World Economic Outlook
Housing and the Business Cycle
April 2008
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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 (6 MB pdf file)
Contents
| Assumptions and Conventions | |||
Preface |
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Foreword |
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Executive Summary |
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| Chapter 1. Global Prospects and Policies | |||
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| Full Text | Video Briefing | Boxes | Figures | |||
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Overview of Recent Developments and Prospects: Divergence but Not Decoupling Financial Market Turbulence: Rocky Ride for the Advanced Economies Can Emerging and Developing Economies Decouple? Outlook and Risks for the Global Economy Policy Challenges in a Multipolar World Appendix 1.1. Implications of New PPP Estimates for Measuring Global Growth Appendix 1.2. Commodity Market Developments and Prospects References |
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| Chapter 2. Country and Regional Perspectives | |||
| Full Text | Boxes | Figures | |||
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United States and Canada: How Long Will the Slowdown Last? Western Europe: Can a Sharp Slowdown Be Averted? Advanced Asia: How Resilient Is Growth in Japan to a Global Slowdown? Emerging Asia: Strong Internal Momentum, but Rising Risks from Spillovers Latin America and the Caribbean: Facing a Cold North Wind Emerging Europe: Adjusting to a Rougher External Environment Commonwealth of Independent States: Containing Inflation Remains the Central Challenge Sub-Saharan Africa: Strong Growth Prospects but Risks Remain Middle East: Inflation Is a Growing Concern References |
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| Chapter 3. The Changing Housing Cycle and the Implications for Monetary Policy | |||
| Full Text | Summary | Video | Boxes | Figures | |||
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Developments in Housing Finance The Housing Sector and the Business Cycle Housing Finance and Spillovers from Housing Housing Finance and Housing as a Transmission Channel for Monetary Policy Should Changes in the Housing Cycle Affect the Conduct of Monetary Policy? Conclusions Appendix 3.1. Data and Methodology References |
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| Chapter 4. Climate Change and the Global Economy | |||
| Full Text | Summary | Video | Boxes | Figures | |||
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How Will Climate Change Affect Economies? How Can Countries Best Adapt to Climate Change? How Can Countries Effectively and Efficiently Mitigate Climate Change? Conclusions Appendix 4.1. The G-Cubed Model, Baseline Assumptions, and Other Models in the Climate Change Literature References |
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| Chapter 5. Globalization, Commodity Prices, and Developing Countries | |||
| Full Text | Summary | Video | Boxes | Figures | |||
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Commodity Prices and Patterns of Integration Globalization and Commodity Price Cycles Explaining the Patterns Conclusions Appendix 5.1. Data and Methodology References |
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| Annex: IMF Executive Board Discussion of the Outlook, March 2008 | |||
| Statistical Appendix | |||
| Assumptions | |||
| What's New | |||
| Data and Conventions | |||
| Classification of Countries | |||
| General Features and Composition of Groups in the World Economic Outlook Classification |
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| List of Tables Part A | |||
| Output (Tables A1–A4) | |||
| Inflation (Tables A5–A7) | |||
| Financial Policies (Table A8) | |||
| Foreign Trade (Table A9) | |||
| Current Account Transactions (Tables A10–A12) | |||
| Balance of Payments and External Financing (Tables A13– A15) |
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| Flow of Funds (Table A16) | |||
| Medium–Term Baseline Scenario (Table A17) | |||
| List of Tables Part B | |||
| Output (Tables B1–B2) | |||
| Inflation (Tables B3–B4) | |||
| Financial Policies (Tables B5–B10) | |||
| Foreign Trade (Tables B11–B13) | |||
| Current Account Transactions (Tables B14–B17) | |||
| Balance of Payments and External Financing (Tables B18–B20) | |||
| External Debt and Debt Service (Tables B21–B25) | |||
| Medium-Term Baseline Scenario (Table B26) | |||
| World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics | |||
| Boxes | ||||
| Chart Chart Chart Chart |
Data Data Data Data |
1.1 | Is There a Credit Crunch? | |
