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Chapte II. The World Economy

Published online by Cambridge University Press:  26 March 2020

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Extract

The most striking developments in the world economy in 1985 were a long-awaited fall in the US dollar, which lost about 15 per cent of its effective value between the first quarter and the fourth, and a general decline in rates of inflation in the industrial countries, especially in their manufacturing sectors, where producers' prices increased by only about ½ per cent during the second half of the year.

Type
Articles
Information
National Institute Economic Review , Volume 115 , February 1986 , pp. 27 - 43
Copyright
Copyright © 1986 National Institute of Economic and Social Research

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References

(1) John Williamson, The Exchange Rate System, Institute for Inter national Economics, Policy Analyses in International Economics 5, September 1983 (revised June 1985).

(2) Williamson also gives the results of a calculation broadly similar to our own, which produces much the same results for the yen, franc, mark and pound but a much lower one (22 per cent) for the whole of OECD. This is presumably because the trade weights which he uses would be higher than our own GDP weights for Canada in particular and for Japan, and lower for the European countries.

(3) OECD's estimate (in November) of 33 /4 per cent for Finland now looks rather high.

(1) Calculated with weighting based on manufacturing employment in 1980.

(1) Commodity prices in ‘Interlink’, Working Paper, no. 27, November 1985.

(1) Wing T. Woo, ‘Exchange rates and the prices of non-food, non- fuel products’, Brookings Papers on Economic Activity, no. 2, 1984, and Jeffrey Sachs, ‘The dollar and the policy mix’, Brookings Papers on Economic Activity, no. 1, 1985.

(1) It has been reduced by about 0.2 per cent a year over the period 1975-83, by as much as 0.7 per cent in 1984 and, combined no doubt with other revisions, at an annual rate of 0.5 per cent (from 4.8 to 4.3 per cent) in the first half of 1985.