World Economic Outlook
Building Institutions
September 2005
World Economic and Financial Surveys
World Economic Outlook
Building Institutions
September 2005Ordering Information
The World Economic Outlook 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
| 208 kb | Assumptions and Conventions | ||
| Preface | |||
| Foreword | |||
| Chapter I. Economic Prospects and Policy Issues | |||
| 697 kb | United States and Canada: Strong U.S. Growth, but Rising Housing Market Risks | ||
| Western Europe: The Recovery Continues to Struggle | |||
| Japan: A Strong Rebound, but Reforms Need to Continue | |||
| Emerging Asia and the Pacific: Balanced, Twin-Engined Growth Needed | |||
| Latin America: Will This Be a More Resilient Expansion? | |||
| Emerging Europe: Is Rapid Credit Growth a Cause for Concern? | |||
| Commonwealth of Independent States: Favorable Short-Term Outlook Masks Medium-Term Investment Risks | |||
| Africa: How Can the Benefits of a Rising Working Age Population be Maximized? | |||
| The Middle East: Managing Booming Oil Exports | |||
| Appendix 1.1 Recent Market Developments in Commodity Markets | |||
| Appendix 1.2 How Will Global Imbalances Adjust? | |||
| References | |||
| Chapter II. Global Imbalances: A Saving and Investment Perspective | |||
| 286 kb | Global Saving and Investment: The Current State of Play | ||
| What Drives Saving, Investment, and the Current Account? | |||
| How Can Existing Global Current Account Imbalances Be Reduced? | |||
| Appendix 2.1. Sample Composition, Data Sources, Methods, and Results | |||
| References | |||
| Chapter III. Building Institutions | |||
| 1,700 kb | The Role of Institutions | ||
| When Do Institutions Change? | |||
| What Changes Institutions? | |||
| Institutions and the External Environment | |||
| Conclusions | |||
| Appendix 3.1. Sample Composition, Data Sources, and Methods | |||
| References | |||
| Chapter IV. Does Inflation Targeting Work in Emerging Markets? | |||
| 219 kb | What Is Inflation Targeting and Why Does Inflation Targeting Matter? | ||
| Inflation Targeting: An Assessment of the Impact | |||
| Do “Preconditions” Need to Be Met Before the Adoption of Inflation Targeting? | |||
| Conclusion | |||
| Appendix 4.1. Details on Econometric Specifications and on Data from the Survey on Preconditions and Current Conditions | |||
| References | |||
| 82 kb | Annex: Summing Up by the Acting Chair | ||
| Statistical Appendix | |||
| 356 kb | Assumptions | ||
| What's New | |||
| Data and Conventions | |||
| Classification of Countries | |||
| 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) | |||
| 109 kb | World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics | ||
| Chapter I Boxes | |||
| Chart | Data | 1.1 | Is Public Debt in Emerging Markets Still Too High? |
| Chart | Data | 1.2 | Why is the U.S. International Income Account Still in the Black, and Will it Last? |
| Chart | Data | 1.3 | What Explains Divergent External Sector Performance in the Euro Area |
| Chart | Data | 1.4 | Is India Becoming an Engine for Global Growth? |
| Chart | Data | 1.5 | Pressures Mount for African Cotton Producers |
| 1.6 | Policies to Reduce Global Imbalances | ||
| Chapter II Boxes | |||
| Chart | Data | 2.1 | Saving and Investment in China |
| 2.2 | Return on Investment in Industrial and Developing Countries | ||
| Chart | Data | 2.3 | Impact of Demographic Change on Saving, Investment, and Current Account Balances |
| Chart | Data | 2.4 | Is Investment in Emerging Asia Too Low? |
| Chart | Data | ||
| Chapter III Boxes | |||