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1.2 | Depreciation of the U.S. Dollar: Causes and Consequences | ||
| Chart | 1.3 | Multilateral Consultation on Global Imbalances: Progress Report | ||
| Chart Chart |
Data Data |
1.4 | Dollar Depreciation and Commodity Prices | |
| Chart | Data | 1.5 | Why Hasn't Oil Supply Responded to Higher Prices? | |
| Chart | Data | 1.6 | Oil Price Benchmarks | |
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Data Data |
2.1 | When Does Fiscal Stimulus Work? | |
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Data Data |
2.2 | Petrodollars and Bank Lending to Emerging Markets | |
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Data Data Data Data |
3.1 | Assessing Vulnerabilities to Housing Market Corrections | |
| Chart | Data | 4.1 | Rising Car Ownership in Emerging Economies: Implications for Climate Change | |
| Chart | Data | 4.2 | South Asia: Illustrative Impact of an Abrupt Climate Shock | |
| 4.3 | Macroeconomic Policies for Smoother Adjustment to Abrupt Climate Shocks | |||
| Chart Chart |
Data Data |
4.4 | Catastrophe Insurance and Bonds: New Instruments to Hedge Extreme Weather Risks | |
| 4.5 | Recent Emission-Reduction Policy Initiatives | |||
| 4.6 | Complexities in Designing Domestic Mitigation Policies | |||
| Chart | Data | 5.1 | How Does the Globalization of Trade and Finance Affect Growth? Theory and Evidence | |
| Chart | Data | 5.2 | The Current Commodity Price Boom in Perspective | |
| Tables | ||||
| 1.1 | Overview of the World Economic Outlook Projections | |||
| 1.2 | Shares of Global GDP, 2007 | |||
| 1.3 | Global Oil Demand and Production by Region | |||
| 1.4 | Food, Fuel, and Headline Inflation | |||
| 2.1 | Advanced Economies: Real GDP, Consumer Prices, and Unemployment | |||
| 2.2 | Advanced Economies: Current Account Positions | |||
| 2.3 | Selected Asian Economies: Real GDP, Consumer Prices, and Current Account Balance | |||
| 2.4 | Selected Western Hemisphere Economies: Real GDP, Consumer Prices, and Current Account Balance | |||
| 2.5 | Selected Emerging European Economies: Real GDP, Consumer Prices, and Current Account Balance | |||
| 2.6 | Commonwealth of Independent States (CIS): Real GDP, Consumer Prices, and Current Account Balance | |||
| 2.7 | Selected African Economies: Real GDP, Consumer Prices, and Current Account Balance | |||
| 2.8 | Selected Middle Eastern Economies: Real GDP, Consumer Prices, and Current Account Balance | |||
| 3.1 | Institutional Differences in National Mortgage Markets and the Mortgage Market Index | |||
| 3.2 | Abnormal Contributions to GDP Growth Weakness One Year before Recessions | |||
| 3.3 | Features of House Price Cycles | |||
| 3.4 | Forecast Variance Decomposition: Housing Demand Shocks—Average across Countries | |||
| 3.5 | Optimal Coefficients in the Taylor Rule | |||
| 3.6 | Estimates of the Error-Correction Model of Consumption | |||
| 4.1 | Losses in Real GNP, 2040 | |||
| 4.2 | Baseline Growth Assumptions | |||
| 4.3 | Carbon-Based Emission Coefficients | |||
| 4.4 | Summary of the Baseline Scenario | |||
| 4.5 | Emission Intensities in the Baseline | |||
| 4.6 | Emission Reductions and Consumption Losses Following a Standardized Carbon Price Shock | |||
| 4.7 | Comparison of Climate Policy Models | |||
| 5.1 | Cross–Sectional Regressions: Overall Trade | |||
| 5.2 | Cross-Sectional Regressions: Commodity Trade, Foreign Direct Investment (FDI) | |||
| 5.3 | Panel Regressions: Overall Trade | |||
| 5.4 | Panel Regressions: Commodity Trade, Foreign Direct Investment (FDI) | |||
| 5.5 | Panel Regressions: Institutions and Policies | |||
| Figures | ||||
| 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 | Measures of Monetary Policy and Liquidity | |
| Chart | Data | 1.5 | Developments in Mature Credit Markets | |
| Chart | Data | 1.6 | Mature Financial and Housing Market Indicators | |
| Chart | Data | 1.7 | External Developments in Selected Advanced Economies | |
| Chart | Data | 1.8 | Emerging Economy Financial Conditions | |
| Chart | Data | 1.9 | External Developments in Emerging and Developing Economies | |
| Chart | Data | 1.10 | Growing Global Role of Emerging and Developing Economies | |
| Chart | Data | 1.11 | Global Outlook | |
| Chart | Data | 1.12 | Risks to the Global Outlook | |
| Chart | Data | 1.13 | Measures of the Output Gap and Capacity Pressures | |
| Chart | Data | 1.14 | Current Account Balances and Net Foreign Assets | |
| Chart | Data | 1.15 | Two Scenarios for the Global Economy | |
| Chart | Data | 1.16 | Purchasing-Power-Parity (PPP) Exchange Rate Revisions and Global GrowthPurchasing-Power-Parity (PPP) Exchange Rate Revisions and Global Growth | |
| Chart | Data | 1.17 | Commodity and Petroleum Prices | |
