Download Macroeconomic Policies Under Globalization

UNCTAD Training Course on
Key Issues on the International Economic
Agenda
Topic 1: Managing Global Integration and
Interdependence
Geneva, 26 February 2007
Macroeconomic Policies Under
Globalization
Presentation by Heiner Flassbeck
Director, Division on Globalization and
Development Strategies
1
Global economic expansion continues
in all the main regions
Growth of world output, 2002 to 2006 (forecast)
9
8
7
6
5
4
3
2
1
0
2002
2003
2004
2005
2006 (f)
World
Developed
countries
Developing
countries
South-East
Europe and
CIS
2
Growth in developing countries is accelerating
since the turn of the century
10
Latin America and the Caribbean M.A.
Latin America and the Caribbean
8
10
8
6
6
4
4
2
2
0
0
-2
-2
1991
1993
1995
1997
1999
2001
10
2003
2005
West Asia M.A.
West Asia
8
1991
4
4
2
2
0
0
-2
-2
1995
1997
1999
2001
2003
2005
1995
1997
1999
2001
2003
2005
Africa M.A.
Africa
8
6
1993
1993
10
6
1991
East and South Asia M.A.
East and South Asia
1991
1993
1995
1997
1999
2001
2003
2005
3
Most commodity prices kept growing in 2005 and
2006, owing to sustained demand of Asian countries
and the US, supply constraints and speculation.
Monthly commodity price indices by commodity group, 1995-2006
(Index numbers, 2000 = 100)
4
Current account balance of developing
countries in per cent of GDP (1980-2005)
5
4
3
2
1
0
-1
-2
-3
1980
1985
1990
1995
2000
2005
5
Argentina: the shock of a devaluation and the
positive response of the economy
Indices: 4th quarter 2001=100
400
300
200
100
0
II
IV I
'01 2002
III
IV
II
I
2003
Employment in manufactures
Exchange rate: pesos per US$
CPI
III
IV
II
I
2004
III
IV
II
I
2005
III
IV
II
I
2006
Nominal wages private sector
Manufacture producer prices
6
Nominal interest rates and inflation, G-7 and
developing countries
25
Per cent
20
15
10
5
0
1990
1995
Nominal interest rate: G-7
Nominal interest rate: developing countries
2000
Inflation: G-7
Inflation: developing countries
2005
7
Nominal interest rates and inflation are at very
low levels in developing countries
Asia
40
40
30
30
Per cent
50
20
20
10
10
0
0
1990
1995
2000
Nominal interest rate
2005
1990
Inflation
1995
Nominal interest rate
2000
2005
Inflation
Sub-Saharan Africa
50
40
Per cent
Per cent
Latin America
50
30
20
10
0
1990
1995
Nominal interest rate
2000
Inflation
2005
8
Nominal interest rate, exchange rate and
inflation in China, 1980-2005
25
10
20
8
7
Per cent
15
6
10
5
4
5
3
NC USD exchange rate
9
2
0
1
-5
0
1980
1985
Nominal interest rate
1990
Inflation
1995
2000
2005
Exchange rate (right scale)
9
A more flexible and pro-active
macroeconomic policy should:
• Put the monetary policy at the service of investment
and growth, not only price stability. This would require
the use of non-monetary instruments to control
inflation;
• Target a real exchange rate consistent with external
competitiveness. This would require the pragmatic use
of “intermediary” exchange rate regimes;
• Additional policy space may also be gained through
temporary capital controls.
10
The need for proactive
development policies
11
The need for a re-orientation of
development policy
• Market-oriented reforms over the past 25 years did
not deliver the expected results;
• More attention has to be given to enhancing
productive capacity and technological change;
• This requires a reform of macroeconomic and
industrial policies;
• At the same time, developing countries have lost
policy autonomy.
12
Good governance is not enough: per capita
income growth, selected groups of economies,
1995–2005 and governance indicators
13
Open-economy industrial policies
support innovative entrepreneurs
• Industrial policies should aim at:
– solving information and coordination problems in the
investment process;
– ensuring that production experience is translated into
productivity gains;
• Complementary trade policies aim to achieve
international competitiveness in increasingly
more sophisticated products;
• This is not an inward-oriented protectionist
approach but an element of strategic trade
integration.
14
There is no “one-size-fits-all” industrial
policy but there are some general
principles
• Innovative private enterprises have lead role;
• Policy support should stimulate innovative investment
and should not be a protectionist defence
mechanism;
• Support should not be open-ended but based on
operational goals, observable monitoring criteria and
specific time horizons;
• Policy measures should result from dialogue between
the government, enterprises and research
institutions.
15
Need for more coherence in
multilateral rules and disciplines
The bottom line is:
• More multilateral disciplines needed in monetary and
financial relations, but more flexibility needed in the
multilateral trading system;
• Multilateral rules and disciplines must be strengthened in
the area of macroeconomic, capital account and exchange
rate policies to avoid ever growing imbalances;
• Anne O. Krueger: …”the absence of a multilateral, nondiscriminatory framework governing international capital
flows (and exchange control mechanisms) is an important
and potentially costly gap in the multilateral economic
system” (Singapore 2006)
16