World Economic Outlook
Globalization and Inflation
April 2006
World Economic and Financial Surveys
World Economic Outlook
Globalization and Inflation
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
| 189 kb | Assumptions and Conventions | ||
| Preface | |||
| Foreword | |||
| Chapter I. Economic Prospects and Policy Issues | |||
| United States and Canada: Robust Growth Set to Continue, but the U.S. Housing Market Is a Key Uncertainty | |||
| Western Europe: Is the Expansion Finally Gaining Traction? | |||
| Japan and Other Industrial Countries in Asia: Managing Three Major Transitions in Japan | |||
| Emerging Asia: Strong Growth Expected to Continue | |||
| Latin America: Improving the Business Climate Key to Raising Long-Term Growth | |||
| Emerging Europe: Addressing Rising Current Account Deficits | |||
| Commonwealth of Independent States: A Rebalancing of Growth is Needed to Sustain the Expansion | |||
| Africa: Sustaining the Recent Growth Acceleration | |||
| Middle East: Booming Asset Prices Across the Region | |||
| Appendix 1.1 Recent Developments in Commodity Markets | |||
| Appendix 1.2 The Global Implications of an Avian Flu Pandemic | |||
| References | |||
| Chapter II. Oil Prices and Global Imbalances | |||
| How Does the Current Oil Price Shock Compare with Previous Episodes? | |||
| How Will the Current Oil Price Shock Affect Global Imbalances? | |||
| Conclusions | |||
| Appendix 2.1 Oil Prices and Global Imbalances: Methodology, Data, and Further Results | |||
| References | |||
| Chapter III. How Has Globalization Affected Inflation? | |||
| Recent Inflation Developments | |||
| Understanding Globalization and Inflation: A Broad Framework | |||
| Globalization and Inflation: An Aggregate Perspective | |||
| A Sectoral Perspective on Globalization and Prices | |||
| A Cost Perspective on the Moderation in Sectoral Producer Prices | |||
| Summary and Policy Conclusions | |||
| Appendix 3.1 Sample Composition, Data Sources, and Methods | |||
| Appendix 3.2 A Sectoral Perspective on Globalization and Inflation | |||
| References | |||
| Chapter IV. Awash With Cash: Why Are Corporate Savings So High? | |||
| What Has Been Driving the Increase in Corporate Excess Saving? | |||
| Are Current Trends in Corporate Excess Saving Sustainable? | |||
| Conclusions | |||
| Appendix 4.1. Econometric Methodology | |||
| References | |||
| 61 kb | Annex: IMF Executive Board Discussion of the Outlook, March 2006 | ||
| Statistical Appendix | |||
| 361 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) | |||
| 68 kb | World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics | ||
| Chapter I Boxes | |||
| Chart | Data | 1.1 | Long-Term Interest Rates from a Historical Perspective |
| Chart Chart |
Data Data |
1.2 | The Impact of Recent Housing Market Adjustments in Industrial Countries |
| 1.3 | How Accurate Are the Forecasts in the World Economic Outlook? | ||
| Chart Chart |
Data Data |
1.4 | How Much Progress Has Been Made in Addressing Global Imbalances? |
| 1.5 | The Doha Round After The Hong Kong SAR Meetings | ||
| Chart | Data | 1.6 | China’s GDP Revision: What Does It Mean for China and The Global Economy? |
| 1.7 | The Spanish Flu of 1918–19 | ||
| Chapter II Boxes | |||
| Chart Chart |
Data Data |
2.1 | How Rapidly Are Oil Exporters Spending Their Revenue Gains? |
| 2.2 | Recycling Petrodollars in the 1970s | ||
| 2.3 | The Impact of Petrodollars on U.S. and Emerging Market Bond Yields | ||
| Chapter III Boxes | |||
| Chart | Data | 3.1 | Globalization and Inflation in Emerging Markets |
| Chart | Data | 3.2 | Globalization and Low Inflation in a Historical Perspective |
| Chart | Data | 3.3 | Exchange Rate Pass-Through to Import Prices |
| Chapter IV Boxes | |||
| Chart Chart |
Data Data |
4.1 | Drawing the Line Between Personal and Corporate Savings |
| Chart Chart |
Data Data |
4.2 | Trends in the Financial Sector’s Profits and Savings |
| 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 | 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 | Nonenergy Commodity Prices | ||
| 2.1 | Increase in Fuel Exporters’ Net Oil Exports | ||
| 2.2 | Change in Net Oil Exports, 2002–05 | ||
| 2.3 | Petroleum Reserves | ||
| 2.4 | Composition of Merchandise Imports | ||
| 2.5 | Impact of Oil Price Shock: Greater Spending by Fuel Exporters | ||
| 2.6 | Impact of Oil Price Shock: Delayed Pass-Through to Core Inflation | ||
| 3.1 | Estimates of Output-Inflation Sensitivity and Inflation Persistence in Advanced Economies | ||
| 3.2 | The Cumulative Impact of a 1 Percent Decrease in Real Import Prices on Inflation | ||
| 3.3 | Impact of Trade Openness on Relative Producer Price Inflation | ||
| 3.4 | Producer Price Inflation by Cost Components | ||
| 3.5 | Impact of Trade Openness on Productivity, Labor Compensation, and Unit Labor Costs | ||
