World Economic Outlook
Financial Systems and Economic Cycles
September 2006
World Economic and Financial Surveys
The World Economic Outlook (WEO) presents the IMF staff's analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF's global surveillance activities. |
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Contents
| 89 kb | Assumptions and Conventions | ||
| Preface | |||
| Foreword | |||
| Executive Summary | |||
| Chapter 1. Global Prospects and Policy Issues | |||
|---|---|---|---|
| Full Text | Boxes | Charts | |||
| Global Economic Environment | |||
| Outlook and Short-Term Risks | |||
| Unwinding Global Imbalances | |||
| Policy Challenges | |||
| Appendix 1.1. Recent Developments in Commodity Markets | |||
| References | |||
| Chapter 2. Country and Regional Perspectives | |||
| Full Text |Boxes | Charts | |||
| United States and Canada: Inflationary Pressures Are Beginning to Rise | |||
| Western Europe: Structural Reforms Remain the Key to Stronger Growth | |||
| Japan: Monetary Policy Adjusts to the End of Deflation | |||
| Emerging Asia: China's Growth Spurt Benefits the Region but Carries Risks | |||
| Latin America: Continuing to Build Resilience | |||
| Emerging Europe: Managing Risks From Heavy Reliance on Foreign Savings | |||
| Commonwealth of Independent States: Managing Large Foreign Currency Inflows | |||
| Africa: Strong Growth Continues Despite High Oil Prices | |||
| Middle East: Living with Booming Oil Exports | |||
| References | |||
| Chapter 3. Asia Rising: Patterns of Economic Development and Growth | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| Asia's Economic Success | |||
| Perspiration or Inspiration? | |||
| Sectoral Effects: Cross-Sector Shifts or Within-Sector Growth? | |||
| Policy Determinants of Productivity Growth | |||
| Conclusions | |||
| Appendix 3.1 Asia Rising: Methods and Additional Results | |||
| References | |||
| Chapter 4. How Do Financial Systems Affect Economic Cycles? | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| How Have Financial Systems Changed? | |||
| How Do Differences in Financial Systems Affect the Behavior of Households Firms, and Cross-Border Capital Flows? | |||
| Conclusions | |||
| Appendix 4.1 Building the Financial Index | |||
| Appendix 4.2 Econometric Methodology | |||
| References | |||
| Chapter 5. The Boom in NonFuel Commodity Prices: Can It Last? | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| Long-Term Trends in Commodity Prices and Volatility | |||
| Assessment of Recent Developments | |||
| Role of Emerging Markets | |||
| Will the Recent Run-Up in Metals Prices Be Sustained? | |||
| Outlook for Food and Other Agricultural Commodities | |||
| Conclusions | |||
| Appendix 5.1 Model of Aluminum and Copper Markets | |||
| Appendix 5.2 Modeling the Relationship Between Speculation and Commodity Prices | |||
| References | |||
| Annex: IMF Executive Board Discussion of the Outlook, August 2006 | |||
| Statistical Appendix | |||
| Assumptions | |||
| What's New | |||
| Data and Conventions | |||
| Classification of Countries | |||
| General Features and Composition of Countries in the World Economic Outlook | |||
| Classification | |||
| List of Tables | |||
| Output (Tables 1–6) | |||
| Inflation (Tables 7–11) | |||
| Financial Policies (Tables 12–19) | |||
| Foreign Trade (Tables 20–24) | |||
| Current Account Transactions (Tables 25–31) | |||
| Balance of Payments and External Financing (Tables 32–36) | |||
| External Debt and Debt Service (Tables 37–42) | |||
| Flow of Funds (Table 43) | |||
| Medium-Term Baseline Scenario (Tables 44–45) | |||
| World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics | |||
| Chapter 1 Boxes | |||
| Chart Chart |
Data Data |
1.1 | Capital Flows to Emerging Market Countries: a Long-Term Perspective |
| Chart | Data | 1.2 | How emerging Market Countries May Be Affected By External Shocks |
| Chart Chart |
Data Data |
1.3 | How Will Global Imbalances Adjust? |
| 1.4 | International and National Oil Companies in a Changing Oil Sector Environment | ||
| Chapter 2 Boxes | |||
| Chart Chart |
Data Data |
2.1 | Improved Emerging Market Fiscal Performance: Cyclical or Structural? |
