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World Economic Outlook

World Economic Outlook
Advancing Structural Reforms
April 2004

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The Impact of NAFTA on Mexican Economy

How Has NAFTA Affected the Mexican Economy? Review and Evidence

Author/Editor: Kose, Ayhan | Meredith, Guy M. | Towe, Christopher M. | Research Department | Western Hemisphere Department

Summary: This paper provides a comprehensive assessment of the impact of NAFTA on growth and business cycles in Mexico. The effect of the agreement in spurring a dramatic increase in trade and financial flows between Mexico and its NAFTA partners, and its impact on Mexican economic growth and business cycle dynamics, are documented with reference both to stylized facts and recent empirical research. The paper concludes by drawing lessons from Mexico's NAFTA experience for policymakers in developing countries. The foremost of these is that in an increasingly globalized trading system, bilateral and regional free trade arrangements should be used to accelerate, rather than postpone, needed structural reform.

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ハイチ(The Economist)


Haiti: After the fall

Apr 22nd 2004 | MIAMI
From The Economist print edition

Is Haiti getting better?

Get article background

THE American-led stabilisation force is more than half way through its 90-day mandate in Haiti, following the fall of President Jean-Bertrand Aristide in February. The UN is due to take over in June. So is Haiti recovering from the pandemonium?

Up to a point. A semblance of order has returned, but many of the rebel leaders who launched the uprising continue to roam the country with their weapons. They had pledged to disarm once Mr Aristide was gone, but many have not. American commanders insist that disarmament is not part of their remit, and limit their operations to securing key installations and helping to sweep the streets of rubbish. Despite early talk of a weapons “buy-back” programme, barely 150 guns have been turned in so far.

Meanwhile, supporters of Mr Aristide complain of a witch-hunt by the new interim government. Amnesty International says at least four of the ex-president's associates have been kidnapped, and other citizens have been attacked and harassed.

And allegations have emerged about the role of the Dominican Republic, Haiti's neighbour, in the uprising. “They didn't give us any guns, but they gave their backing,” says one rebel source. The theory is that Dominican generals wanted a military rival next door to justify their own budget (the Dominican armed forces are one of the largest in the hemisphere on a per capita basis). There are also questions about how much the Americans knew about this collusion. A Pentagon official conceded that a rebel military camp on the Haitian-Dominican border was identified a year before the revolt began. Critics say the Americans could easily have snuffed out the plot by leaning on the Dominican government, but that—although there were some pretty disreputable characters in the rebel ranks—they chose not to.

What about the future? Though American troops will soon be pulling out, Haiti's fortunes will still partly rest on the extent of Washington's largesse. So far, the United States has pledged only $55 million for Haiti, far less than was once anticipated.

The country will need manpower as well as money. Kofi Annan, the UN secretary-general, this week called for a new stabilisation mission, involving some 6,700 troops and over 1,600 international police and experts (the current force contains only 3,600 soldiers, more than half of them Americans; the rest are French, Chileans and Canadians). Reginald Dumas, Mr Annan's envoy to Haiti, says the international community needs to make a 20-year commitment to prevent the country sliding back into violence yet again.

The rebels have their own agenda. They and their allies have already been allowed to fill municipal positions left vacant by fleeing supporters of Mr Aristide's Lavalas Family party. Their next goal could be the reconstitution of the Haitian armed forces, as the Dominicans allegedly intended. Herard Abraham, a retired general and Haiti's new interior minister, is sympathetic. Mr Aristide disbanded the army in 1994, after it had ousted him in 1991; several former army officers were among the rebel leaders. Some of them are now demanding a decade's worth of back pay.

Human-rights activists fear a new Haitian army would guarantee the impunity of criminals. The Americans argue that Haiti doesn't need an army. But if they and the rest of the world look away, as they have done in the past, the rebels may get their way again.