| 3.6 | Inflation in Advanced Economies: SUR Estimates | ||
| 3.7 | Classification of Sectors by Technological and Skill Intensity | ||
| 3.8 | Impact of Changes in Import Prices on Relative Producer Price Inflation | ||
| 3.9 | Impact of Trade Openness on Cost Components | ||
| 4.1 | Nonfinancial Corporate Sector: Change in Selected Variables | ||
| 4.2 | Group of Seven (G-7) Countries: Cash Accumulation by Size of Firm’s Sales | ||
| 4.3 | Defined Benefits Corporate Pension Plans: Assets Over Liabilities | ||
| 4.4 | Weighted Average, Median, and 90th Percentile of Selected Series, by Change in Cash to Total Assets Quartile, 2001–04 | ||
| 4.5 | Regression Results: Dependent Variable—Change in Cash and Short-Term Investments | ||
| Chapter I Charts | |||
| Chart | Data | 1.1 | Prospects for World GDP Growth |
| Chart | Data | 1.2 | Global Indicators |
| Chart | Data | 1.3 | Current and Forward-Looking Indicators |
| Chart | Data | 1.4 | Developments in Mature Financial Markets |
| Chart | Data | 1.5 | Emerging Market Financial Conditions |
| Chart | Data | 1.6 | Global Exchange Rate Developments |
| Chart | Data | 1.7 | Global Inflation |
| Chart | Data | 1.8 | Global Outlook |
| Chart | Data | 1.9 | Fiscal and Monetary Policies in the Major Advanced Economies |
| Chart | Data | 1.10 | How Will Global Imbalances Adjust? |
| Chart | Data | 1.11 | United States: The Housing Market and Growth |
| Chart | Data | 1.12 | Western Europe: Social Policy Indicators and Outcomes |
| Chart | Data | 1.13 | Japan: Reversing the Relative Decline in per Capita GDP Growth |
| Chart | Data | 1.14 | Emerging Asia: Understanding Recent Developments in the Current Account |
| Chart | Data | 1.15 | Latin America: Public Debt Ratios and Investment |
| Chart | Data | 1.16 | Emerging Europe: Current Account Deficits Remain High |
| Chart | Data | 1.17 | Commonwealth of Independent States: Unbalanced Growth Raises Concerns About the Outlook |
| Chart | Data | 1.18 | Sub-Saharan Africa: Growth, Investment and Economic Transitions |
| Chart | Data | 1.19 | Middle East: Surging Asset Markets |
| Chart | Data | 1.20 | Crude Oil Prices, Futures, and Petroleum Product Prices |
| Chart | Data | 1.21 | World Refinery Capacity, Spare Capacity and Production |
| Chart | Data | 1.22 | Commercial Oil Inventories, Spot and Future Prices |
| Chart | Data | 1.23 | Energy Prices, Taxes, and Fuel Subsidies |
| Chart | Data | 1.24 | Nonenergy Commodities |
| Chart | Data | 1.25 | Semiconductor Market |
| Chapter II Charts | |||
| Chart | Data | 2.1 | Current Account Balances and Net Foreign Asset Positions |
| Chart | Data | 2.2 | Real Oil Prices and Net Oil Exports |
| Chart | Data | 2.3 | Fuel Exporters’ Cumulative Current Account Balances and Capital Flows |
| Chart | Data | 2.4 | Fuel Exporters’ Cumulative Current Account Balances and Identified Asset Purchases |
| Chart | Data | 2.5 | Current Account and Oil Trade Balances |
| Chart | Data | 2.6 | Impact of Oil Price Shocks on External Imbalances, 1972–2004 |
| Chart Chart |
Data | 2.7 | Adjustment to Oil Price Shocks, 1979:Q2–2003:Q4 |
| Chart Chart |
Data | 2.8 | Additional Results: Adjustment to Oil Price Shocks, 1979:Q2–2003:Q4 |
| Chapter III Charts | |||
| Chart | Data | 3.1 | Inflation |
| Chart | Data | 3.2 | Inflation Volatility |
| Chart | Data | 3.3 | Prices of Goods and Services |
| Chart | Data | 3.4 | Trade and Financial Openness |
| Chart | Data | 3.5 | Inflation over the Business Cycle, 1961–2003 |
| Chart | Data | 3.6 | Selected Structural Indicators |
| Chart | Data | 3.7 | Import Prices |
| Chart | Data | 3.8 | The Impact of Import Prices on CPI Inflation |
| Chart | Data | 3.9 | Inflation in Manufacturing and Business Services in Selected Industrial Countries |
| Chart | Data | 3.10 | Relative Producer Price Inflation by Technological and Skill Intensity |
| Chart | Data | 3.11 | Producer Price Inflation and Openness |
| Chart | Data | 3.12 | Contributions to Declines in Relative Producer Prices |
| Chart | Data | 3.13 | Producer Price Inflation by Cost Components |
| Chapter IV Charts | |||
| Chart | Data | 4.1 | Group of Seven (G-7), Excluding Germany: Gross Saving, Capital Spending, and Net Lending/Borrowing |
| Chart | Data | 4.2 | Nonfinancial Corporate Sector: Gross Saving, Capital Spending, and Net Lending/Borrowing |
| Chart | Data | 4.3 | Nonfinancial Corporate Sector: Gross Operating Surplus and Profits |
| Chart | Data | 4.4 | Nonfinancial Corporate Sector: Financial Accounts, Selected Variables |
| Chart | Data | 4.5 | Financial Transactions: Nonfinancial Corporate Sector of the G-7 Countries |
| Chart | Data | 4.6 | Cash Accumulation in the G-7 Countries by Industry |
| Chart | Data | 4.7 | Sales Volatility and Intangible Assets in the G-7 Countries |
| Chart | Data | 4.8 | Nonfinancial Corporate Sector Debt |