7
    Qatar6.34.54.63.33.04.43.03.13.0
    Saudi Arabia2.7-1.60.91.02.14.6-0.40.80.6
    Syrian Arab Republic13.859.534.610.011.19.011.013.215.0
    Turkey45.938.873.763.360.366.070.166.1106.3
    United Arab Emirates8.25.55.03.30.65.56.84.74.6
    Yemen Arab Republic, former14.520.713.919.414.0
    Yemen, former P.D. Republic of6.32.50.52.1
    Yemen, Republic of44.950.662.371.8
    Western Hemisphere69.3120.9233.3340.0438.6129.4152.7212.2226.7
    Antigua and Barbuda10.83.66.83.77.05.73.03.13.5
    Argentina216.7131.3343.03,080.52,314.7171.724.910.64.3
    Aruba3.63.14.05.85.63.95.25.2
    Bahamas, Theto6.04.15.44.67.35.72.73.2
    Barbados8.83.64.76.33.06.36.01.1
    Belize4.12.03.22.13.05.62.81.62.3
    Bolivia227.914.656.015.217.121.412.18.57.7
    Brazil2109.4224.8684.61,319.92,740.0413.3991.42,103.32,407.6
    Chile31.319.914.717.026.021.815.412.711.4
    Colombia23.623.328.125.929.130.527.022.422.6
    Costa Rica21.616.820.816.519.028.721.89.813.5
    Dominica9.64.72.26.92.06.25.31.41.6
    Dominican Republic13.113.543.940.750.447.14.35.28.3
    Ecuador20.229.558.275.748.448.854.645.027.3
    El Salvador15.825.319.917.624.014.411.218.510.8
    Grenada11.8-4.44.05.62.72.73.82.82.6
    Guatemala12.112.310.813.041.035.110.213.412.5
    Guyana16.028.739.989.763.6101.528.211.314.0
    Haiti8.1-5.02.911.020.419.517.720.242.6
    Honduras8.22.86.67.021.226.09.110.722.5
    Jamaica20.711.28.214.321.951.077.322.130.0
    Mexico46.4131.8114.220.026.722.715.59.87.0
    Netherlands Antilles6.33.82.63.83.73.91.51.93.5
    Nicaragua69.0911.914,315.84,709.33,127.57,755.340.520.47.7
    Panama4.31.01.00.20.81.41.80.51.3
    Paraguay17.921.823.026.038.224.315.118.320.6
    Peru79.685.8667.03,398.67,481.6409.273.248.623.7
    Si. Kills and Nevis9.30.90.25.14.24.22.91.82.6
    Si. Lucia7.17.011.54.43.86.15.70.82.7
    St. Vincent and the Grenadines8.92.90.32.77.36.03.74.30.5
    Suriname10.053.47.30.821.826.043.7143.4368.5
    Trinidad and Tobago12.413.412.14.611.113.86.510.88.8
    Uruguay53.563.662.280.4112.5102.068.554.144.7
    Venezuela11.528.129.484.540.734.231.438.160.8

    For many countries, figures for recent years are IMF staff estimates. Data for some countries are for fiscal years.

    From December 1993 to June 1994, consumer prices in Brazil rose 763 percent. Following the introduction of the real on July 1, 1994. monthly inflation fell to 5½ percent in July, From June 1994 to December 1994. consumer prices increased by 17 percent. These figures differ from the year-on-year changes reported in the table.