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What I should read


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Remarks by Governor Ben S. Bernanke

The economic outlook and monetary policy

At the Bond Market Association Annual Meeting, New York, New York
Presented at the World Economy Laboratory Spring Conference, Washington, D.C. April 23, 2004

April 22, 2004

I am pleased to have the opportunity to address the members of the Bond Market Association. I know that you have a keen interest in the likely future course of the economy and of monetary policy, so I will use my time today to comment on both topics. I will begin with the economic outlook, discussing prospects for economic growth, the labor market, and inflation, and conclude by drawing some implications for monetary policy. As always, my views are my responsibility alone and are not to be ascribed to my colleagues in the Federal Reserve System. ...

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Stephen Roach、中国経済に自信

Global: The Wise Men of China

Stephen Roach (from Shanghai)

Once again, the world is hunkering down for the worst from China. Fears of a hard landing abound as the authorities attempt to cope with a seemingly explosive boom. In my view, those fears are overblown. Since the Asian crisis of 1997-98, China’s macro managers have defied the naysayers repeatedly. I suspect that a similar outcome is in the offing, as China once again succeeds in avoiding the pitfalls of the dreaded boom-bust syndrome.

Back in China for the second time in a month, I took advantage of the occasion to spend time with some old friends — seasoned veterans of the nation’s remarkable journey over the past several decades. They were on the inside of many of China’s more difficult moments over that period — from the Cultural Revolution and Tiananmen Square to the Asian crisis and SARS. They had seen it all. But several of them had also been on the firing line in 1993-94 — the last time an overheated Chinese economy flirted with the boom-bust cycle that most believe is once again at hand. In drawing inferences about what now lies ahead for the Chinese economy, they urged me to consider both the differences and similarities between the current situation and the circumstances of a decade ago. A synopsis of our discussions follows.

There are three key similarities between these two cyclical inflection points: First and foremost, there were major investment booms on both occasions. Annualized growth in investment in fixed assets peaked out at around 60% in 1993; in the first two months of 2004, the rate exceeded 50%. Moreover, in one important respect, the consequences of a Chinese investment boom are more serious today than was the case a decade ago: The investment share of GDP hit a record 43% in 2003, well in excess of the 34% share in 1994. Second, there was a leadership change in China on both occasions; Jiang Zemin became president in 1993, and the reins of power were passed to Hu Jintao in 2003. China has a long history of interplay between political and economic cycles, often using economic vigor as a foil to mask any frictions in a leadership change. Just as policies were predisposed toward accommodating the political cycle a decade ago, a similar bias could well be in evidence today. Third, liquidity creation went to excess in both periods, as measured by growth in the money supply as well as bank lending.

Notwithstanding these similarities, I was struck far more by the differences as seen through the eyes of China’s wise men. First, the overheating of a decade ago involved excesses of both investment and private consumption; today’s overheating is almost exclusively an investment boom — the consumption share of Chinese GDP fell to a record low of 54% in 2003. Second, while the investment boom of a decade ago was entirely state sponsored, this time it reflects the excesses of both public and private spending. Senior officials are inclined to believe that the current impetus is far more private — driven both by domestic enterprises as well as by foreign direct investment. To the extent that market-driven private spending is tied more explicitly to perceived returns than is the case for public investment, today’s excesses should be more benign. Third, while inflation picked up in both periods, the 22% annualized surge in 1994 dwarfs the 3% pace currently evident. Fourth, the fiscal situation was far more worrisome a decade ago than is the case today; back then, government revenues were basically stagnant, whereas today they are expanding at close to a 33% annual rate. Fifth, there has been a significant change in the culture of Chinese bank lending; ten years ago, there was literally no discipline to credit allocation, whereas today the focus on banking reform and the related cleanup of nonperforming bank loans has elevated the importance of credit quality considerations.

