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The World Economy

Published online by Cambridge University Press:  26 March 2020

R. Barrell ,
R. Anderton ,
N. Vaughan  and
J.W. in't Veld
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Extract

Output growth in the OECD as a whole is likely to be around 2 per cent in 1994, the fourth year in succession when it has been below estimates of potential growth. A number of economies were growing very rapidly in 1990 and 1991, and capacity was stretched in both Germany and Japan. However, subsequent recession has taken these economies to levels of capacity utilisation and unemployment that have resulted in downward pressure being put on wage and price inflation. Inflation generally falls in recessions, and the fall from an OECD average inflation rate of 4.5 per cent in 1990 to around the 2.5 per cent projected for 1994 is not without precedent. However, the prospects for inflation over the next few years look a little better than one might expect in an upturn, and we are forecasting that OECD consumer price inflation will stay around 3 per cent for the next few years.

Type
Articles
Information
National Institute Economic Review , Volume 147 , February 1994 , pp. 30 - 49
Copyright
Copyright © 1994 National Institute of Economic and Social Research

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Footnotes

∗

We would like to thank Andrew Britton, Carry Young, Nigel Pain for helpful comments and Helen Finnegan and Florence Hubert for statistical assistance. The forecast was prepared using our Global Econometric Model, NiGEM. The model is available from the Institute. It was developed by the Institute and is now jointly maintained with the London Business School. The forecast was completed on 8th February.

References

Barrell, R. (forthcoming), ‘Solvency and cycles’, paper to be presented at the Royal Economic Society conference, Exeter, April 1994.Google Scholar
Barrell, R. and In't Veld, J.W. (1991), FEERs and the path to EMU’, National Institute Economic Review, no. 137, August.CrossRefGoogle Scholar
Sefton, J. and In't Veld, J.W. (forthcoming), ‘Consumption and wealth’, paper to be presented at the Royal Economic Society conference, Exeter, April 1994.Google Scholar