| 3.1 | Developing Institutions to Reflect Local Conditions: The Example of Ownership Transformation in China Versus Central and Eastern Europe | ||
| 3.2 | The Use of Specific Levers to Reduce Corruption | ||
| Chart | Data | 3.3 | Examining the Impact of Aid and Resource Rents on Institutions |
| Chapter IV Boxes | |||
| Chart | Data | 4.1 | A Closer Look at Inflation Targeting Alternatives: Money and Exchange Rate Targets |
| Chart | Data | ||
| Chart | Data | 4.2 | Long-Term Inflation Expectations and Credibility |
| A1 | Economic Policy Assumptions Underlying the Projections for Selected Advanced Economies | ||
| Chapter 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 | Advanced Economies: Real GDP, Consumer Prices, and Unemployment | ||
| 1.5 | Selected Economies: Current Account Positions | ||
| 1.6 | Selected Asian Economies: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.7 | Selected Western Hemisphere Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.8 | Emerging Europe: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.9 | Commonwealth of Independent States: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.10 | Selected African Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.11 | Selected Middle Eastern Countries: Real GDP, Consumer Prices, and Current Account Balance | ||
| 1.12 | Global Oil Demand by Region | ||
| 1.13 | Causality Tests: Spot Price, Long-Term Futures Prices and Net Long Position | ||
| 1.14 | Nonenergy Commodity Prices | ||
| 2.1 | Average Correlations of Saving and Investment Ratios | ||
| 2.2 | Global Saving and Investment: Panel Regression | ||
| 2.3 | Variance Decomposition | ||
| 2.4 | Average Trade by Region: 1970–2004 | ||
| 2.5 | Variance Decomposition for Country Regions | ||
| 2.6 | Investment and Capital Ratios for Emerging Asia | ||
| 3.1 | Frequency of Institutional Transitions | ||
| 3.2 | Institutional Transitions: Probit Estimates | ||
| 3.3 | Institutional Quality: Cross-Sectional and Panel IV Estimates | ||
| 3.4 | List of Institutional Transitions, 1970–2004 | ||
| 4.1 | Inflation Targeters | ||
| 4.2 | Inflation Outcomes Relative to Target | ||
| 4.3 | Baseline Results | ||
| 4.4 | Baseline Model Robustness Checks Using Different Classifications | ||
| 4.5 | Baseline Model Robustness Checks by Date and Control Variables | ||
| 4.6 | Baseline Model Robustness Checks: Additional Performance Indicators | ||
| 4.7 | Baseline Model Robustness Checks: Preconditions and Current Conditions | ||
| Chapter I Charts | |||
| Chart | Data | 1.1 | Global Indicators |
| Chart | Data | 1.2 | Current and Forward-Looking Indicators |
| Chart | Data | 1.3 | Global Exchange Rate Developments |
| Chart | Data | 1.4 | Global Inflation |
| Chart | Data | 1.5 | Developments in Mature Financial Markets |
| Chart | Data | 1.6 | Emerging Market Financial Conditions |
| Chart | Data | 1.7 | Savings Glut or Investment Drought? |
| Chart | Data | 1.8 | Global Outlook |
| Chart | Data | 1.9 | Fiscal and Monetary Policies in the Major Advanced Countries |
| Chart | Data | 1.10 | Trade Gains and Losses from Commodity Price Movements Relative to 2002 |
| Chart | Data | 1.11 | United States: House Prices and Household Demand |
| Chart | Data | 1.12 | Euro Area: Growth Divergences Since EMU |
| Chart | Data | 1.13 | Europe: Why Has per Capita GDP Stagnated Relative to the United States? |
| Chart | Data | 1.14 | Japan: Indicators of Bank and Corporate Sector Financial Health |
| Chart | Data | 1.15 | Emerging Asia: Growth, Reserves, and Exchange Rate Flexibility |
| Chart | Data | 1.16 | Latin America: An Anatomy of Recent Expansions |
| Chart | Data | 1.17 | Emerging Europe: Is Strong Credit Growth a Cause for Concern? |