But the biggest difference of all between the China of today and the nation ten years ago is its character. The Chinese economy of 2004 is bigger, stronger, and far more experienced than it was in 1993-94 — far more capable of withstanding the stresses and strains of macro imbalances. China’s share of world GDP has basically doubled — rising from 2.1% in 1994 to 3.9% in 2003 (at market exchange rates). Its per capita income has pierced the US$1,000 threshold, long viewed as a critical milestone on the road to economic development. China’s exports have nearly quadrupled from US$120 billion in 1994 to $438 billion in 2003. Nor is China’s trade a one-way street. Its imports surged 40% in 2003, and China’s trade balance tipped into deficit in early 2004; its resulting demand for foreign-made components and products has turned China into an engine of growth for its major trading partners — not just in Asia (i.e., Japan, Korea, and Taiwan) but also in the United States and Europe (i.e., Germany). And China’s reservoir of official foreign exchange reserves has ballooned from $108 billion in early 1997 (the earliest data point) to $440 billion in March 2004.

But the wise men of China also urged me to give its macro managers credit for experience — that intangible characteristic of policy judgment that comes from coping with a history of macro management challenges. China is not your basic inexperienced, uninitiated developing country that suddenly finds itself on the Big Stage for the first time. Time and again, but especially over the past seven years, China has weathered tough learning experiences. It distinguished itself during the Asian crisis of 1997-98 — not only by resisting the pan-regional contagion of currency devaluation but by keeping the growth momentum of its real economy largely intact. A few years later, when the world entered a synchronous recession in 2001, an externally dependent Chinese economy barely flinched. “Proactive” fiscal policy measures were adroitly deployed to cushion the downward pressures from external demand.

I remain confident that China will pull it off again — bringing its large and rapidly growing economy in for a soft landing over the next couple of years. Unlike their counterparts in most major economies of the world, Chinese policy makers are frank and transparent when they see a problem of macro management that must be addressed. Notwithstanding the intense debate over China raging in many quarters of the world, I can assure you that inside of China, there is no such debate. From the Premier, to the State Council (the Chinese cabinet), to the central bank, there is unanimous agreement that forceful action needs to be taken to bring China’s lending-driven, investment-led, overheated economy under control. The People’s Bank of China has, in fact, tightened monetary three times in the past seven months in an effort to do just that. Like all central banks, it is mindful of the lags and will probably pause to assess whether the medicine is working. But if there is no slowdown in the months immediately ahead, I have little doubt that further tightening measures will be implemented. And I am equally confident that Chinese policy makers will keep acting until the economy flinches (see my March 24 Global Economic Forum dispatch, “China — Determined to Slow”).

Ironically, the legacy of a centrally controlled economy can have its benefits. This is one of those rare instances. The Chinese government has put out a marker with its downwardly revised 7% GDP growth target for 2004. With the official data revealing a 9.7% annualized surge in the first quarter of the year, the task becomes all the more formidable. But Chinese policy makers are well-practiced at the art of achieving targets and avoiding economic instability. As the economy evolves into more of a market-based system, it may well get tougher for the authorities to steer the big ship with great precision. But that’s not the case just yet. While China has taken enormous strides on the road to reform and transition, the government is still very much in charge.

The wise men of China have no doubt that the current leadership has learned the lessons of macro management well. They lived through China’s soft landing a decade ago, and are convinced that the authorities are perfectly capable of pulling it off again. I couldn’t agree more. If my personal experience over the past several years tells me one thing, it’s not to underestimate the capacity of modern China to rise to the occasion. My bet is on another soft landing later this year and well into 2005.

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Brazil: Growth or Eruption?

Gray Newman and Claudia Castro (New York)

The twin jobs and inflation reports from the US have raised the specter once again that the Fed will act sooner rather than later, and could produce a bond debacle reminiscent of 1994 (see Richard Berner’s “2004: Déjà vu All Over Again?” Global Economic Forum, April 12, 2004). While many argue that 2004 is different — and we believe that it is in many ways — there are enough similarities between 1994 and 2004 to cause emerging market investors to pause (see also Steve Roach’s “Shades of 1994,” Global Economic Forum, April 12, 2004). And nowhere in Latin America do these concerns appear to be greater than in Brazil.

