Beginning in the late 1970s, and extending to the present, a large number of industrial countries initiated a process of financial deregulation and liberalization. The gains from this have been substantial, including increased access to credit markets by households and enterprises, higher rates of remuneration on deposits, and a more market-determined allocation of resources. Major economic sectors have been affected by this process and the responses of these sectors have contributed to important economic developments in the 1980s and early 1990s.
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]
Adams, Charles, R. Fenton, Paul, and Larsen Flemming
For more than a decade, a fundamental question has been whether the industrial countries can be expected to return eventually to the rapid rates of economic growth that prevailed during the 1950s and 1960s. This question is particularly relevant in light of the decline in oil prices in 1986, which more than halved the price of internationally traded oil. Indeed, in view of the role that has been attributed to higher energy prices as a major factor behind the growth slowdown in the 1970s, it is hardly surprising that the recent price reduction has been widely perceived as being beneficial for growth in the industrial countries, not only in the short run but possibly allowing also a return to more rapid growth rates in the medium run.
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.
Until recently, the issues raised by capital outflows from developing countries have been overshadowed by the concerns over the growth of their gross external debt. In the past few years, however, there has been an increasing recognition of the significance of these capital outflows, reflecting in part greater awareness of the sheer volume of assets that have been transferred abroad. For the group of capital importing developing countries, for instance, external assets are estimated to have amounted to some $500 billion at the end of 1985, of which only $150 billion was accounted for by official reserves. These countries’ total external assets, therefore, amounted to well over half of their external liabilities.
Economic activity is affected by decisions that are based on projections of future growth and inflation. Consumption and investment decisions rely heavily on projections of future economic developments. Governments plan budgets and set macroeconomic policies based on forecasts of future economic activity. Because large deviations from anticipated conditions may prove to be costly in terms of lost output and employment, it is important to assess whether forecasts are accurate, given the information that is available when they are made.
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.