    Table A13.Countries in Transition: Consumer Prices1(Annual percent change)
    Average
    1977-86
    19871988198919901991199219931994
    Central and eastern Europe97.2368.4458.8203.2
    Albania35.8225.285.022.6
    Belarus83.5969.01,188.02,220.0
    Bulgaria1.42.72.56.423.9333.582.072.896.0
    Croatia1,516.097.5
    Czech Republic20.810.0
    Czechoslovakia, former0.10.21.410.859.011.0
    Estonia210.61,069.089.047.8
    Hungary6.58.615.716.929.034.223.022.518.8
    Latvia124.4951.2109.035.6
    Lithuania224.71,020.5410.472.1
    Macedonia, former Yugoslav Rep. of247.655.0
    Moldova162.01,276.0837.0111.1
    Poland20.425.260.2251.1585.870.343.035.332.2
    Romania2.91.12.60.94.7161.1210.3256.0136.8
    Slovak Republic23.113.4
    Slovenia32.319.8
    Ukraine91.21,209.74,734.9891.0
    Yugoslavia, former39.0120.8194.11,239.9583.1117.46,146.6
    Russia92.71,353.0896.0302.0
    Transcaucasus and central Asia95.7914.91,241.31,582.7
    Armenia100.3824.53,731.85,273.4
    Azerbaijan105.6912.61,129.71,664.4
    Georgia78.5913.03,421.57,379.8
    Kazakhstan91.01,381.01,662.31,879.9
    Kyrgyz Republic85.0854.61,208.8278.1
    Mongolia0.220.2202.6268.487.6
    Tajikistan111.61,156.72,194.9350.4
    Turkmenistan102.5492.93,102.42,610.7
    Uzbekistan105.0644.7534.21,432.5

    For many countries, inflation for the earlier years is measured based on a retail price index. Consumer price indices with a broader and more up-to-date coverage are typically used for more recent years.

    Financial Policies

    Table A14.Summary Financial Indicators(In percent)
    1987198819891990199119921993199419951996
    Industrial countries
    Central government fiscal balance1
    Indus trial countries-3.2-2.6-2.3-2.7-3.1-4.2-4.5-3.8-3.4-3.1
    United Slates-3.3-2.8-2.3-2.9-3.5-4.7-3.8-2.4-2.3-2.3
    European Union-3.8-3.3-2.9-3.5-3.9-4.8-6.0-5.3-4.4-3.6
    Japan-2.2-1.3-1.2-0.5-0.2-1.6-2.8-3.8-4.4-4.7
    Other industrial countries-1.5-0.9-0.1-1.2-3.0-4.2-5.5-4.4-3.6-1.9
    General government fiscal balance1
    Industrial countries-2.5-1.9-1.2-2.0-2.8-3.8-4.4-3.7-3.4-3.0
    United States-2.5-2.0-1.5-2.5-3.2-4.3-3.4-2.0-1.9-2.0
    European Union-3.8-3.2-2.4-3.6-4.4-5.2-6.5-5.7-4.9-4.0
    Japan0.11.52.52.93.01.5-1.4-3.0-3.7-3.9
    Other industrial countries-1.2-0.3-0.1-0.9-3.7-5.4-6.2-4.7-3.7-2.4
    Growth of broad money
    Industrial countries8.08.89.08.05.73.44.12.4
    United States4.35.34.94.02.92.01.71.0
    European Union10.110.111.012.210.05.66.42.7
    Japan10.810.212.07.42.3-0.22.22.8
    Other industrial countries11.715.911.67.819.16.76.25.1
    Short-term interest rates2
    United States5.86.78.17.55.43.43.04.25.65.6
    Japan3.94.04.76.97.04.12.71.91.11.0
    Germany4.04.37.18.49.29.57.25.34.54.9
    LIBOR7.38.19.38.411.13.93.45.16.26.2
    Developing countries
    Central government fiscal balance1
    Weighted average-5.8-5.3-4.2-3.1-3.3-2.7-3.0-2.5-2.0-1.2
    Median-5.3-5.3-4.7-4.2-4.44.0-4.3-4.2-3.0-2.4
    Growth of broad money
    Weighted average44.274.284.879.257.966.273.455.625.720.3
    Median16.118.416.517.218.115.614.515.712.411.1
    Countries in transition
    Central government fiscal balance1,3-1.9-2.3-2.1-4.9-9.8-12.9-7.3-8.3-4.4-3.2
    Growth of broad money18.422.934.821.6116.7654.6409.3207.740.227.2

    In percent of GDP.

    For the United States, three-month treasury bills; for Japan, three-month certificates of deposit: for Germany, three-month interbank deposits; for LIBOR, London interbank offered rate on six-month U.S. dollar deposits.

    Because of country differences in definition and coverage, the estimates for this group of countries should be interpreted only as indicative of broad orders of magnitude.