| Chart | Data | 2.2 | Commodity Price Shocks, Growth, and Financing in Sub-Saharan Africa |
| Chapter 3 Boxes | |||
| Chart Chart |
Data Data |
3.1 | Japan's Potential Output and Productivity Growth |
| Chart Chart |
Data Data |
3.2 | The Evolution and Impact of Corporate Governance Quality in Asia |
| Chapter 4 Boxes | |||
| 4.1 | Financial Leverage and Debt Deflation | ||
| Chapter 5 Boxes | |||
| Chart Chart |
Data Data |
5.1 | Has Speculation Contributed to Higher Commodity Prices? |
| 5.2 | Agricultural Trade Liberalization and Commodity Prices | ||
| Appendix Boxes | |||
| A1. | Economic Policy Assumptions Underlying the Projections for Selected Advanced Economies | ||
| Tables | |||
| 1.1 | Overview of the World Economic Outlook Projections | ||
| 1.2 | Emerging Market and Developing Countries: Net Capital Flows | ||
| 1.3 | Major Advanced Economies: General Government Fiscal Balances and Debt | ||
| 1.4 | Global Oil Demand by Region | ||
| 1.5 | Selected Domestic Fuel Price Changes, January 2005–June 2006 | ||
| 1.6 | Nonenergy Commodity Prices | ||
| 2.1 | Advanced Economies: Real GDP, Consumer Prices, and Unemployment | ||
| 2.2 | Advanced Economies: Current Account Positions | ||
| 2.3 | Selected Asian Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 2.4 | Selected Western Hemisphere Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 2.5 | Emerging Europe: Real GDP, Consumer Prices, and Current Account Balance | ||
| 2.6 | Commonwealth of Independent States: Real GDP, Consumer Prices, and Current Account Balance | ||
| 2.7 | Selected African Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 2.8 | Selected Middle Eastern Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 3.1 | Sectoral Shares in Value Added and Employment | ||
| 3.2 | Determinants of Productivity Growth | ||
| 4.1 | Dependent Variable: Private Consumption | ||
| 4.2 | Dependent Variable: _1,i,t | ||
| 4.3 | Dependent Variable: Bilateral Portfolio Investment | ||
| 5.1 | Dependence on Exports of Selected Non-Fuel Commodities | ||
| 5.2 | Decomposition of IMF Non-Fuel Commodities Price Index, 2002–06 | ||
| 5.3 | Consumption of Industrial Metals and Oil | ||
| 5.4 | Consumption of Selected Agricultural Commodities | ||
| 5.5 | Cash Costs of Production for Selected Base Metals | ||
| 5.6 | Estimated Elasticities of Demand for Selected Base Metals | ||
| 5.7 | Estimates of Metal Demand | ||
| 5.8 | Estimates of Price Equations | ||
| 5.9 | Equation for Industrial Production | ||
| 5.10 | Consumption of Metals | ||
| 5.11 | Summary of the Results from Rolling Regressions | ||
| Chapter 1 Charts | |||
| Chart | Data | 1.1 | Global Indicators |
| Chart | Data | 1.2 | Current and Forward-Looking Indicators |
| Chart | Data | 1.3 | Measures of the Output Gap and Labor Market Pressures |
| Chart | Data | 1.4 | Global Inflation |
| Chart | Data | 1.5 | Developments in Mature Financial Markets |
| Chart | Data | 1.6 | Mature Financial Market Indicators |
| Chart | Data | 1.7 | External Developments in Major Advanced Economies |
| Chart | Data | 1.8 | External Developments in Emerging Market Countries |
| Chart | Data | 1.9 | Emerging Market Financial Conditions |
| Chart | Data | 1.10 | Global Outlook |
| Chart | Data | 1.11 | Prospects for World GDP Growth |
| Chart | Data | 1.12 | Productivity Developments in Selected Advanced Economies |
| Chart | Data | 1.13 | Impact of Commodity Price Movements on Trade Balances in Emerging Markets and Developing Countries |
| Chart | Data | 1.14 | Current Account Balances and Net Foreign Assets |
| Chart | Data | 1.15 | Crude Oil Spot and Futures Prices, Price Volatility, and Consumption-Production Changes |
| Chart | Data | 1.16 | OPEC Production, OPEC Spare Capacity, and OECD Inventories |
| Chart | Data | 1.17 | Stock Market Valuations and Real Investment in Oil and Non-Oil Sectors |
| Chart | Data | 1.18 | Nonenergy Commodities |
| Chart | Data | 1.19 | Semiconductor Market |
| Chapter 2 Charts | |||
| Chart | Data | 2.1 | United States: Are Inflationary Pressures Building |
| Chart | Data | 2.2 | Western Europe: Boosting Productivity is the Key to Stronger Growth |
