World Economic Outlook World Economic and Financial Surveys

World Economic Outlook

Globalization and Inflation

April 2006

Ordering Information

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