    Table A15.Industrial Countries: General and Central Government Fiscal Balances and Balances Excluding Social Security Transactions1(In percent of GDP)
    1987198819891990199119921993199419951996
    General government fiscal balance
    Industrial countries-2.5-1.9-1.2-2.0-2.8-3.8-4.4-3.7-3.4-3.0
    Major industrial countries-2.5-1.8-1.1-2.0-2.6-3.7-4.1-3.5-3.3-3.0
    United States-2.5-2.0-1.5-2.5-3.2-4.3-3.4-2.0-1.9-2.0
    Japan0.51.52.52.93.01.5-1.4-3.0-3.7-3.9
    Germany2-1.9-2.10.1-1.9-3.3-2.9-3.3-2.5-2.5-2.1
    France3-1.9-1.7-1.2-1.6-2.2-4.0-6.1-6.0-5.2-4.5
    Italy4-11.0-10.7-9.9-10.9-10.2-9.5-9.6-9.0-7.7-6.5
    United Kingdom5-1.41.00.9-1.2-2.6-6.1-7.8-6.8-4.9-3.2
    Canada-3.8-2.5-2.9-4.4-6.6-7.4-7.3-5.3-46-3.4
    Other industrial countries-2.6-2.0-1.7-23-3.7-4.6-6.0-5.1-4.1-3.3
    Spain6-3.1-3.3-2.8-3.9-5.0-4A-7.5-6.6-5.9-5.5
    Netherlands-5.9-4.6-4.7-5.1-2.9-3.9-3.3-3.4-3.2-2.7
    Belgium-7.4-6.6-6.2-5.4-6.5-6.7-6.6-5.4-4.5-4.4
    Sweden4.23.55.44.2-1.1-7.8-13.4-104-8.9-5.3
    Austria-4.3-3.0-2.8-2.2-2.4-2.04J-4.0-4.2-4.1
    Denmark2.40.6-0.5-1.5-2.1-2.9-4.5-3.8-1.9-1.3
    Finland1.14.16.35.3-1.5-5.9-8.0-5.8-5.3-1.3
    Greece-11.8-11.9-14.7-14.0-11.4-11.7-12.1-11.4-9.0-7.7
    Portugal-6.1-3.6-2.3-5.4-6.5-3.3-7.0-5.8-5.3-4.6
    Ireland-9.8-3.3-2.6-2.5-2.9-2.9-2.7-2.5-2.5-2.5
    Luxembourg1.01.85.25.7-0.5-0.9-0.50.51.01.0
    Switzerland1.21.00.8-2.1-3.4-4.3-1.2-3.7-3.1
    Norway2.41.00.52.0-0.9-3.2-4.1-2.1-0.21.6
    Iceland-0.9-2.0-4.6-3.3-2.9-2.8-4.5-4.1-4.34.9
    Australia-0.71.01.50.4-2.6-4.6-3.9-3.1-0.8-0.6
    New Zealand-2.0-1.4-1.8-2.3-2.2-2.1-0.71.52.84.3
    Memorandum
    European Union-3.8-3.2-2.4-3.64.4-5.2-6.5-5.7-4.94.0
    Fiscal balance excluding social security transactions
    United Slates-4.3-4.2-3.8-4.1-5.2-5.9-5.0-3.7-3.7-3.7
    Japan-2.3-1.6-0.7-0.6-0.7-2.0-4.9-6.5-7.0-7.0
    Germany2-2.2-2.2-0.6-2.6-4.0-2.9-3.6-2.7-2.6-2.3
    France-2.1-1.9-1.5-1.6-1.9-3.3-4.7-5.0-4.4-3.6
    Italy4-6.6-5.8-4.9-5.3-5.1-4.0-4.5-3.7-3.6-3.1
    Canada-2.2-0.9-1.3-2.4-4.8-5.3-5.0-2.9-2.4-1.2
    Central government fiscal balance
    Industrial countries-3.2-2.6-2.3-2.7-3.1-4.2-4.5-3.8-3.4-3.1
    Major industrial countries-3.3-2.7-2.3-2.7-3.1-4.2-4.3-3.6-3.3-3.1
    United States7-3.3-2.8-2.3-2.9-3.5-4.7-3.8-2.4-2.3-2.3
    Japan8-2.2-1.3-1.2-0.5-0.2-1.6-2.8-3.8-4.4-4.7
    Germany9,10-1.4-1.7-0.9-1.8-1.9-1.3-2.1-1.5-1.4-1.6
    France11-1.9-1.7-1.4-1.6-1.7-3.0-4.5-4.9-4.2-3.5
    Italy11-11.2-11.0-10.7-10.1-10.3-10.4-10.0-9.5-7.4-6.2
    United Kingdom-1.11.11.2-1.1-2.3-6.9-8.0-6.5-4.6-2.9
    Canada-3.8-3.2-3.2-3.9-4.5-4.2-4.9-3.8-3.7-22
    Other industrial countries-2.8-2.3-2.0-2.3-3.3-4.0-5.8-4.8-4.0-3.1
    Memorandum
    European Union-3.8-3.3-2.9-3.5-3.9-4.8-6.0-5.3-4.4-3.6

