October 14, 2007 The dramatic growth in China's exports of consumer goods such as clothing, toys, and electronics, and imports of primary commodities such as oil and metals is having major effects on global supply and demand. In examining China's role in global relative price changes, Francis finds that downward pressure on the relative prices of consumer goods is likely to persist as China's large labour supply continues its migration into manufacturing. Likewise, China's size and growth will also remain key drivers of global commodities demand for some time. Despite these forces, inflation-targeting central banks have the tools to keep inflation close to target, thus offsetting any persistent upward or downward inflationary pressure.
Over the past 15 years, long-term interest rates have declined to levels not seen since the 1970s. This paper explores possible shifts in global savings and investment that have led to this fall in the world real interest rate.