Russian
Global growth is in low gear, and the drivers of activity are
changing. These dynamics raise new policy challenges. Advanced
economies are growing again but must continue financial sector
repair, pursue fiscal consolidation, and spur job growth. Emerging
market economies face the dual challenges of slowing growth and
tighter global financial conditions. This issue of the World
Economic Outlook examines the potential spillovers from these
transitions and the appropriate policy responses. Chapter 3 explores
how output comovements are influenced by policy and financial shocks,
growth surprises, and other linkages. Chapter 4 assesses why certain
emerging market economies were able to avoid the classical
boom-and-bust cycle in the face of volatile capital flows during the
global financial crisis.
Contents
Chapter 1:
Recent Developments and Prospects
The Demand and Activity
Perspective |
The External Sector
Perspective |
Downside Risks |
Policies |
Special Feature: Commodity
Prices and Forecasts |
References |
Boxes |
1.1 |
Credit Supply
and Economic Growth |
1.2 |
Is China’s
Spending Pattern Shifting (away from
Commodities)? |
1.3 |
Anchoring
Inflation Expectations When Inflation Is
Undershooting |
1.4 |
Exchange Rate
Regimes and Crisis Susceptibility in
Emerging Markets |
Tables |
1.1 |
Overview of the
World Economic Outlook Projections |
1.SF.1 |
Root-Mean-Squared Errors across Forecast
Horizons h (Relative to the Random Walk
Model) |
1.3.1 |
Consensus
Consumer Price Index Inflation Expectations
|
Figures |
Chart |
Data |
1.1 |
Global
Activity Indicators |
Chart |
Data |
1.2 |
GDP Growth
Forecasts |
Chart |
Data |
1.3 |
Monetary
Conditions in Advanced Economies
|
Chart |
Data |
1.4 |
Fiscal
Policies |
Chart |
Data |
1.5 |
Global
Inflation |
Chart |
Data |
1.6 |
Capacity,
Unemployment, and Output Trend |
Chart |
|
1.7 |
Overheating
Indicators for the Group of Twenty Economies
|
Chart |
Data |
1.8 |
Financial
Market Conditions in Advanced Economies
|
Chart |
Data |
1.9 |
Financial
Conditions and Capital Flows in Emerging
Market Economies |
Chart |
Data |
1.10 |
Monetary
Policies and Credit in Emerging Market
Economies |
Chart |
Data |
1.11 |
Exchange
Rates and Reserves |
Chart |
Data |
1.12 |
External
Sector |
Chart |
Data |
1.13 |
Risks to the
Global Outlook |
Chart |
Data |
1.14 |
Recession
and Deflation Risks |
Chart |
Data |
1.15 |
Slower
Growth in Emerging Market Economies and a
Faster Recovery in the United States
|
Chart |
Data |
1.SF.1 |
Commodity
Market Developments |
Chart |
Data |
1.SF.2 |
Brent
Forecast Errors and Futures |
Chart |
Data |
1.SF.3 |
Vector
Autoregression and Combination Forecasts
|
Chart |
Data |
1.SF.4 |
Rolling
Root-Mean-Squared Errors: Recursive
Estimation |
Chart |
Data |
1.1.1 |
Cumulative
Responses of GDP to a 10 Percentage Point
Tightening of Lending Standards |
Chart |
Data |
1.1.2 |
Credit
Supply Shocks |
Chart |
Data |
1.1.3 |
Contribution
of Credit Supply Shocks to GDP |
Chart |
Data |
1.2.1 |
China: Real
GDP Growth and Commodity Prices |
Chart |
Data |
1.2.2 |
Growth Rate
of Global Commodity Consumption |
Chart |
Data |
1.2.3 |
Actual and
Predicted Per Capita Commodity Consumption
|
Chart |
Data |
1.2.4 |
Spending
Patterns |
Chart |
Data |
1.3.1 |
Inflation
Expectations in Euro Area, United States,
Japan, and Norway |
Chart |
Data |
1.4.1 |
Distribution
of Exchange Rate Regimes in Emerging
Markets, 1980–2011 |
Chart |
Data |
1.4.2 |
Predicted
Crisis Probability in Emerging Markets,
1980–2011 |
Chart |
Data |
1.4.3 |
Probability
of Banking or Currency Crisis |
Chapter 2:
Country and Regional Perspectives
The United States and
Canada: Firming Momentum |
Europe |
Asia: Steady Recovery |
Latin America and the
Caribbean: Subdued Growth |
Commonwealth of Independent
States: Subdued Prospects |
The Middle East and North
Africa: Turning the Corner? |
Sub-Saharan Africa:
Accelerating Growth |
Spillover Feature: Should
Advanced Economies Worry about Growth Shocks
in Emerging Market Economies? |
References |
Tables |
2.1 |
Selected Advanced Economies: Real GDP,
Consumer Prices, Current Account Balance,
and Unemployment |
2.2 |
Selected European Economies:
Real GDP, Consumer Prices, Current Account
Balance, and Unemployment |
2.3 |
Selected Asian Economies: Real GDP, Consumer
Prices, Current Account Balance, and
Unemployment |
2.4 |