    On a national income accounts basis except as indicated in footnotes. The projections are based on “unchanged fiscal policies" which may differ from countries’ stated fiscal objectives. For a summary of medium-term fiscal objectives see the May 1995 World Economic Outlook, Table 5, p. 28.

    Data through 1990 apply to west Germany only.

    Adjusted for valuation changes of the foreign exchange stabilization fund.

    Includes interest accruing on zero coupon bonds.

    Excludes asset sales.

    The authorities have indicated their intention to present a budget for 1996 limiting the general government’s deficit in that year to 4.4 percent, in accordance with the objective in the government’s Maastricht convergence plan.

    Data are on a budget basis.

    Data are on a national income basis and exclude social security transactions.

    Data through June 1990 apply to west Germany only.

    Data are on an administrative basis and exclude social security transactions.

    Data refer to the state sector and cover the transactions of the stale budget as well as those of several autonomous entities operating at the same level; data do not include the gross transactions of social security institutions, only their deficits. Includes interest accruing on zero coupon bonds.

    Table A16.Industrial Countries: General Government Structural Balances and Fiscal Impulses1(In percent of GDP)
    1987198819891990199119921993199419951996
    Structural balance2
    Major industrial countries-2.6-2.7-2.3-3.1-2.9-3.3-3.0-2.6-2.5-2.2
    United States-2.9-3.0-2.5-3.2-2.8-3.6-2.9-2.0-2.1-2.1
    Japan0.60.91.71.81.91.2-0.5-1.4-1.5-1.6
    Germany3-0.9-1.7-3.3-5.2-3.9-2.2-1.2-1.2-1.0
    France-1.0-1.7-2.3-2.8-2.4-3.7-3.8-3.6-3.5-3.2
    Italy4-11.3-11.6-11.4-12.4-11.2-9.6-7.9-7.3-6.5-5.6
    United Kingdom-1.3-0.8-2.0-3.6-2.7-3.7-4.4-4.1-3.1-2.0
    Canada-4.9-4.7-5.1-4.9-4.9-4.8-4.6-3.8-3.3-2.3
    Other industrial countries-2.5-2.4-2.6-3.3-3.7-3.7-3.4-2.8-2.6-2.2
    Spain5-3.0-4.0-4.2-5.1-5.6-3.6-4.1-3.0-3.0-3.2
    Netherlands-4.8-3.5-5.1-6.7-4.5-4.7-2.5-2.5-3.0-2.7
    Belgium-5.0-6.1-7.0-7.1-8.3-8.0-5.3-4.1-3.6-4.0
    Sweden-0.41.50.7-1.9-6.2-8.1-7.3-7.2-4.5
    Austria-3.1-2.8-3.9-3.6-3.6-2.6-3.3-3.4-4.4-3.9
    Denmark0.8-0.3-0.5-1.0-0.4-0.4-1.0-1.3-1.0-0.7
    Finland0.72.63.32.40.1-1.1-1.1-0.1-1.50.8
    Ireland-6.7-0.2-2.0-3.4-2.7-2.8-2.4-2.5-2.6-2.5
    Norway-1.1-0.71.43.51.9-0.4-1.7-1.0-0.31.1
    Australia-0.90.30.2-0.4-1.6-2.6-2.0-2.1-0.3-0.5
    New Zealand-5.1-6.4-7.1-8.0-2.80.10.21.13.05.1
    Memorandum
    European Union6-3.3-3.5-3.5-5.0-5.1-4.9-4.2-3.6-3.4-2.8
    Fiscal impulse7
    Major industrial countries-0.6-0.40.60.20.2-0.3-0.4-0.2-0.3
    United States8-0.7-0.50.7-0.6-0.8
    Japan8-1.6-0.4-1.20.60.80.6-0.4
    Germany3,80.40.7-1.73.01.2-0.8-1.7-0.9
    France8-1.00.60.51.10.4-0.4
    Italy0.50.8-1.3-1.6-1.9-0.6-0.7-0.8
    United Kingdom-1.01.1-0.52.01.7-1.3-1.2
    Canada-0.9-0.7-0.4-0.9

