World Economic Outlook
Spillovers and Cycles in the Global Economy
April 2007
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. |
View the Full Text of the WEO (use the free Adobe Acrobat Reader).
Contents
| Assumptions and Conventions, Preface, Foreword | |||
| Executive Summary | |||
| Chapter 1. Global Prospects and Policy Issues | |||
|---|---|---|---|
| Full Text | Video Briefing | Boxes | Charts | |||
| Global Economic Environment | |||
| Outlook and Short-Term Risks | |||
| Cross-Country Spillovers: Can the Global Economy Decouple from a U.S. Slowdown? | |||
| Medium-Term Challenges: Can the Productivity Boom Be Sustained? | |||
| 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: How Much Will the U.S. Economy Slow? | |||
| Western Europe: Can Recent Vigor Be Sustained? | |||
| Industrial Asia: Japan's Expansion Remains on Track | |||
| Emerging Asia: How Resilient Is the Region to a U.S. Slowdown? | |||
| Latin America: Boosting Productivity Is the Key to Sustaining Growth | |||
| Emerging Europe: Integrating with the European Union | |||
| Commonwealth of Independent States: Strong Growth but More Economic Diversification Needed | |||
| Africa: Sustaining Recent Growth Momentum | |||
| Middle East: Expanding the Benefits of the Oil Boom | |||
| References | |||
| Chapter 3. Exchange Rates and the Adjustment of External Imbalances | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| Past Episodes of Large External Imbalances: An Event Analysis | |||
| How Responsive Are U.S. Trade Volumes to Exchange Rate Movements? | |||
| Implications for Global Imbalances | |||
| Conclusions | |||
| Appendix 3.1. Event Analysis: Methodology and Data | |||
| Appendix 3.2. Econometric Estimates of Trade Models | |||
| References | |||
| Chapter 4. Decoupling the Train? Spillovers and Cycles in the Global Economy | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| U.S. Economy and International Business Cycle Fluctuations | |||
| Identifying Common Elements in International Business Cycle Fluctuations | |||
| How the United States Affects the Global Economy—A Model-Based Simulation Analysis | |||
| Summary and Conclusions | |||
| Appendix 4.1. Econometric Methodology | |||
| Appendix 4.2. Common Elements in International Business Cycle Fluctuations: Description of the Dynamic Factor Models | |||
| References | |||
| Chapter 5. The Globalization of Labor | |||
| Full Text | Summary | Video Briefing | Boxes | Charts | |||
| How Globalized Is Labor? | |||
| How Has the Globalization of Labor Affected Workers in Advanced Economies? | |||
| Summary and Policy Implications | |||
| Appendix 5.1. Data Sources and Methods | |||
| References | |||
| Annex: IMF Executive Board Discussion of the Outlook, March 2007 | |||
| Statistical Appendix | |||
| Assumptions | |||
| What's New | |||
| Data and Conventions | |||
| Classification of Countries | |||
| General Features and Composition of Countries in the World Economic Outlook | |||
| Classification | |||
| 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 | Understanding the Link Between Oil Prices and the World Economy |
| Chart | Data | 1.2 | Ensuring Fiscal Sustainability in G-7 Countries |
| Chart | Data | 1.3 | Oil Consumption Across Major Countries: Is the United States Different? |
| Chart Chart |
Data Data |
1.4 | Hedging Against Oil Price Volatility |
| Chapter 2 Boxes | |||
| Chart | Data | 2.1 | Housing Market Slowdowns |
| Chart | Data | 2.2 | Lessons from Successful European Labor Market Reformers |
| Chart Chart |
Data Data |
2.3 | Is China Investing Too Much? |
| Chapter 3 Boxes | |||
| Chart | Data | 3.1 | External Sustainability and Financial Integration |
| Chart Chart |
Data Data |
3.2 | Large and Persistent Current Account Imbalances |
| 3.3 | Exchange Rate Pass-Through to Trade Prices and External Adjustment | ||
| Chapter 4 Boxes | |||
| Chart | Data | 4.1 | Financial Linkages and Spillovers |
| Chart Chart |
Data Data |
4.2 | Macroeconomic Conditions in Industrial Countries and Financial Flows to Emerging Markets |
| Chart | Data | 4.3 | Spillovers and International Business Cycle Synchronization: A Broader Perspective |