Selected Western Hemisphere Economies: Real
GDP, Consumer Prices, Current Account
Balance, and Unemployment |
2.5 |
Commonwealth of Independent States: Real
GDP, Consumer Prices, Current Account
Balance, and Unemployment |
2.6 |
Selected Middle East and North African
Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment
|
2.7 |
Selected Sub-Saharan African Economies: Real
GDP, Consumer Prices, Current Account
Balance, and Unemployment |
2.SF.1 |
Exports to Emerging Market Economies, 1995
versus 28 |
Figures |
Chart |
Data |
2.1 |
2014 GDP
Growth Forecasts and the Effects of a
Plausible Downside Scenario |
Chart |
Data |
2.2 |
United
States and Canada: Recovery Firming Up
|
Chart |
Data |
2.3 |
Advanced
Europe: From Recession to Recovery
|
Chart |
Data |
2.4 |
Emerging and
Developing Europe: Recovery Strengthening,
but with Vulnerabilities |
Chart |
Data |
2.5 |
Asia: Steady
Recovery |
Chart |
Data |
2.6 |
Latin
America and the Caribbean: Subdued Growth
|
Chart |
Data |
2.7 |
Commonwealth
of Independent States: Subdued Prospects
|
Chart |
Data |
2.8 |
Middle East,
North Africa, Afghanistan, and Pakistan:
Turning a Corner? |
Chart |
Data |
2.9 |
Sub-Saharan
Africa: Accelerating Growth |
Chart |
Data |
2.SF.1 |
Real Trade
Linkages between Advanced Economies and
Emerging Market Economies |
Chart |
Data |
2.SF.2 |
Financial
Exposure of Advanced Economies to Emerging
Market Economies |
Chart |
Data |
2.SF.3 |
Event
Studies around Downturn Episodes in Emerging
Market Economies |
Chart |
Data |
2.SF.4 |
Peak Effect
of a Growth Shock to Emerging Market
Economies on Advanced Economies' Output
Growth |
Chart |
Data |
2.SF.5 |
Model
Simulations of Potential Growth Spillover
Effects from Emerging Market Economies on
Advanced Economies |
Chapter 3:
Perspectives on Global Real Interest Rates
This chapter analyzes the causes of worldwide
decreases in real interest rates since the
1980s.
Stylized Facts: Measuring
Real Rates and the Cost of Capital |
Determinants of Real Rates:
A Saving-Investment Framework |
Which Factors Contributed to
the Decline in Real Interest Rates? |
Should We Expect a Large
Reversal in Real Rates? |
Summary and Policy
Conclusions |
References |
Appendices |
3.1 |
Model-Based Inflation and Dividend Growth
Expectations |
3.2 |
Investment Profitability |
3.3 |
Fiscal Indicator |
3.3 |
The Effect of Financial Crises on Investment
and Saving |
3.5 |
Sensitivity of Saving and Investment to Real
Rates |
3.6 |
Saving and Growth with Consumption Habit
|
3.7 |
Sample of Countries Used in Tables and
Figures |
Box |
3.1 |
Saving and Economic Growth |
Figures |
Chart |
Data |
3.1 |
Ten-Year
Interest Rate on Government Bonds and
Inflation |
Chart |
Data |
3.2 |
Real
Interest Rate Comparison |
Chart |
Data |
3.3 |
Real
Interest Rates, Real Returns on Equity, and
Cost of Capital |
Chart |
Data |
3.4 |
Common
Factors in Real Interest Rates |
Chart |
Data |
3.5 |
Real
Interest Rate and Shifts in Demand for and
Supply of Funds |
Chart |
Data |
3.6 |
Investment-to-GDP Ratios |
Chart |
Data |
3.7 |
Investment
Shifts in Advanced Economies |
Chart |
Data |
3.8 |
Saving
Shifts in Emerging Markets |
Chart |
Data |
3.9 |
Effect of
Fiscal Policy on Real Interest Rates
|
Chart |
Data |
3.10 |
Effect of
U.S. Monetary Policy Shocks on Real Interest
Rates |
Chart |
Data |
3.11 |
Real
Long-Term Interest Rates and Real Returns on
Equity |
Chart |
Data |
3.12 |
Portfolio
Shifts and Relative Demand for Bonds versus
Equity |
Chart |
Data |
3.13 |
Portfolio
Shifts and Relative Riskiness of Bonds
versus Equity, 1980–2013 |
Chart |
Data |
3.14 |
Effect of
Financial Crises on Saving- and
Investment-to-GDP Ratios |
Chart |
Data |
3.15 |
Implications
of Lower Real Interest Rates for Debt
Sustainability |
Chart |
Data |
3.16 |
Investment
Shifts in Advanced Economies |
Chart |
Data |
3.17 |
Global
Long-Term Real Interest Rates |
Chart |
Data |
3.18 |
Convergence
of Real Interest Rates in the Euro Area
|
Chart |
Data |
3.1.1 |
Saving Rate
and Accelerations (Decelerations) in GDP
|
Chart |
Data |
3.1.2 |
Total
Saving: Actual versus Conditional Forecasts
|
Chapter
4: On the Receiving End? External Conditions and
Emerging Market Growth Before, During, and After the
Global Financial Crisis
The chapter examines factors behind the
fluctuations in emerging market economies'
growth, including the role of China.
