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Harry C. Broadman

For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.

J. J. Polak

BY THE MIDDLE OF 1951, the “dollar problem” had come much nearer to solution than most observers had considered possible not many months earlier. Some of the more recent improvement in the dollar position of countries outside the United States is due to the rapid acceleration of U.S. imports after the middle of 1950 in connection with the hostilities in Korea. But even before this, the change in the situation had been very pronounced. The surplus on account of goods and services in the U.S. balance of payments, which had been at an annual rate of $7.6 billion in the first half of 1949, was reduced to an annual rate of $3 billion in the first half of 1950. In transactions with the OEEC countries in Europe alone, the U.S. surplus decreased from $3.7 billion to $1.9 billion (annual rates). Measured by the amount of grants from the United States and the use of dollar balances and gold sales to the United States, the improvement in the position of the European countries was even more striking, with the U.S. surplus vis-à-vis these countries dropping from $5.2 billion to $1.9 billion (annual rates).


This paper presents evidence, using data from Consensus Forecasts, that there is an "attraction" to conform to the mean forecasts; in other words, views expressed by other forecasters in the previous period influence individuals’ current forecast. The paper then discusses and provides further evidence on two important implications of this finding. The first is that the forecasting performance of these groups may be severely affected by the detected imitation behavior and lead to convergence to a value that is not the “right#x201D; target. Second, since the forecasts are not independent, the common practice of using the standard deviation from the forecasts’ distribution, as if they were standard errors of the estimated mean, is not warranted.