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Saving trends and behaviour in OECD countries
Andrew Dean, Martine Durand, John Fallon and Peter Hoeller
National saving ratios are generally lower now than in the 1960s or 1970s. This paper first reviews developments in national and international saving and investment trends in OECD countries since the 1960s. It then examines sectoral saving trends and considers the links between them. There are seen to be important offsets between government and private sector saving and, within the latter, between the business sector and households, so that national and private saving rates tend to be more stable than their component parts. The paper looks in particular at the reasons lying behind the volatile behaviour of household saving in certain countries in recent years.
The information content of the term structure of interest rates: theory and evidence
Frank Browne and Paolo Manasse
The paper is devoted to an empirical examination of the information content in the term structure of nominal interest rates for future inflation. Tests of the ability of the term structure to forecast future changes in the inflation rate are carried out for six major OECD countries using monthly data. These tests demonstrate that the term structure does have considerable forecasting ability, particularly for rates taken from the short end of the maturity spectrum. However, with one exception, forecasting power tends to fade or disappear completely when the term structure in question is formed using, as the long rate, yields on increasingly distant maturities. This suggests that changes in the nominal term structure using such rates reflect mostly changes in the term structure of ex post real interest rates.
Promoting new industrial activities: a survey of recent arguments and evidence
Gene M. Grossman
Popular support is growing in Europe and North America for an industrial policy that would encourage entry of national firms into new industrial activities. The activities that proponents have in mind are primarily technology-based and skilled-labour intensive. Recent analysis has sought to identify the distinguishing features of modern industries and to evaluate the arguments for government policy support in the light of these features. This paper reviews a number of economically based arguments for an active industrial policy. The arguments rely on the alleged importance to modern industrial competition of economies of scale, of learning-by-doing, of externalities stemming from R&D, production experience, on-the-job training and demand linkages, and of imperfections in capital and product markets due to asymmetries of information. In each instance, the logical merits and empirical relevance of the case for government action are evaluated and an attempt is made to identify an appropriate policy response where it seems warranted.
Measuring potential output in the seven major OECD countries
Raymond Torres et John P. Martin
Over the past decade much greater attention has been paid to setting economic policies in a medium-term framework. In this context, potential output can play a useful role as a summary indicator of aggregate supply, and it does so in the OECD's medium-term work. The aims of this paper are three-fold: i) to explain the method used by the OECD to derive a measure of potential output; ii) to present recent OECD estimates of potential output and capacity utilisation for the seven major OECD countries; and iii) to illustrate some of the possible effects of faster productivity and potential output growth on macroeconomic performance.
A model of housing investment for the major OECD economies
Thomas Egebo, Pete Richardson and Ian Lienert
Housing investment accounts for a small but cyclically volatile share of GNP in the major OECD economies. This paper surveys a range of recent empirical studies of housing and presents a set of estimated equations for the seven major countries in the OECD INTERLINK model. These results suggest that reasonable estimates can be obtained by applying a common stock-adjustment approach to housing, in spite of major variations in institutional factors.
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