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There has been a vast literature of cross-country studies of economic growth, but the mechanics of growth and development are still not fully understood. The lack of an explicit theory identifying growth determinants has recently prompted researchers to start investigating how robust the various possible empirical relations are by formally incorporating model uncertainty in the empirical growth analysis. This article surveys the latest research related to investigating growth empirics using robustness analysis.
Climate Change: Stimulating a Green Recovery” looks at the global problem of climate change. With the world apparently on an economic recovery path, policymakers are looking at ways to limit the impact of climate change through broad international action. One of the challenges is to balance actions to mitigate climate change with measures to stimulate growth and prosperity. This issue of F&D also examines a variety of issues raised by the crisis—including the future of macroeconomics, explored by William White, former chief economist at the Bank for International Settlements, and the longer-term impact of the crisis on the United States, the world’s largest economy. Our “People in Economics” profile spotlights Joseph Stiglitz, the Nobel Laureate who “can’t get any respect at home.” We also look at the need for rebalancing growth in Asia, which is leading the world out of recession, and we interview five influential Asians on the region’s fragile rebound. We turn our “Straight Talk” column over to Barbara Stocking of Oxfam, who makes a forceful case for stepping up help to the most vulnerable around the world. “Data Spotlight” looks at trends in inflation, which has fallen into negative territory in some countries during the crisis, and in “Point-Counterpoint,” two experts discuss the pros and cons of remittances—funds repatriated by migrant workers to family and friends back home. “Back to Basics” gives a primer on international trade.
As in several other industrial countries, inflation in the United States has been low since the mid-1990s despite generally robust economic growth and—especially in recent years—substantial increases in the prices of oil and other primary commodities. A new IMF Working Paper investigates this apparent puzzle by decomposing changes in U.S. inflation into their structural (or long-run) and cyclical components and focusing on the roles that improved monetary policy credibility and globalization have played.
An important aim of this paper is to take shifts in the long-term anchor in the empirical specifications. The study examines exchange-rate pass-through and external adjustment in the euro area. The impact on third-country trade and investment is also discussed. A better understanding of the economic behavior underlying limited pass-through is an important consideration for investigating the implications of currency fluctuations and the pattern of external adjustment. The impulse-response patterns suggest a high degree of local currency pricing in import prices and producer currency pricing in export prices.