These studies, prepared by the staff of the International Monetary Fund, comprise supporting material for the analyses and scenarios in the World Economic Outlook and provide a more detailed examination of the theory and evidence on some major issues affecting the global economy, commodity prices, and individual countries.
This paper describes the functioning of labor markets and to eliminate other structural obstacles to noninflationary growth. The decline in the price level in the home country will involve a rise in the real money supply and, if output is sluggish, this will result in an excess supply of money. This, in turn, will lead to a drop in the domestic interest rate and, given foreign interest rates, to a temporary depreciation of the exchange rate. Structural measures could also affect investment and the current account by raising the rate of return on capital in the home country. If capital is internationally mobile, a higher rate of return on capital would result in a rise in investment and a temporary deterioration in the home country’s current account, which will be financed by an inflow of foreign capital. The quantitative impact of financial market deregulation on the economy is rather uncertain.
This paper reviews recent analytical and empirical research on the determination of employment, to provide a framework for evaluating the merits of alternative policies to cope with unemployment. Particular emphasis is placed on the mechanisms of employment and wage determination described in recent studies. The lack of any systematic relationship between countries' long-run growth and employment performances reflects the fact that output per person employed (labor productivity) or, conversely, the labor intensity of production, has developed quite differently across countries. The main mechanism through which the rise in real wages has prevented greater employment gains in Europe over the past ten to fifteen years seems to have been a substitution of capital for labor which has lowered the labor intensity of production significantly more than in the United States. There are a number of important caveats with respect to the apparent relationship between differences in employment and labor cost developments across countries.
Adams, Charles, Fenton, Paul R., and Larsen Flemming
The deterioration in labor market performance in most of the industrial countries since the early 1970s remains one of the most serious economic problems confronting policymakers. Even though a broad range of measures has been implemented to tackle this problem, unemployment has continued to rise in a large number of countries, particularly in Europe.
This paper analyzes the short-term forecasts for industrial and developing countries produced by the IMF and published twice a year in the World Economic Outlook. For the industrial country group, the forecasts for output growth and inflation are satisfactory and pass most conventional tests in forecasting economic developments, although forecast accuracy has not improved over time, and predicting the turning points of the business cycle remains a weakness. For the developing countries, the task of forecasting movements in economic activity is even more difficult and the conventional measures of forecast accuracy are less satisfactory than for the industrial countries. [JEL: E17, E37, F17, F47]
Mr. Paul R Masson, Mr. Tamim Bayoumi, and Hossein Samiei
Saving has always been an important issue in economics. It plays a central role in income determination, both in the short run through aggregate demand and in the long run through capital formation and wealth accumulation. The prospects for aggregate saving are a particularly relevant issue currently, as there are large potential future demands on world saving. In particular, the investment needs of transforming and newly industrializing economies may come at a time of significant government dissaving in many industrial countries, where aging populations are also likely to reduce private saving rates and raise government deficits in the coming decades. Understanding the determinants of saving is necessary in order to assess the resources that will be available to finance investment and the prospects for real interest rates.
Feldman Robert Alan, Mr. Ernesto Hernández-Catá, Flemming Larsen, and Michael Wattleworth
A major turning point in the thinking of economic policy makers in industrial countries occurred at the beginning of the 1980s. The change was motivated by a desire to shift from the existing environment of low growth, high and rising unemployment, high inflation, and large fiscal deficits to conditions of stronger and sustained non-inflationary growth. The reorientation of policies that followed the reassessment of the early 1980s included two main elements, both of which were based on a recognition that, beyond the short run. Macroeconomic performance is strongly influenced by the supply side of the economy.
The concepts of potential output and the output gap are central to the IMF’s analytical work in providing policy recommendations to member governments. This key role has stimulated research at the IMF to develop and refine estimation techniques. This paper summarizes the methodology and results of IMF research on potential output, which has mainly focused on the industrial countries, but more recently has addressed issues related to developing countries and countries in transition. It then discusses the approaches that country desk officers use for operational purposes, and presents estimates of potential output for the major industrial countries. [JEL: E3].
Developments in the world economy since 1979 have heightened concern for the economic well-being of the poorest groups of the population in the developing countries. Widespread payments difficulties and a consequent import compression since 1982 have set back the growth process in many of these countries. One of the chief concerns arising out of the slowdown in growth has been the impact on employment, and this study focuses on three aspects of this issue: the evidence of changes in unemployment (or underemployment) in developing countries in recent years; the functioning of labor markets in these countries and the nature of policies that affect these markets; and, finally, the factors (including labor market efficiency) that affect the transmission of external economic disturbances to labor markets in developing countries.