The paper reviews the trade policies applied by developed and by developing countries in the postwar period and examines the effects of these policies on trade between the two groups of countries. Emphasis is given to trade in manufactured goods, which has been the most dynamic element of world trade. The possible interest of developed and developing countries in the liberalisation of their mutual trade is examined, with a view to establishing a policy package for multilateral trade liberalisation. Finally, matters relating to the conduct of a North-South round of trade negotiations are analysed.
Robert W.R. Price and Patrice Muller
Distinguishing "structural" from "cyclical" budget deficits, this paper presents estimates of structural budget deficits in OECD economies and traces them to, primarily, government debt interest payments. It also analyses recent structural budget developments in the context of monetary targeting, pressures on private savings and the growing burden of public debt and debt service, which now places severe limits on the room for fiscal manoeuvre in most OECD countries. It concludes that the budget deficit adjusted for variations both in the cycle and in the rate of inflation appears to be a more informative indicator of the fiscal stance than the budget deficit per se.
John Llewellyn and Haruhito Arai
This article examines the accuracy of real GNP and inflation forecasts made by the OECD Secretariat and various bodies in OECD Member countries. In many years, there is cancelling of errors across countries, so that year-ahead forecasts for OECD real GNP have been within one percentage point or so of the outcome. In a few years, however, the majority of single-country forecasts exhibited errors in the same direction, leading to large forecasting errors for OECD GNP. These occasions generally followed large, and novel, shocks to the OECD economy, whether originating inside or outside the region.
Paul Masson, Adrian Blundell-Wignall, Bixio Barenco and Gerald Holtham
Knowledge of the interaction between macro-economic policy and exchange rates is imperfect and incomplete. Nonetheless, there is a widespread presumption that a country can use an adjustment of its monetary and/or fiscal policy to influence its exchange rate. This paper examines the scope for such usage looking at relevant qualitative, quantitative and historical evidence. Broadly it would appear that, although many other factors are at work, policies can influence exchange rates - at least if the policy adjustments are large enough and in harmony with each other.
Paul Atkinson, Adrian Blundell-Wignall, Manuela Rondoni and Helmut Ziegelschmidt
The recent experience with monetary targeting (particularly in countries where velocity has behaved in an unexpected way), and uncertainties implied by the unpredictable future effects of financial innovations have led to reservations about the reliability of relations between money and income. This paper considers the likely implications of financial innovations on the demand for money and uses econometric techniques to analyse the empirical stability of money demand equations in major OECD countries. There appears to be at least one monetary aggregate for which a stable demand function can be identified in each of the major OECD economies.
Paul Masson, Adrian Blundell-Wignall and Pete Richardson
To what extent do government deficits, by increasing the stock of debt, contribute to higher interest rates? It is sometimes argued that empirical evidence of such a linkage is weak, so that, for example, expansionary fiscal policy in the United States cannot be the cause of high interest rates and of a strong dollar. This paper shows that even in the absence of debt supply effects on interest rates, increased U.S. government spending may be associated with substantial increases in long-term interest rates and in dollar strength, as the result of stronger aggregate demand and unchanged monetary targets.
Economic Policy Reforms: Going for Growth 2008