    On a national income accounts basis.

    The structural budget position is defined as the actual budget deficit (or surplus) less the effects of cyclical deviations of output from potential output, Because of the margin of uncertainty that attaches to estimates of cyclical gaps and to tax and expenditure elasticities with respect to national income, indicators of structural budget positions should be interpreted as broad orders of magnitude. Moreover, it is important to note that changes in structural budget balances are not necessarily attributable to policy changes but may reflect the built-in momentum of existing expenditure programs. In the period beyond that for which specific consolidation programs exist, it is assumed that the structural deficit remains unchanged.

    Data through 1990 apply to west Germany only. The estimate of the fiscal impulse for 1995 is affected by the assumption by the federal government of the debt of the Treuhandanstalt and various other agencies, which were formerly held outside the general government sector. At the public sector level, there would be an estimated withdrawal of fiscal impulse amounting to just over 1 percent of GDP.

    Includes interest accruing on zero coupon bonds.

    See footnote 6 on Table A15.

    Excludes Greece, Luxembourg, and Portugal.

    For a definition of the fiscal impulse measure, see The New Palgrave Dictionary of Money and Finance, edited by Peter Newman. Murray Milgate, and John Eatwell (London: Macmillan, 1992; New York: Stockton, 1992). Impulse estimates equal to or less than ±0.3 percent of GDP are indicated by “—”.

    For relevant years, the fiscal impulse is calculated on the basis of data adjusted for net international financial transfers related to the 1990-91 regional conflict in the Middle East.

    Table A17.Industrial Countries: Monetary Aggregates

    (Annual percent change)1

    19871988198919901991199219931994
    Narrow money2
    Industrial countries6.86.84.67.86.47.48.14.0
    Major industrial countries6.06.33.16.66.58.28.43.7
    United States6.34.30.64.27.914.310.52.4
    Japan4.88.62.44.59.53.97.04.2
    Germany37.410.95.629.63.410.88.55.2
    France4.34.17.73.9-4.7-0.21.53.0
    Italy7.87.310.26.610.50.77.63.5
    United Kingdom4.27.75.72.73.02.86.06.7
    Canada8.27.43.3-1.05.55.714.77.0
    Other industrial countries12.210.013.515.55.22.76.45.4
    Memorandum
    European Union6.88.58.011.73.83.86.44.7
    Broad money4
    Industrial countries8.08.89.08.115.73.44.12.4
    Major industrial countries7.38.08.67.83.72.73.31.9
    United States4.35.34.94.02.92.0171.0
    Japan10.810.212.07.42.3-0.22.22.8
    Germany35.96.95.519.76.37.610.91.6
    France11.28.19.99.02.05.1-3.12.0
    Italy7.19.510.79.49.14.78.11.9
    United Kingdom17.917.719.012.35.63.15.14.2
    Canada8.412.714.38.14.63.13.22.8
    Other industrial countries12.614.211.68.817.27.78.55.0
    Memorandum
    European Union10.110.111.012.210.05.66.42.7

    Based on end-of-period data.

    M1 except for the United Kingdom, where M0 is used here as a measure of narrow money; it comprises notes in circulation plus bankers’ operational deposits. Ml is generally currency in circulation plus private demand deposits. In addition, the United States includes traveler’s checks of nonbank issues and other checkable deposits and excludes private sector float and demand deposits of banks. Japan includes government demand deposits and excludes float. Germany includes demand deposits at fixed interest rate». Canada excludes private sector float.