| Chapter 5 Boxes | |||
| 5.1 | Emigration and Trade: How Do They Affect Developing Countries? | ||
| 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 | Effects of Petroleum Products on Production of Selected Grains in the United States | ||
| 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 | Summary Statistics of Episodes of Reversals | ||
| 3.2 | Standard Trade Model: Estimates of U.S. Trade Elasticities | ||
| 3.3 | List of Reversal Episodes | ||
| 3.4 | List of Large and Persistent Episodes | ||
| 3.5 | Advanced Economies: Contractionary and Expansionary Deficit Reversals | ||
| 3.6 | Emerging Markets: Contractionary and Expansionary Surplus Reversals | ||
| 3.7 | Variable Definitions | ||
| 3.8 | Standard Empirical Trade Model: Long-Run U.S. Trade Elasticities | ||
| 3.9 | Long-Run U.S. Trade Elasticities and Aggregation Bias | ||
| 3.10 | Long-Run U.S. Import Elasticities and Vertical Integration | ||
| 3.11 | Nonlinearity Tests (p value) and Thresholds for Changes in Relative Import Prices | ||
| 3.12 | Error Correction Model for U.S. Imports, Sample 1973:Q1—2006:Q3 | ||
| 4.1 | Role of Large Economies in the Global Economy | ||
| 4.2 | Export Orientation by Region | ||
| 4.3 | External Portfolio Assets and Liabilities by Region | ||
| 4.4 | U.S. Downturns and Global Growth | ||
| 4.5 | Growth and Spillovers (1) | ||
| 4.6 | Growth and Spillovers (2) | ||
| 4.7 | Contributions to Output Fluctuations | ||
| 4.8 | Consumption | ||
| 4.9 | Investment | ||
| 4.10 | Contributions to Business Cycle Fluctuations in G-7 Countries | ||
| 5.1 | Classification of Sectors by Skill Intensity | ||
| 5.2 | Impact of Labor Globalization and Technological Change on Labor Shares | ||
| 5.3 | Impact of Labor Globalization and Technological Change on the Skilled and Unskilled Labor Shares | ||
| Chapter 1 Charts | |||
| Chart | Data | 1.1 | Global Indicators |
| Chart | Data | 1.2 | Current and Forward-Looking Indicators |
| Chart | Data | 1.3 | Global Inflation |
| Chart | Data | 1.4 | Developments in Mature Financial Markets |
| Chart | Data | 1.5 | Mature Financial Market Indicators |
| Chart | Data | 1.6 | Emerging Market Financial Conditions |
| Chart | Data | 1.7 | External Developments in Major Advanced Economies |
| Chart | Data | 1.8 | External Developments in Emerging Market Countries |
| Chart | Data | 1.9 | Global Outlook |
| Chart | Data | 1.10 | Risks to the Global Outlook |
| Chart | Data | 1.11 | Productivity and Labor Cost Developments in Selected Advanced Economies |
| Chart | Data | 1.12 | Measures of the Output Gap and Capacity Pressures |
| Chart | Data | 1.13 | Current Account Balances and Net Foreign Assets |
| Chart | Data | 1.14 | Global Productivity Performance |
| Chart | Data | 1.15 | Global Saving, Investment, and Current Accounts |
| Chart | Data | 1.16 | Saving and Investment in Emerging Market and Oil-Producing Economies |
| Chart | Data | 1.17 | Average Petroleum Spot and Futures Prices, and Selected Energy Product Prices |
| Chart | Data | 1.18 | Demand and Prices of Petroleum Products in Selected Developing and OECD Countries |
| Chart | Data | 1.19 | Oil Supply, OECD Inventories, and OPEC Spare Capacity |
| Chart | Data | 1.20 | Actual and Expected Semiannual World Consumption and Non-OPEC Production Growth, and Brent Crude Oil Prices |
| Chart | Data | 1.21 | Commodity Price Indices and Selected Metals and Food Price Indices |
| Chart | Data | 1.22 | Semiconductor Market |
| Chapter 2 Charts | |||
| Chart | Data | 2.1 | United States: How Much Will the U.S. Economy Slow? |
| Chart | Data | 2.2 | United States: Developments in the Residential and Nonresidential Construction Sectors |
| Chart | Data | 2.3 | Western Europe: Productivity Is Failing to Catch Up |
| Chart | Data | 2.4 | Western Europe: Need to do More to Raise Labor Utilization |
| Chart | Data | 2.5 | Japan: Understanding Developments in Domestic Demand |
| Chart | Data | 2.6 | Emerging Asia: Assessing the Resilience to a Global Slowdown |
| Chart | Data | 2.7 | Latin America: Productivity Is Lagging |
| Chart | Data | 2.8 | Emerging Europe: Convergence with the European Union |
