This chapter reviews the experience of economic growth during the twentieth century in the context of trends in globalization and with a view to highlighting implications relevant to early twenty-first century policymakers. The first section provides a descriptive analysis of trends in growth and living standards during the century, which highlights differences between periods and across countries. The next section looks at the rollercoaster progress of globalization both in trade and capital flows since the late nineteenth century, with particular emphasis on explanations for the prolonged reverse to globalization from the backlash of the interwar years. The final section uses the building blocks of the earlier analysis to provide an end-of-century perspective on growth prospects and the extent to which they are likely to be enhanced by improved policies, technological progress, and globalization.
The dawn of the new millennium is an appropriate time to take stock of the evolution of the international monetary system. In most of the literature on this subject, a long view is anything that considers the behavior of exchange rates and associated policies prior to the breakdown of the Bretton Woods System of par values in 1973. Thus, Baxter and Stockman (1989), in a widely cited study of exchange rate regimes, extend their data set all the way back to 1960!
Mr. Jahangir Aziz, Mr. Francesco Caramazza, and Mr. Ranil M Salgado
The financial crisis that erupted in east Asia in the second half of 1997 was the latest in a series of currency crises that at various times in the post–Bretton Woods period have engulfed emerging market economies and industrial countries alike. Financial innovations and the increased international integration of financial markets appear to have altered the nature of these crises in recent years; in particular, the spillover effects and the contagious spread of crises seem to have become both more pronounced and far-reaching. At a fundamental level, however, many of the same forces have often been at work in different crises. This chapter is concerned with these common characteristics. It examines a large number of currency crises in an effort to identify similarities in the behavior of a variety of macroeconomic and financial variables around the times of crises. The sample spans the period 1975–97 for 50 industrial countries and emerging market economies. It covers crises that culminated in large currency depreciation as well as those in which there was a substantial loss of foreign reserves. The analysis involves comparing the monthly or annual pattern of movement of the various macroeconomic and financial variables around the time of crisis to their behavior during tranquil periods. The robustness of the results is tested by subdividing the sample into different types of currency crises and carrying out a similar analysis for each. The paper also examines the behavior of the various variables in the aftermath of a crisis and assesses the costs of crises in terms of lost output.
This chapter examines the relationship between exchange rates and the business cycle. A principal goal is to assess the extent to which exchange rate movements reflect countries’ relative positions over the business cycle. Are the influences similar across countries and at different points in time? The importance of this question is highlighted by the late 1990s conjuncture of low inflation, sustained economic growth, and appreciated currencies in the United States and United Kingdom compared to relatively slack conditions in continental Europe and a weak euro. The conclusion of the research summarized in this paper is that cyclical movements in activity have substantial effects on exchange rates, though these are of course not the only or at all times the most important influence on currencies.
The early years of transition from a command to a market-based economy in central and eastern Europe have typically witnessed considerable output drops, at least according to official national statistics. Output contractions were even more pronounced in the Baltics, Russia, and the other countries of the former Soviet Union. By 1997, growth had resumed in the vast majority of transition countries. Even though a number of them faced renewed output declines in 1998, mainly associated with the financial crisis in Russia, it appears that the bulk of the transitional recession is now over in most cases. With the benefit of hindsight, this study attempts to put the contractions endured in the Baltics as well as in Russia and the other countries of the Commonwealth of Independent States (CIS) in perspective, examining them from several angles.
Rüdiger Soltwedel, Dirk Dohse, and Christiane Krieger-Boden
On “E-day,” January 1, 1999, phase 3 of the Economic and Monetary Union—EMU for short1—became reality. The euro area comprises all European Union member states and Sweden, Denmark, and the United Kingdom, which voluntarily abstained.
This 2009 Article IV Consultation focuses on euro area policies. The euro area remains in recession, with signs of improvement yet to evolve into a recovery. The large drop in financial wealth, an associated increase in private savings, tight financing conditions, and the adjustment of global imbalances are key drivers of the economic decline. Executive Directors have welcomed the broad arsenal of macroeconomic policies and financial sector interventions deployed by euro area authorities and Member States to address the crisis.
International Monetary Fund. External Relations Dept.
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This 2008 Article IV Consultation highlights that the economy of Estonia is now experiencing its most severe recession since the early 1990s. The financial sector has withstood the global financial turbulence well so far, but risks remain significant. Executive Directors have commended the Estonian authorities for the progress made in recent years in achieving economic convergence and deepening real and financial ties with the European Union. Directors have also commended the authorities for their planned substantial fiscal restraint in 2009.