    Data through 1989 apply to west Germany only. The growth rates for the monetary aggregates in 1990 are affected by the extension of the currency area.

    M2, defined as Ml plus quasi-money, except for Japan, Germany, and the United Kingdom, for which the data are based on M2 plus certificates of deposit (CDs), M3, and M4, respectively. Quasi-money is essentially private term deposits and other notice deposits. The United States also includes money market mutual fund balances, money market deposit accounts, overnight repurchase agreements, and overnight Eurodollars issued to U.S. residents by foreign branches of U.S. banks. For Japan, M2 plus CDs is currency in circulation plus total private and public sector deposits and installments of Sogo Banks plus CDs. For Germany, M3 is MI plus private time deposits with maturities of less than four years plus savings deposits at statutory notice. For the United Kingdom. M4 is composed of non-interest-bearing MI, private sector interest-bearing sterling sight bank deposits, private sector sterling time bank deposits. private sector holdings of sterling bank CDs, private sector holdings of building society shares and deposits, and sterling CDs less building society holdings of bank deposits and bank CDs, and notes and coins.

    Table A18.Industrial Countries: Interest Rates(In percent a year)
    19871988198919901991199219931994August
    1995
    Policy-related interest rate1
    Major industrial countries6.46.98.69.07.86.34.94.44.8
    United States6.77.69.28.15.73.53.04.25.7
    Japan3.53.64.97.27.54.63.02.10.8
    Germany3.73.86.68.08.99.47.45.34.5
    France8.07.69.410.09.510.78.65.65.8
    Italy11.111.212.712.312.714.510.58.810.6
    United Kingdom9.610.313.914.811.59.45.95.56.8
    Canada8.09.211.912.99.06.64.65.16.4
    Short-term interest rate2
    Industrial countries6.77.18.89.28.06.85.24.9
    Major industrial countries6.77.28.79.27.86.44.94.64.7
    United States6.97.79.18.25.83.73.24.65.8
    Japan4.14.45.37.67.24.32.82.10.7
    Germany4.04.37.18.49.29.57.25.34.4
    France8.27.99.310.39.710.48.45.86.0
    Italy11.111.212.712.312.714.510.58.810.6
    United Kingdom9.710.313.914.811.59.65.95.56.8
    Canada8.49.612.213.09.06.75.05.66.6
    Other industrial countries9.58.910.911.410.710.58.46.8
    Memorandum
    European Union8.18.210.311.110.711.08.36.6
    Long-term interest rate3
    Industrial countries8.48.68.79.68.78.06.67.2
    Major industrial countries8.08.18.19.08.37.56.26.86.2
    United States8.48.88.58.67.97.05.97.16.5
    Japan1.04.85.17.06.35.14.04.23.1
    Germany6.26.57.08.78.57.96.56.96.8
    France9.49.18.810.09.08.66.97.47.3
    Italy411.612.013.313.613.113.111.310.311.3
    United Kingdom9.69.710.211.810.19.17.58.28.2
    Canada9.910.29.910.89.88.87.98.68.5
    Other industrial countries10.910.311.212.210.810.38.58.6
    Memorandum
    European Union9.49.510.011.310.410.08.284

    For the United Stales, federal funds rate: for Japan, overnight call rate; for Germany, repurchase rate; for France, day-to-day money rate; for Italy, three-month treasury hill rate; for the United Kingdom, base lending rate; and for Canada, overnight money market financing rate.

    For the United States, three-month certificates of deposit (CDs) in secondary markets; for Japan, three-month CDs; for Germany, France, and the United Kingdom, three-month interbank deposits; for Italy, three-month treasury bills; and for Canada, three-month prime corporate paper.

    For the United States, yield on ten-year treasury bonds; for Japan, over-the-counter sales yield on ten-year government bonds with longest residual maturity; for Germany, yield on government bonds with maturities of nine to ten years; for France, long-term (seven- to ten-year) government bond yield (Emprunts d’Etat a long terme TME); for Italy, secondary market yield on fixed-coupon (BTP) government bonds with two to four years’ residual maturity: for the United Kingdom, yield on medium-dated (ten-year) government stock; and for Canada, average yield on government bonds with residual maturities of over ten years.