Brazil’s vulnerability is easy to understand. After last year’s downturn in the economy — private consumption posted its most severe contraction in more than a decade — policy makers are under fire to ensure that growth is back, long before the closely watched municipal elections slated for October. While the new administration might try to stay the course with prudent fiscal and monetary policy even if good growth does not re-emerge, there is significant risk that investors will not stay around to find out. And given Brazil’s large — and largely floating — debt stock, the absence of good growth could trigger a sudden reversal of risk appetite and reignite fears of 2002’s vicious cycle, regardless of the pace of the Fed’s tightening.

The stakes have rarely been higher in Brazil. Without good growth in Brazil in 2004, the risk that political pressure forces a change in policy — or simply prompts investors to expect a policy shift — is considerable. Add to that the market jitters seen around the globe as investors try to prepare for the Fed’s exit strategy from the past two and a half years of unusual monetary accommodation, and it is easy to see why concerns over Brazil have risen. With that in mind, we have decided to review the latest indicators of activity in Brazil.

We conclude that Brazil’s economy is still on track for strong growth in 2004 and we expect growth this year to exceed the market consensus near 3.5%. However, the data points from the first months of the year are hardly uniform. Indeed, we are still puzzled by the newly revised industrial production series, which appears to be out of synch with other indicators suggesting a much stronger 2004.

With an uneven recovery, it is not hard to pick and chose from the plethora of data releases in Brazil to support a more negative view. But in forecasting, as in driving a car, focusing on the rearview mirror can be hazardous. The best news coming from Brazil is that the drivers of activity — which give us a glimpse of what is to come — remain positive.

Slugishness Reemerges

Our biggest disappointment comes from the newly revised industrial production series that suggests output is slumping. While February industrial production rose 1.8% compared with the previous year, it appears to have fallen from January’s level of output. Even after attempting to correct for the shorter month and the fact that the carnival holidays fell within February this year, the series suggests that the downturn actually began late in the fourth quarter of 2003. The previous series had suggested a pause in December 2003 and January 2004, but the new series — rebased with new industries — is indicative of a downturn. Interestingly enough, the one piece of good news in the new, rebased series is that semi- and non-durable consumer goods production is up — consistent with the improvement that we are seeing in retail sales and an encouraging sign that the recovery is broadening.

We are hesitant to read too much into the February data. First, we are still examining the new industrial output series. It appears to be applying seasonal weights from the old series to the new series, which has been rebased with new industries only back to the beginning of 2002. The correct seasonality for the moving carnival holiday is hard to determine. Second, the results appear to be inconsistent with a host of other data series — from hours worked in the manufacturing sector to employment and installed capacity — suggesting something at worst more akin to a pause than a downturn. Finally, given the traditional responsiveness of Brazil’s economy to monetary easing, the present trajectory of rates, and the positive developments in a host of leading indicators, too great a focus on the February industrial output series could lead to “rearview mirror” economics.

Leading good news

We are maintaining our upbeat view on growth in 2004 thanks to our belief that, with inflation largely under control, the authorities can continue to cut interest rates further. The central bank’s modest 25 basis-point cut on April 14 to 16% for the Selic target rate can hardly be characterized as significant monetary stimulus, but it does serve notice that the central bank is interested in prolonged growth rather than a one-off boost that will be quickly aborted as inflation expectations rear their head. We expect the monetary authorities to continue to ease rates to 14% during the course of the year.

In turn, we expect the Brazilian economy to respond to lower interest rates during the current cycle much as it has in the past. During those brief periods in the past decade when real interest rates have fallen below 10%, activity has responded strongly. And with lower interest rates and lower inflation, credit should improve along with gains in real wages. With an improvement in activity, investment and employment should also show signs of a turnaround.

The good news is that real wages are gaining ground for the first time in nearly two years in Brazil. The turnaround — reconfirmed with the release of February data — should not be much of a surprise: It comes as a result of the successful fight on the part of the central bank to rein in inflation and inflation expectations.