| Chart | Data | 1.18 | World Oil Market Balances | |
| Chart | Data | 1.19 | Energy and Metal Prices and Metal Consumption Growth | |
| Chart | Data | 1.20 | Recent Developments in Major Food Crops | |
| Chart | Data | 1.21 | Macroeconomic Implications of High Commodity Prices | |
| Chart | Data | 2.1 | United States: Housing Cycles in Perspective | |
| Chart | Data | 2.2 | Western Europe: Tightening Lending Standards | |
| Chart | Data | 2.3 | Japan: Will Domestic Demand Be Able to Support Growth? | |
| Chart | Data | 2.4 | Emerging Asia: Trade Patterns and Growth Developments | |
| Chart | Data | 2.5 | Latin America: Long Road to Stronger Performance | |
| Chart | Data | 2.6 | Emerging Europe: Macroeconomic Vulnerabilities on the Rise | |
| Chart | Data | 2.7 | Commonwealth of Independent States (CIS): Inflation Pressures Remain the Central Concern | |
| Chart | Data | 2.8 | Sub-Saharan Africa: Vulnerability of Commodity Exports to Global Demand | |
| Chart | Data | 2.9 | Middle East: Strong Growth, Rising Inflation | |
| Chart | Data | 3.1 | Mortgage Debt and Financial Innovation | |
| Chart Chart |
Data | 3.2 | Correlation of Real House Prices and Real Residential Investment with the Output Gap | |
| Chart | Data | 3.3 | Labor Market Characteristics and the Contribution of Residential Investment to the Business Cycle | |
| Chart | Data | 3.4 | Mortgage Market Index, Consumption and House Price Correlation, and the Long-Run Marginal Propensity to Consume out of Housing Wealth | |
| Chart | Data | 3.5 | Share of Output Variation Explained by Housing Demand Shocks | |
| Chart | Data | 3.6 | Correlation between the Shares of Output and Housing Sector Variation Explained by Housing Demand Shocks | |
| Chart | Data | 3.7 | Correlation between the Share of Output Variation Explained by Housing Demand Shocks and the Mortgage Market Index | |
| Chart | 3.8 | Housing and the Monetary Transmission Mechanism | ||
| Chart | Data | 3.9 | Effect of Monetary Policy Shocks on Output and Housing Sector Variables in the United States | |
| Chart | Data | 3.10 | Elasticity of Real Residential Investment, Real House Prices, and Output to a 100-Basis-Point Increase in Short-Term Interest Rates | |
| Chart | Data | 3.11 | Interest Rate Elasticity of Real Residential Investment, Real House Prices, and Output and the Mortgage Market Index | |
| Chart | Data | 3.12 | Monetary Policy Counterfactuals | |
| Chart | Data | 3.13 | Macroeconomic Model with Housing as Collateral: Responses of Output and Consumption to Shocks for Different Loan-to-Value (LTV) Ratios | |
| Chart | Data | 3.14 | Macroeconomic Model with Housing as Collateral: Response of Nominal Interest Rates to a Positive Housing Demand Shock and a Negative Financial Shock for Various Loan-to-Value (LTV) Ratios | |
| Chart | Data | 4.1 | Carbon Dioxide Energy-Related Emissions | |
| Chart | Data | 4.2 | Emission Forecasts | |
| Chart | Data | 4.3 | Mean GDP Losses at Various Levels of Warming | |
| Chart | Data | 4.4 | Damages from 2.5°C Warming by Region | |
| Chart | Data | 4.5 | Impact of Warming by Region and Sector | |
| Chart | Data | 4.6 | Physical Impact by 2080 | |
| Chart | Data | 4.7 | Variation in Estimates of Damages from Climate Change | |
| Chart | Data | 4.8 | Weather Derivatives and Catastrophe Bonds | |
| Chart | Data | 4.9 | Global Emission Targets and Paths, 1990–2100 | |
| Chart | Data | 4.10 | Uniform Carbon Tax, 2013–40 | |
| Chart | Data | 4.11 | Total Costs of Mitigation, 2013–40 | |
| Chart | Data | 4.12 | Cap-and-Trade System, 2013–40 | |
| Chart | Data | 4.13 | International Transfers under the Cap-and-Trade System | |
| Chart | Data | 4.14 | Cap-and-Trade System for All Regions Based on Share of World Population, 2013–40 | |
| Chart | Data | 4.15 | Global Emissions from Energy Only, 2030 | |
| Chart | Data | 5.1 | Trade in Goods and Services | |
| Chart | Data | 5.2 | Merchandise Exports of Emerging and Developing Economies | |
| Chart | Data | 5.3 | Gross Foreign Capital and Gross Foreign Liabilities | |
| Chart | Data | 5.4 | Commodity Prices | |
| Chart | Data | 5.5 | Values of Exports of Commodities and Manufactures | |
| Chart | Data | 5.6 | Volumes of Exports of Commodities and Manufactures | |
| Chart | Data | 5.7 | Patterns of Regional Trade | |
| Chart | Data | 5.8 | Foreign Direct Investment in Emerging and Developing Economies | |
| Chart | Data | 5.9 | Policy and Institutional Environment | |
| Chart | Data | 5.10 | Commodity Price Booms | |
| Chart | Data | 5.11 | Event Study of the Commodity Terms of Trade, 1970–2007 | |
| Chart | Data | |||
| Chart | Data | 5.12 | Explaining the Increase in Integration from the 1980s to the 2000s | |