Over the past 25 years, world long-term interest rates have declined to levels not seen since the 1960s. This decline has been accompanied by falling world investment and savings rates. The authors explore global saving and investment outcomes that have led to the fall in the world real interest rate. The results show that the key factors explaining movements in savings and investment are variables that evolve relatively slowly over time, such as labour force growth and the age structure of the world economy. The conclusions suggest that, over the coming years, it is unlikely that these slowly changing variables will be a source of significant changes in world real interest rates.
Topics: Interest rates; International topicsA nation's productivity is the prime determinant of its real incomes and standard of living, as well as being a major determinant of its potential output. In the short run, deviations of actual output from potential output are a useful indicator of inflationary pressures. This article is a short summary of the proceedings of the workshop, which focus on productivity and potential output growth among industrialized countries. The research is organized under three main themes: estimating potential growth; productivity and growth; and institutions, policies, and growth.
Topics: International topics; Potential output; ProductivityThe authors show that the widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange each have a separately identifiable effect on a firm's valuation.
Topics: Financial markets; International topicsStaff projections provided for the Bank of Canada's monetary policy decision process take into account the integration of Canada's very open economy within the global economy, as well as its close real and financial linkages with the United States. To provide inputs for this projection, the Bank has developed several models, including MUSE, NEUQ (the New European Quarterly Model), and BoC-GEM (Bank of Canada Global Economy Model), to analyze and forecast economic developments in the rest of the world. The authors focus on MUSE, the model currently used to describe interaction among the principal U.S. economic variables, including gross domestic product, inflation, interest rates, and the exchange rate. Brief descriptions are also provided of NEUQ and BoC-GEM.
Topics: Econometric and statistical methods; Economic models; International topicsConsumption volatility relative to output volatility is consistently higher in emerging economies than in developed economies.
Topics: International topicsThe governance challenges facing the International Monetary Fund (IMF) are not simply limited to representation and voice, and the associated question of quota allocation.
Topics: International topicsThe combination of rising current account surpluses in Asia and a growing current account deficit in the United States has raised concerns that the resulting imbalances pose a threat to the world economy, especially if they are reversed in a disorderly manner. Some experts believe that normal market forces will resolve these imbalances over time; others argue that policy-makers should facilitate the adjustment with policies that curb domestic demand in deficit countries and stimulate it in surplus countries. Little and Lafrance provide a guide to the major issues and controversies involved in the debate.
Topics: Balance of payments and components; Exchange rates; International topicsThe authors examine the characteristics of International Monetary Fund (IMF) lending from the 1960s to 2005.
Topics: International topicsConventional wisdom holds that institutional changes and trade liberalization are two main sources of growth in per capita income around the world.
Topics: Development economics; International topicsThe author empirically assesses the effects of institutional and political factors on the need and willingness of governments to make large fiscal adjustments.
Topics: Development economics; Econometric and statistical methods; Fiscal Policy; International topics