    August 1995 data refer lo yield On ten-year government bonds.

    Table A19.Industrial Countries: Exchange Rates
    19871988198919901991199219931994August1
    1995
    National currency units per U.S. dollar
    U.S. dollar nominal exchange rates
    Japanese yen144.6128.2138.0144.8134.7126.7111.2102.293.5
    Deutsche mark1.801.761.881.621.661.561.651.621.43
    French franc6.015.966.385.455.645.295.665.554.93
    Pound sterling21.631.781.641.781.761.761.501.531.58
    Italian lira129613021372119812411232157416121599
    Canadian dollar1.331.23LIS1.171.151.211.291.371.36
    Spanish peseta123.5116.5118.4101.9103.9102.4127.3134.0122.3
    Dutch guilder2.031.982.121.821.871.761.861.821.61
    Belgian franc37.336.839.433.434.132.134.633.529.5
    Swedish krona6.346.136.455.926.055,827.787.727.19
    Austrian schilling12.612.313.211.411.711.011.611.410.1
    Danish krone6.846.737.316.196.406.046.486.365.56
    Finnish markka4.404.184.293.824.044.485.715.224.27
    Creek drachma135.4141.9162.4158.5182.3190.6229.2242.6230.4
    Portuguese escudo140.9144.0157.5142.6144.5135.0160.8166.0148.6
    Irish pound0.670.660.710.600.620.590.680.670.62
    Swiss franc1.491.461.641.391.431.411.481.371.19
    Norwegian krone6.746.526.906.266.486.217.097.066.30
    Icelandic krona38.743.057.058.359.057.567.669.964.6
    Australian dollar1.431.281.261.281.281.361.471.371.35
    New Zealand dollar1.691.531.671.681.731.861.851.691.51
    Annual percent change
    Real effective exchange rates3
    United States-13.2-6.23.4-4.7-1.7-2.13.8-0.4
    Japan4.75.1-6.1-10.65.93.017.07.2
    Germany6.8-0.1-1.65.7-0.52.88.1-0.1
    France-2.0-3.1-2.23.0-4.51.12.11.1
    United Kingdom2.67.50.1-5.83.8-0.2-6.61.4
    Italy0.9-0.94.33.81.1-1.9-16.8-4.3
    Canada4.49.36.4LA3.1-5.3-7.7-10.7
    Spain1.84.68.26.21.70.6-8.5-7.6
    Netherlands3.3-3.2-5.21.2-1.14.12.61.5
    Belgium0.9-2.8-0.64.50.11.80.21.4
    Sweden0.13.87.21.00.31.0-23.5-1.3
    Austria0.9-3.5-3.0-1.1-3.00.6-1.6
    Denmark9.7-0.3-1.36.6-3.5-0.11.90.1
    Finland-0.82.65.13.3-8.0-18.0-16.45.5
    Ireland-6.5-5.6-6.81.7-6.1-2.0-7.7-3.9
    Switzerland1.2-2.8-7.92.0-2.5-4.0-1.84.7
    Norway4.11.6-2.0-1.0-2.7-0.4-2.90.3

    August data refer to the average for August 1-23, the reference period for the exchange rate assumptions. See “Assumptions” in the introduction to this Statistical Appendix.

    Expressed in U.S. dollars per pound.

    Defined as the ratio, in common currency, of the normalized unit labor costs in the manufacturing sector to the weighted average of those of its industrial country trading partners, using 1989-91 trade weights.

