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Mr. Taimur Baig, Mr. Jörg Decressin, Mr. Tarhan Feyzioglu, Mr. Manmohan S. Kumar, and Mr. Chris Faulkner-MacDonagh

Abstract

Deflation can be costly and difficult to anticipate, and concerns of a generalized decline in prices in both industrial and emerging market economies have increased recently. This paper investigates the causes and consequences of deflation, the risk of deflation globally and in individual countries, and policy options. The authors discuss issues related to the measurement, determinants, and costs of deflation and examine previous episodes of deflation. They compute an index of deflation vulnerability, which they apply to the 35 largest industrial and emerging market economies. Finally, the paper offers several policy options for protecting against deflation and for coping with it should it strike.

Mr. Malcolm D. Knight and Mr. Mohsin S. Khan

Abstract

This is the first of a group of papers dealing with various aspects of Fund-supported adjustment programs. The other two, The Global Effects of Fund-supported Adjustment Programs by Morris Goldstein and Fund-Supported Programs, Fiscal Policy, and Income Distribution by the Fiscal Affairs Department, will also be published in the Fund's Occasional Paper Series.

International Monetary Fund

Abstract

This study, another in the series focusing on special issues in transition, reviews the experience of output decline and recovery in the 25 countries of eastern and central Europe and the Baltics, Russia, and other countries of the former Soviet Union. Although these countries began the process of economic transformation with similar circumstances of output decline, the extent of decline, its duration, and the sustainability of recovery in growth varied considerably. The authors explore the factors behind this variation and find that the most important policies promoting early and sustained recovery were ones that supported financial stabilization and structural reforms in key areas such as private sector development, the tax system, economic liberalization, and secure property rights.

Mr. Abdul d Abiad, Mr. Ashoka Mody, Ms. Susan M Schadler, and Mr. Daniel Leigh

Abstract

The central challenges facing the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia as they work to catch up to advanced European Union (EU) income levels are discussed in this new book. Focusing on the region’s growth performance, and outlining two growth scenarios that illustrate the range of investment and productivity growth rates under the income catchup objective, the authors draw upon extensive resources to identify strengths and weaknesses.

Mr. Malcolm D. Knight and Mr. Mohsin S. Khan

Abstract

The Fund’s Articles of Agreement make it clear (Article I) that promoting the growth of output and trade is a primary objective of economic policy and that eliminating payments disequilibria should be sought in accordance with this objective. Fund-supported adjustment programs consequently have to be designed to achieve a viable balance of payments within the context of improved long-term growth performance and price stability.1 Nevertheless, Fund policies and programs have come under mounting criticism in recent years in the press, as well as in certain academic circles, for failing to encourage economic growth.2 Indeed, it has been frequently argued that rather than fostering the growth of output, Fund programs tend to cause a slowdown in economic activity, increased unemployment, and a general worsening of living standards.

Hari Vittas

Abstract

The purposes of this Occasional Paper are twofold: first, to review economic and financial developments in Germany since its reunification nearly five years ago; and, second, to analyze some critical issues that have featured prominently in the policy debate over this period and are likely to continue attracting attention in the years ahead.

Mr. Taimur Baig, Mr. Jörg Decressin, Mr. Tarhan Feyzioglu, Mr. Manmohan S. Kumar, and Mr. Chris Faulkner-MacDonagh

Abstract

Concerns of a generalized decline in prices in both industrial and emerging market economies have increased markedly since last fall. With Japan, China, and several other Asian economies already experiencing declining prices, the worry has been that deflationary pressures could deepen, and even spread more widely. This concern comes amid massive declines in global equity markets; significant excess capacity and widening output gaps; repeated disappointments over the pace of global recovery; geopolitical uncertainties; and the impact on activity of higher oil prices.

International Monetary Fund

Abstract

The transition from predominantly socialist ownership and central planning to a market economy with private ownership is a complex process involving profound changes in the political, economic, institutional, legal, and social domains. While there may not be a simple unifying theme to capture this complexity, the quest for economic recovery and sustained growth is certainly an important common thread for all the transition countries. This paper reviews the record of growth performance in 25 countries, comprising central and eastern Europe (CEE) and the Baltics, Russia, and other countries of the former Soviet Union (BRO).

International Monetary Fund

Abstract

A revival of interest in economic growth in the mid-1980s led to the development of a new wave of models that established a synthesis now known as endogenous growth theory, which has produced a large volume of empirical studies of growth. The first element of this synthesis is the earlier prevailing doctrine on economic growth, the “neoclassical” model of Solow-Swan and Cass-Koopmans from the 1950–60s, which attributed growth to the expansion of capital and labor, augmented by exogenous technological progress. Simple factor input and factor productivity calculations of the sources of growth are based on this paradigm and continue to be used widely, including in many IMF background studies.

Mr. Malcolm D. Knight and Mr. Mohsin S. Khan

Abstract

In analyzing the effects of Fund-supported adjustment programs on the level or rate of growth of output, it is crucial first to consider the circumstances in which such programs are introduced. Typically the need for a stabilization program, whether supported by the Fund or otherwise, arises when a country experiences an imbalance between aggregate domestic demand (absorption) and aggregate supply, which is reflected in a worsening of its external payments position. While it is true that such external factors as an exogenous deterioration of the terms of trade or an increase in foreign interest rates can be responsible for the basic demand-supply imbalances, often these imbalances can be traced to inappropriate domestic policies that expand aggregate domestic demand too rapidly relative to the productive potential of the economy and seriously distort relative prices.3 If foreign financing is available, the relative expansion of domestic demand can persist for extended periods—albeit at the cost of a widening current account deficit, a loss of international competitiveness owing to rapid domestic inflation, an inefficient allocation of resources because of the distortions in relative prices, and a heavier foreign debt burden.