| Chart | Data | 1.18 | CIS: Investment, Growth, and Structural Reforms |
| Chart | Data | 1.19 | Sub-Saharan Africa: Maximizing the Benefits of the Demographic Dividend |
| Chart | Data | 1.20 | Middle East: Oil Shocks and Macroeconomic Management |
| Chart | Data | 1.21 | Oil Prices, Futures, and Production |
| Chart | Data | 1.22 | Commercial Oil Inventories, World Refinery Capacity, and Option Prices |
| Chart | Data | 1.23 | Nonenergy Commodities |
| Chart | Data | 1.24 | Semiconductor Market |
| Chart | Data | 1.25 | Current Account Balances |
| Chart | Data | 1.26 | Real Effective Exchange Rates |
| Chart | Data | 1.27 | Net Foreign Assets |
| Chart | Data | 1.28 | United States: Baseline Scenario |
| Chart | Data | 1.29 | Emerging Asia: Baseline Scenario |
| Chart | Data | 1.30 | Japan and Euro Area: Baseline Scenario |
| Chart | Data | 1.31 | Disruptive Adjustment |
| Chart | Data | 1.32 | Greater Exchange Rate Flexibility in Emerging Asia |
| Chart | Data | 1.33 | Incremental Effects of Fiscal Consolidation in the United States |
| Chart | Data | 1.34 | Incremental Effects of Competition-Friendly Policies in Europe and Japan |
| Chart | Data | 1.35 | Scenarios for Global Adjustments |
| Chapter II Charts | |||
| Chart | Data | 2.1 | Global Saving, Investment, and Current Accounts |
| Chart | Data | 2.2 | Saving and Investment in the Industrial Countries |
| Chart | Data | 2.3 | Saving Trends Across Regions |
| Chart | Data | 2.4 | Saving and Investment in the Emerging Market and Oil-Producing Economies |
| Chart | Data | 2.5 | Explaining Saving and Investment Rate Movements Between 1997 and 2004 |
| Chart | Data | 2.6 | Saving: Global Factor |
| Chart | Data | 2.7 | Investment: Global Factor |
| Chart | Data | 2.8 | Current Account: Global Factor |
| Chart | Data | 2.9 | How Would the Current Account React to an Increase in the U.S. Saving Ratio? |
| Chart | Data | 2.10 | How Would Current Account Imbalances React to Changes in the Investment Rate in Asia? |
| Chart | Data | 2.11 | How Would the Current Account React to Changes in Japan's GDP Growth? |
| Chart | Data | 2.12 | How Would the Current Account React to Changes in the U.S. Real Interest Rate? |
| Chapter III Charts | |||
| Chart | Data | 3.1 | Institutions and Income Per Capita: Impact of Raising Regional Institutional Quality |
| Chart | Data | 3.2 | Developing Economies: Recent Developments in Institutional Quality by Region |
| Chart | Data | 3.3 | Evolution of Economic Institutions |
| Chart | Data | 3.4 | Developing Economies: Impact of Economic Transitions on Output Growth, Private Investment, and Productivity Growth |
| Chart | Data | 3.5 | Number of Institutional Transitions by Region |
| Chart | Data | 3.6 | Institutional Transitions by Region |
| Chart | Data | 3.7 | Openness and Economic Transitions |
| Chart | Data | 3.8 | Institutional Quality Relative to the Group of Advanced Countries |
| Chart | Data | 3.9 | Openness, Education, Accountability, and Quality of Economic Institutions |
| Chart | Data | 3.10 | Evolution of Institutions in the European Union and EU Accession Candidates |
| Chart | Data | 3.11 | Aid Dependency Ratios in Sub-Saharan Africa under the Millennium Development Goals |
| Chart | Data | 3.12 | Uganda: Leakage of Schooling Grants |
| Chart | Data | 3.13 | Accountability and Improvements in Corruption |
| Chapter IV Charts | |||
| Chart | Data | 4.1 | Inflation, 1990–2004 |
| Chart | Data | 4.2 | Inflation and Growth Performance, 1985–2004 |
| Chart | Data | 4.3 | Initial Conditions Prior to Adopting Inflation Targeting |