| Chart | Data | 2.9 | Commonwealth of Independent States (CIS): Further Return Needed to Raise Investment Levels |
| Chart | Data | 2.10 | Sub-Saharan Africa: Can Recent Growth Momentum Be Sustained? |
| Chart | Data | 2.11 | Middle East: Investment in Non-Oil Sectors Key to Employment Growth |
| Chapter 3 Charts | |||
| Chart | Data | 3.1 | Episodes of Deficit Reversals and Large and Persistent Deficits |
| Chart | Data | 3.2 | Advanced Economies: Key Indicators During Deficit Reversals |
| Chart | Data | 3.3 | Deficit Reversals in Advanced Economies: Episode Characteristics by Average Change in GDP Growth |
| Chart | Data | 3.4 | Advanced Economies: Total Change in Real Effective Exchange Rate and Average Change in GDP Growth During Deficit Reversals |
| Chart | Data | 3.5 | Episodes of Surplus Reversals and Large and Persistent Surpluses |
| Chart | Data | 3.6 | Key Indicators During Surplus Reversals |
| Chart | Data | 3.7 | Surplus Reversals in Emerging Markets: Episode Characteristics by Average Change in GDP Growth |
| Chart | Data | 3.8 | Oil Exporters: Surplus Reversals |
| Chart | Data | 3.9 | Thresholds in Relative Trade Prices, Real Effective Exchange Rate, and Flexibility of Markets |
| Chart | Data | 3.10 | United States: Trade Flows, Real Effective Exchange Rate (REER), and Growth Differential with Trading Partners |
| Chart | Data | 3.11 | Required Exchange Rate Change for a 1 Percentage Point Reduction in the Ratio of U.S. Trade Deficit to GDP |
| Chart | Data | 3.12 | Sectoral Price Elasticities of Trade |
| Chapter 4 Charts | |||
| Chart | Data | 4.1 | U.S. Recessions and Real GDP Growth by Region |
| Chart | Data | 4.2 | Trade Orientation |
| Chart | Data | 4.3 | United States: Real Imports, Real Effective Exchange Rate, Real Stock Returns, and Interest Rates During Recessions and Slowdowns |
| Chart | Data | 4.4 | Output Gaps and Structural Characteristics During U.S. Recessions |
| Chart | Data | 4.5 | Growth Declines and Spillovers: Regional Implications |
| Chart | Data | 4.6 | Impact of Growth Declines in the United States and Japan |
| Chart | Data | 4.7 | Global Factor |
| Chart | Data | 4.8 | Global Implications of a Disturbance to U.S. Private Demand |
| Chart | Data | 4.9 | Global Growth and Inflation with Correlated Disturbances and Delayed Monetary Policy Response |
| Chart | Data | 4.10 | Limited In-Sample Persistence of U.S. Growth Shocks |
| Chart | Data | 4.11 | Impact of U.S. Growth Declines on Growth in Latin America: Effects by Country |
| Chart | Data | 4.12 | Impact of Euro Area Growth Declines on Growth in Latin America: Effects by Country |
| Chart | Data | 4.13 | Impact of U.S. Growth Declines on Growth in Emerging Asia: Effects by Country |
| Chart | Data | 4.14 | Impact of Japanese Growth Declines on Growth in Emerging Asia: Effects by Country |
| Chapter 5 Charts | |||
| Chart | Data | 5.1 | Alternative Measures of Global Labor Supply |
| Chart | Data | 5.2 | Immigration and Trade |
| Chart | Data | 5.3 | Share of Developing Countries in Trade |
| Chart | Data | 5.4 | Developing Countries: Exports of Skilled Manufacturing Goods and Services |
| Chart | Data | 5.5 | Offshoring by Advanced Economies |
| Chart | Data | 5.6 | Advanced Economies: Offshoring by Category of Inputs |
| Chart
Chart |
Data Data |
5.7 | Advanced Economies: Labor Income Shares |
| Chart | Data | 5.8 | Advanced Economies: Labor Compensation and Employment |
| Chart | Data | 5.9 | Advanced Economies: Labor Compensation and Employment in Skilled and Unskilled Sectors |
| Chart | Data | 5.10 | Catch-Up by Emerging Markets' Manufacturing Wages |
| Chart | Data | 5.11 | Information and Communications Technology (ICT) Capital, Patents, and Labor Market Indicators |
| Chart | Data | 5.12 | Contributions to the Annual Change in Labor Share |
| Chart | Data | 5.13 | Advanced Economies: Contributions to the Annual Change in the Labor Share by Skill Level |
| Chart | Data | 5.14 | Effects of Changes in Trade Prices on Labor Share, Output, and Labor Compensation |
| Chart | Data | 5.15 | Advanced Economies' Labor Income Share, Labor Compensation, and Employment: Robustness to Alternative Skill Classification |