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Mr. Charles Frederick Kramer

Asia Rising -- explores Asia's role in the world economy, the challenges faced from globalization, the quest for greater regional financial integration, the problem of lagging investment, and why East Asia performed so much better than Latin America. It also looks at the recovery of Japan and the rise of India and China. The economies of the ASEAN-4 come under the microscope in Country Focus. Other articles examine financial sector reform in Africa and the remaining hurdles to financial integration in the European Union. People in Economics profiles Paul Krugman, Back to Basics focuses on hedge funds, and the Straight Talk column looks at the problem of underdevelopment.

Mr. Ulrich Baumgartner and Mr. Guy M Meredith

Abstract

This volume brings together various analytical studies the IMF staff has undertaken on the Japanese economy, focusing on two areas of particular interest for both longer-term economic performance and recent cyclical developments. The first is Japan’s saving behavior; the second is the remarkable swing in asset prices that occurred in the late 1980s and early 1990s. As regards saving, Japan for many years has had the highest national saving rate among the major industrial countries. While its domestic investment rate has also been higher than that of other major industrial countries, the excess of saving over investment has been reflected in Japan’s significant current account surplus since the early 1980s. Japan’s saving performance raises several issues. Does Japan save “too much” on economic grounds? How has Japan’s saving been channeled abroad? What effect will an aging population have on future saving patterns of the private and public sectors? Answers to these questions are the focus of Sections II through V of this volume.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia recorded another year of strong growth in 2006, and the prospects are for the favorable economic performance to continue into 2007. That said, there has been somewhat less rebalancing of growth than expected, which leaves much of the region exposed to changes in external conditions. Indeed, weaker U.S. growth in recent quarters and ongoing inventory corrections led to a loss in export momentum in late 2006. Lower oil prices combined with modest domestic demand growth have helped to reduce inflation pressures in parts of the region, while overheating as well as real estate and equity price rises are a concern in some economies. Real sector risks have diminished in line with a more balanced G-3 growth profile. Meanwhile, financial risks are seen to have risen somewhat owing to possible spillovers from weakness in the U.S. mortgage market.

Kenneth Miranda

Abstract

Japan’s high saving rate relative to those of other industrial countries gives rise to the question of whether Japan is saving “too much.” This section utilizes the conditions on optimal steady-state saving behavior derived from neoclassical growth theory to examine whether Japan saves too much (or too little)—thus assessing the optimality of its national saving behavior.

International Monetary Fund. Asia and Pacific Dept

Abstract

Gross cross-border capital flows in emerging Asia12 have grown significantly over the past decade, rising from about US$270 billion to US$830 billion.13 Such flows—into and out of Asia as well as within the region—bring many benefits and help facilitate economic growth and development. They reflect greater real and financial integration in the region, as well as the strengthening and development of financial institutions and markets. At the same time, sudden shifts in flows have, in the past, caused economic problems in many parts of Asia and in other emerging markets. These include macroeconomic imbalances such as the rapid appreciation of the real exchange rate; unproductive or imprudent investment, including in some cases asset price bubbles; destabilizing effects from sudden stops or outflows in capital; and risks associated with high levels of leverage. Recently, policymakers and economists in the region have expressed concerns that strong capital inflows might be leading to some of these problems, especially with regard to the rapid appreciation of exchange rates.

International Monetary Fund. Asia and Pacific Dept

Abstract

In the past several years, authorities in a number of Asian countries have implemented, or are considering implementing, policies to deal with rising housing prices and attendant risks. In India and Korea, the focus has been on tightening prudential regulations on real-estate-related finance. In Australia and New Zealand, monetary policy is shaped in part by concerns that rising housing prices could lead to domestic demand overheating and overall inflationary pressures. And in several countries, there is growing emphasis on increasing the public supply of housing or attempting to influence housing markets via tax and other structural measures.

Mr. Juha Kähkönen

Abstract

Since the early 1980s, Japan has been the world’s largest exporter of capital. Despite having the highest investment rate of all major industrial countries, Japan has invested less at home than it has saved, transferring part of its saving abroad and, as a consequence, running current account surpluses. From modest amounts in 1980, outflows of portfolio capital and foreign direct investment (FDI) have since surged; Japan has also become the world’s largest provider of development assistance. This section discusses the developments in Japan’s net capital outflows, with particular attention paid to the determinants and impact of Japan’s FDI.

International Monetary Fund
Canadian housing prices are higher than levels consistent with current fundamentals in some provinces. The empirical estimates suggest that a 10 percent decline in housing prices would lead to a 1¼ percent decline in private consumption. The high level of household leverage and housing prices could prove to be a source of vulnerability. The rebound in debt and housing prices after the crisis largely reflects the resilience of the financial system and the stronger economic recovery in Canada, as well as historically low interest rates.
International Monetary Fund. Middle East and Central Asia Dept.
This 2015 Article IV Consultation highlights that decline in oil prices has adversely affected Kuwait’s fiscal and current account balances and slowed growth in 2014–15. Real non-oil GDP growth is projected to slow in 2015 and 2016, and pick up to 4 percent in the medium term, supported by government investment in infrastructure and private investment. The fiscal and external positions are projected to deteriorate further in 2015 and 2016, and improve somewhat over the medium term as oil prices and production recover partially.
International Monetary Fund
New Zealand’s recovery has stalled since mid-2010. Spare capacity has helped contain inflation. The Reserve Bank of New Zealand (RBNZ) lifted its policy rate in two steps from a record low of 2.5 percent to 3 percent in mid-2010. The exchange rate appreciated and financial markets have largely recovered from the global financial crisis. The banking sector remains profitable and is dominated by four subsidiaries of Australian banks that performed well during the crisis. The 2010 Canterbury earthquakes have disrupted economic activity, reduced wealth, and weakened confidence.