| Chart | Data | 2.3 | Japan: Balancing Inflation and Deflation Risks |
| Chart | Data | 2.4 | Emerging Asia: The Regional Impact of China's Rapid Growth |
| Chart | Data | 2.5 | Latin America: Progress Toward Fiscal Sustainability |
| Chart | Data | 2.6 | Latin America: Mixed Performance in the Hydrocarbons Sector |
| Chart | Data | 2.7 | Emerging Europe: Rapid Growth and Its Risks |
| Chart | Data | 2.8 | Commonwealth of Independent States: Strong Foreign Currency Inflows Create Macroeconomic Challenges |
| Chart | Data | 2.9 | Sub-Saharan Africa: Oil-Importing Countries Record Strong Growth Despite High Oil Prices |
| Chart | Data | 2.10 | Middle East: Spending Booming Oil Revenue Wisely |
| Chapter 3 Charts | |||
| Chart | Data | 3.1 | Output per Capita |
| Chart | Data | 3.2 | Selected Indicators |
| Chart | Data | 3.3 | Growth Decompositions |
| Chart | Data | 3.4 | Information and Communications Technologies (ICT) Investment and Labor Productivity Growth, 1989–2005 |
| Chart | Data | 3.5 | Sectoral Shares of Value Added and Employment for Asia |
| Chart | Data | 3.6 | Employment and Labor Productivity in the Agricultural Sector Over Time |
| Chart | Data | 3.7 | Productivity Growth by Sector |
| Chart | Data | 3.8 | Sectoral Productivity Growth Since Takeoff |
| Chart | Data | 3.9 | 9Contributions to Average Labor Productivity Growth Differential with the United States |
| Chart | Data | 3.10 | Skill Intensive Manufacturing Sectors: Employment and Value Added Shares |
| Chart | Data | 3.11 | Contributions to Average Manufacturing Productivity Growth Differential with the United States |
| Chart | Data | 3.12 | Determinants of Productivity Growth, 1970–2004 |
| Chart | Data | 3.13 | Determinants of Labor Shifts from Agriculture |
| Chart | Data | 3.14 | Partial Correlations Between Labor Shift From Agriculture and Its Determinants |
| Chapter 4 Charts | |||
| Chart | Data | 4.1 | Stock and Bond Market Capitalization and Nonfinancial Sector Liabilities,1995–2004 |
| Chart | Data | 4.2 | Traditional Banking: Index for Selected Advanced Economies |
| Chart | Data | 4.3 | New Financial Intermediation: Index for Selected Advanced Countries |
| Chart | Data | 4.4 | Financial Markets: Index for Selected Advanced Economies |
| Chart | Data | 4.5 | Financial Index Scores for Advanced Economies |
| Chart | Data | 4.6 | Features of Mortgage Markets |
| Chart | Data | 4.7 | Total Household Liabilities |
| Chart | Data | 4.8 | Consumption-Income Correlations and the Financial Index, 1985–2005 |
| Chart | Data | 4.9 | Private Consumption: Response to Equity Busts, 1985–2005 |
| Chart | Data | 4.10 | Private Consumption and Residential Investment: A Response to Housing Busts, 1970–2005 |
| Chart | Data | 4.11 | Depth of Equity and Housing Busts and the Financial Index, 1985–2005 |
| Chart | Data | 4.12 | Investment and Financing by the Corporate Sector |
| Chart | Data | 4.13 | The Financial Index and Foreign Portfolio Investment |
| 4.14 | The Financial Index | ||
| Chart | Data | 4.15 | The Financial Index: Subindices for Selected Advanced Economies |
| 4.16 | Clustering Results | ||
| Chapter 5 Charts | |||
| Chart | Data | 5.1 | Dependence on Exports of Non-Fuel Commodities and Geographical Concentration of Production |
| Chart | Data | 5.2 | Long-Term Price Trends |
| Chart | Data | 5.3 | Volatility in Nonfuel Commodities Prices |
| Chart | Data | 5.4 | Commodity Prices over the Business Cycle |
| Chart | Data | 5.5 | Recent Developments in Commodity Prices |
| Chart | Data | 5.6 | Perspective on the Recent Price Developments, 1957–2006 |
| Chart | Data | 5.7 | Consumption of Base Metals and Steel, 1960–2005 |
| Chart | Data | 5.8 | The Importance of Industry at Various Stages of Economic Development, 1965–2004 |
| Chart | Data | 5.9 | Base Metal Prices on Futures Markets |
| Chart | Data | 5.10 | Model-Based Forecasts of Aluminum and Copper Prices |
| Chart | Data | 5.11 | Consumption of Base Metals and Industrial Production, 1960–2005 |
| Chart | Data | 5.12 | Crude Oil: Rolling Estimates of the Model's Long-Run Parameters |
| Chart | Data | 5.13 | Crude Oil: Rolling Estimates of the Model's Short-Run Parameters |