    Table A20.Developing Countries: Central Government Fiscal Balances(In percent of GDP)
    1987198819891990199119921993199419951996
    Developing countries-5.8-5.3-4.2-3.1-3.3-2.7-3.0-2.5-2.0-1.2
    By region
    Africa-6.0-6.3-4.6-3.3-4.5-6.1-8.3-6.0-3.8-2.0
    Asia-3.9-3.5-3.0-2.6-2.6-2.6-2.4-2.2-2.1-1.3
    Middle East and Europe-11.7-12.2-9.1-9.5-11.4-5.5-7.0-6.0-4.6-3.5
    Western Hemisphere-6.0-4.9-4.1-0.3-0.2-0.1-0.2-0.40.21.2
    Sub-Saharan Africa-8.1-7.3-6.7-7.0-7.0-7.9-7.7-6.7-4.8-3.6
    Four newly industrializing Asian economies0.82.01 S1.0-0.10.60.90.4
    By predominant export
    Fuel-11.8-13.6-7.7-5.2-5.9-4.6-8.8-7.1-3.9-2.2
    Nonfuel exports-5.0-4.3-3.8-2.8-3.0-2.5-2.4-2.1-1.8-1.1
    Manufactures-1.6-1.4-1.6-1.4-1.8-1.8-1.3-1.3-1.4-0.6
    Primary products-5.8-5.7-6.4-3.9-3.6-3.3-3.0-2.5-2.4-1.6
    Agricultural products-6.3-7.4-8.8-4.5-4.3-4.2-3.7-3.8-3.0-2.3
    Minerals-4.8-2.2-1.5-2.6-2.2-1.4-1.50.2-0.9-0.3
    Services, income, and private transfers-10.2-10.4-10.0-14.3-19.5-8.1-5.9-5.6-4.8-3.4
    Diversified export base-6.1-5.1-4.2-2.5-2.3-2.3-2.7-2.3-1.8-1.3
    By financial criteria
    Net creditor countries-9.7-6.5-2.2-6.9-15.7-6.7-5.9-4.8-4.1-2.9
    Net debtor countries-5.6-5.2-4.3-2.8-2.6-2.5-2.8-2.4-1.9-1.1
    Market borrowers-4.0-3.4-2.6-0.6-0.8-0.8-1.0-1.0-0.60.2
    Diversified borrowers-6.6-6.7-6.0-5.1-4.4-4.1-4.9-4.2-3.8-3.1
    Official borrowers-9.5-9.7-8.4-7.8-7.0-6.4-6.8-5.6-4.4-3.2
    Countries with recent debt-servicing difficulties-7.8-7.3-6.1-3.2-2.5-2.2-2.5-2.2-1.3-0.1
    Countries without debt-servicing difficulties-4.1-3.9-3.3-2.7-2.7-2.6-3.0-2.5-2.2-1.6
    Other groups
    Small low-income economies-10.3-11.0-9.4-9.0-8.1-7.2-7.8-6.2-4.8-3.5
    Least developed countries-9.1-9.5-8.2-8.3-7.5-7.8-7.3-7.8-7.0-6.3
    Memorandum
    Median
    Developing countries-5.3-5.3-4.7-4.2-4.4-4.0-4.3-4.2-3.0-2.4
    By region
    Africa-6.4-6.8-5.9-5.2-5.4-6.5-6.8-6.1-4.3-3.4
    Asia-5.1-2.6-3.5-6.3-4.7-3.7-3.4-3.4-3.0-2.9
    Middle East and Europe-11.9-11.7-5.1-4.5-6.6-4.4-6.3-5.1-40-3.1
    Western Hemisphere-3.2-4.4-3.9-1.7-2.1-1.9-1.9-2.1-1.2-0.8
    Table A21.Developing Countries: Broad Money Aggregates(Annual percent change)
    1987198819891990199119921993199419951996
    Developing countries44.274.284.579.257.966.273.488.625.720.3
    By region Africa20.725.515.918.131.432.126.231.920.612.1
    Asia27.525.023.522.222.020.520.819.118.616.5
    Middle East and Europe16.418.519.919.624.324.628.432.026.222.8
    Western Hemisphere126.3376.8541.3454.6210.7284.2322.3172.737.626.4
    Sub-Saharan Africa27.726.222.021.457.157.344.858.228.415.7
    Four newly industrializing Asian economies23.120.018.815.919.315.415.415.714.413.3
    By predominant export
    Fuel
    14.017.215.918.820.920.225.623.027.219.4
    Nonfuel exports54.795.5109.299.469.682.988.463.225.520.4
    Manufactures24.220.818.921.222.823.022.524.320.917.8
    Primary products101.7237.3451.0332.6101.157.6