Effects of External Factors
on Emerging Market Growth |
Global Chain or Global
China? Quantifying China’s Impact |
Growth Effects: The Long and
the Short of It |
Shifting Gears: Have
Emerging Markets’ Growth Dynamics Changed
since the Global Financial Crisis? |
Policy Implications and
Conclusions |
References |
Appendices |
4.1 |
Data Definitions, Sources, and Descriptions
|
4.2 |
Estimation Approach and Robustness Checks |
Box |
4.1 |
The Impact of External Conditions on
Medium-Term Growth in Emerging Market
Economies |
Tables |
4.1 |
Impulse Responses to Shocks within the
External Block: Baseline Model |
4.2 |
Impulse Responses to Shocks within the
External Block: Modified Baseline Model with
China Real GDP Growth |
4.3 |
Share of Output Variance Due to External
Factors |
4.4 |
Data Sources |
4.5 |
Sample of Emerging Market Economies and
International Organization for
Standardization Country Codes |
4.6 |
Correlations of Domestic Real GDP Growth
with Key Variables, 1998–2013 |
4.1.1 |
Growth Regressions for Emerging Markets,
1997–2011 |
4.1.2 |
Growth Regressions for Emerging Markets:
Brazil, China, India, Russia, and South
Africa versus Other Emerging Market Partner
Growth, 1997–2011 |
4.1.3 |
Growth Regressions for Emerging Markets
|
Figures |
Chart |
Data |
4.1 |
Growth
Developments in Advanced and Emerging Market
and Developing Economies |
Chart |
Data |
4.2 |
Average
Country Rankings, 2000–12 |
Chart |
Data |
4.3 |
Impulse
Responses of Domestic Real GDP Growth to
External Demand Shocks |
Chart |
Data |
4.4 |
Impulse
Responses to External Financing Shock
|
Chart |
Data |
4.5 |
Impulse
Responses to U.S. High-Yield Spread Shock
|
Chart |
Data |
4.6 |
Correlations
between Growth Responses to External Shocks
and Country-Specific Characteristics
|
Chart |
Data |
4.7 |
Impulse
Responses of Domestic Real GDP Growth to
Terms-of-Trade Growth Shock |
Chart |
Data |
4.8 |
Historical
Decompositions of Real GDP Growth into
Internal and External Factors |
Chart |
Data |
4.9 |
Impulse
Responses to Real GDP Growth Shock in China
|
Chart |
Data |
4.10 |
Historical
Decomposition of Real GDP Growth with China
as an Explicit External Factor |
Chart |
Data |
4.11 |
Emerging
Markets’ Output and Growth Performance after
Global Recessions |
Chart |
Data |
4.12 |
Out-of-Sample Growth Forecasts Conditional
on External Factors, by Country |
Chart |
Data |
4.13 |
Conditional
Forecast and Actual Growth since the Global
Financial Crisis, by Country |
Chart |
Data |
4.14 |
Domestic
Real GDP Growth across Emerging Markets
versus United States and China |
Chart |
Data |
4.15 |
Average
Growth for Regional Groups of Emerging
Market Economies |
Chart |
Data |
4.16 |
Impact of
Prior Choice on Average Impulse Responses
|
Chart |
Data |
4.17 |
Average
Impulse Responses to Shocks from Alternative
U.S. Monetary Policy Variables |
Chart |
Data |
4.18 |
Domestic
Real GDP Growth Response to U.S. Federal
Funds Rate and 10-Year U.S. Treasury Bond
Rate under Alternative Specifications
|
Chart |
Data |
4.19 |
Average
Impulse Responses to Alternative Measures of
U.S. Monetary Policy Shock |
Chart |
Data |
4.20 |
Alternative
Monetary Policy Shocks |
Chart |
Data |
4.21 |
Impulse
Response of Domestic Real GDP Growth to
External Financing Shocks |
Chart |
Data |
4.22 |
Average
Impulse Responses of Domestic Real GDP
Growth to Shocks under Alternative Vector
Autoregression Specifications |
Chart |
Data |
4.23 |
Brazil:
Comparison of Responses under the Baseline
Model with Responses from Model with Sample
Beginning in the First Quarter of 1995
|
Chart |
Data |
4.24 |
Comparison
of Impulse Responses from Panel Vector
Autoregression with Responses from the
Baseline Model |
Chart |
Data |
4.1.1 |
Export
Partner Growth Elasticity |
Chart |
Data |
4.1.2 |
Export
Partner Growth |
Source
|