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Scenarios for growth in the 1990s, Volume 1
 
Author:Fardoust, Shahrokh; Jian-Ping Zhou; Collection Title:Policy, Research working papers ; no. WPS 834. International economic analysis and prospects
Date Stored:2001/04/26Document Date:1992/01/31
Document Type:Policy Research Working PaperLanguage:English
Major Sector:(Historic)Economic PolicyReport Number:WPS834
Sub Sectors:Macro/Non-TradeSubTopics:Environmental Economics & Policies; Achieving Shared Growth; Economic Theory & Research; Macroeconomic Management; Insurance & Risk Mitigation
Volume No:1  

Summary: Using two macroeconomic models and results, the authors simulate global outcomes in the 1990s under several scenarios, allowing for the impact of: (a) changes in industrial countries' financial and macroeconomic conditions; (b) changes in the international oil market; and (c) changes in developing countries' domestic policies under varying assumptions about the world economy and trading environment. They find that an increase in the growth rate in industrial countries has an unambiguously positive effect on the growth rate in developing countries, but that the magnitude of the impact depends largely on the level of real international interest rates. To an extent, low real interest rates together with continuing financial flows to the developing countries could cushion the negative impact on developing countries of the recession in industrial countries. The authors' simulations reinforce the argument that developing countries' domestic policies play a crucial role in determining long-run growth, inflation, and interest rates. The simulation results show that as world oil prices become more volatile, so do world inflation, interest, and GDP growth rates. The results also show the superiority of non-debt-creating flows to debt-creating, interest-sensitive flows to developing countries, in terms of long-term sustainable growth.

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