Front Matter

Front Matter

International Monetary Fund
Published Date:
September 1995
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    © 1995 International Monetary Fund

    ISBN 9781557754998

    ISSN 0258-7440

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    • Preface

    • I. Saving Behavior in Industrial and Developing Countries

    • Paul R. Masson, Tamim Bayoumi, and Hossein Samiei

    • A broad set of possible determinants of private saving behavior is examined, using data for a large sample of industrial and developing countries. Both time-series and cross-section estimates are obtained. Results suggest that there is a partial offset on private saving of changes in public saving and (for developing countries) in foreign saving, that demographics and growth are important determinants of private saving rates, and that interest rates and terms of trade have positive, but less robust, effects. Increases in per capita GDP seem to increase saving at low income levels (relative to the United States) but decrease it at higher ones.

    • II. The Global Real Interest Rate

    • Thomas Helbling and Robert Wescott

    • There is a striking degree of comovement in real interest rates across countries over time. This common component is taken to represent “the global real interest rale,” and it can be thought of as a sufficient statistic representing the average rate at which agents in the world economy are willing to substitute consumption today for consumption tomorrow. Empirical results indicate that there have been three regimes of the global real interest rate since 1960, and that the global real interest rate has been high since 1981. The paper also investigates the main determinants of the global real interest rate. A cointegration error-correction model is developed to establish that world gross public debt and world stock returns have a significant impact on the global real interest rate in the long run. Estimates suggest that the increase in world public debt over the past 15 years explains most of the rise in the global real interest rate.

    • III. A Monetary Impulse Measure for Medium-Term Policy Analysis

    • Bennett T. McCallum and Monica Hargraves

    • A measure of monetary impulse that is intended to reflect the medium-term inflationary implications of a nation’s current monetary policy is presented. The measure consists of the growth rate of the monetary base, adjusted for reserve requirement changes and augmented by an implicit forecast of future growth rates of base velocity. Time-series plots of the impulse measure for the seven major industrial countries are presented and compared with plots of inflation and of two alternative monetary indicators—the yield curve slope and the growth rate of a broad monetary aggregate. The impulse measure serves well as a medium-term indicator of future inflation and, on balance, matches or outperforms the alternative indicators.

    • IV. Evaluating Unemployment Policies: What Do the Underlying Theories Tell Us?

    • Dennis J. Snower

    • Unemployment policies for advanced market economies are surveyed and evaluated by examining the predictions of the underlying macroeconomic theories. The motivation for this approach is that, for the most part, different unemployment policy prescriptions rest on different macroeconomic theories, and confidence in the prescriptions should depend—at least in part—on the theories’ ability to predict some salient stylized facts about unemployment behavior. Four types of policies are considered: laissez-faire, demand-management, supply-side, and institutional policies.

    • V. Institutional Structure and Labor Market Outcomes: Western Lessons for European Countries in Transition

    • Robert J. Flanagan

    • Changes in economic systems provide rare opportunities to redesign basic institutional structures in labor markets. This paper attempts to provide guidance for such institutional choice by drawing on the findings of recent labor market research in market economies on the links between institutional structure and labor market performance. After considering the suitability of research from market economies for the labor market problems faced by economies in transition from central planning, the paper considers the effects of alternative institutions for wage determination—collective bargaining structures and minimum wage and indexation legislation—employment security, income security, and active labor market policies.

    • VI. How Large Was the Output Collapse in Russia? Alternative Estimates and Welfare Implications

    • Evgeny Gavrilenkov and Vincent Koen

    • The divergence between production and consumption indicators in Russia suggests that the magnitude of the output collapse in the course of the transition is overstated by the official statistics. Alternative estimates for real GDP are derived that reconcile the official production and consumption data. Based on cautious assumptions, real GDP appears to have declined cumulatively by no more than one third rather than by one half. The estimated drop in household welfare is much smaller still, as the output mix shifts and deadweight losses are sharply reduced.

    • VII. Foreign Direct Investment in the World Economy

    • Edward M. Graham

    • A number of aspects of foreign direct investment and its role in the “globalized” economy are examined from both microeconomic and macroeconomic perspectives. Following an exploration of historic patterns of foreign direct investment, with emphasis on the large surge that took place after 1985, key characteristics of foreign direct investment and the multinational corporations that generate it are examined in detail. These include the determinants of foreign direct investment and the international expansion of firms. The relationships between foreign direct investment and capital formation, technology transfer, international trade, and economic growth in both host (recipient) and home (investor) countries are also analyzed. Policy issues surrounding the possible extension of multilateral trade rules to cover foreign direct investment are discussed.


    Staff Studies for the World Economic Outlook contains background analyses for the World Economic Outlook exercise carried out by staff in the International Monetary Fund’s Research Department and by visiting scholars. The World Economic Outlook project is directed by Flemming Larsen, Senior Advisor in the Research Department, together with David T. Coe, Chief of the World Economic Studies Division.

    The papers have benefited from comments by colleagues throughout the Fund and, in some cases, by the Fund’s Executive Directors. However, the views presented in the papers are those of the authors and should not be interpreted as representing the views of the International Monetary Fund. The authors would like to thank Claire Adams, Sheila Bassett, Sungcha H. Cha, and Toh Kuan for research assistance and Susan Duff and Margaret Dapaah for word processing. Thomas Walter of the External Relations Department edited the manuscripts and coordinated production of the publication.

    The following symbols have been used throughout this paper:

    … to indicate that data are not available;

    —to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

    – between years or months (e.g., 1991-92 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years (e.g., 1991/92) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

    Minor discrepancies between constituent figures and totals are due to rounding.

    The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

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