On the jobs front, we continue to see an improvement in formal employment. Our focus is on formal employment because much of the job creation during 2003 — job creation was up 5.5%, the strongest in the past ten years — was of questionable origin. There is evidence that the workforce increased last year as workers sought to supplement their real wages, which had been damaged by inflation. An improvement in employment and wage mass brought on by declining average wages is hardly the kind of recovery in jobs to be lauded. The good news, however, is that the most recent data in early 2004 suggest a turnaround in average wages and a continued improvement in formal employment. The most recent data from Brazil’s industrial chamber (CNI) suggest employment rose slightly in February compared with January, as did hours worked. The biggest gains, however, were seen in real wages, up 1.2% from the previous month and up 7.2% compared with the same month from the previous year.

While consumer confidence has been a bit more volatile, business confidence remains upbeat. The most recent survey, conducted by Sao Paulo’s FIESP in March, showed 63% of those surveyed were optimistic about their operations in 2004, virtually unchanged from 65% in February. (There was a slight decline in the proportion of “very confident” responses, to 8% from 12% the previous month).

Meanwhile, credit conditions continue to improve, with consumer credit leading the way. Our Latam banks analyst, Jorge Kuri, sees upside to bank forecasts of 20-25% credit growth in 2004. In meeting after meeting with the principal banking groups in Brazil in mid-April, the message from Jorge remains upbeat on good loan growth. Indeed, there is some anecdotal evidence that corporate lending and activity has begun to gain ground in late March and early April.

For example, signs of strong paper packaging demand in March and in early April bodes well for an upturn in industrial activity and retail sales in the months to come. In March, Brazil paper packaging sales posted a strong recovery, reaching 180,196 tons, a 13% increase year over year. Even adjusting for the carnival holiday (which fell in March last year in contrast with February this year), year-to-date sales were still up 6% year over year. According to our Latam paper and pulp analyst, Andres Perez, the packaging pickup suggests that consumption is gaining ground as the bulk of paper packaging is used in non-durable and semi-durable consumer goods industries.

Bottom line

It’s inevitable with any turnaround — the pace of the recovery is rarely constant. After a strong upturn in industrial activity in the second half of 2003, and an improvement most dramatically seen in interest-rate sensitive durable consumption, Brazil’s upturn is showing signs of consolidation. It is easy to pick one or two months of industrial output data and argue that the recovery is over — or, even more misguided, to ask when the recovery is set to begin. But the good news is that the underlying drivers of a turnaround — real wages, employment and lower interest rates — are all kicking in for the first time in years. While the markets are likely to experience considerable jitters in the months to come as the Fed hike becomes “imminent,” then fades as a risk and then becomes “imminent” again, we believe Brazil’s real economy is likely to surprise in 2004 with better growth than most expect.

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日経4月20日 日銀総裁「量的緩和政策、当面続ける」



 解除条件を満たした後の金融政策については「国民が日銀の政策に安心できるよう、将来的に(政策運営の)新しい枠組みを示したい」との考えを示した。 (21:01)

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Krugman on US Interest Rate (NYT)

April 20, 2004
Questions of Interest

Yes, the republic is in danger," a friend said. "But what's going to happen to interest rates?" O.K., let's take a break from politics.

Over the past two years, interest rates have been very low. Last June the 10-year bond rate hit a 48-year low. Even three weeks ago the rate was still below 4 percent, a level last seen in 1963.

If the economy fully recovers — or even if investors just think it will — interest rates will rise sharply. In its World Economic Outlook report, to be issued tomorrow, the International Monetary Fund urges the Federal Reserve to prepare the economy for higher rates to "avoid financial market disruption both domestically and abroad."

But how far will rates rise? Let's not get into Greenspan Kremlinology, parsing the chairman's mumbles for clues about the Fed's next move. Let's ask, instead, how much rates will rise if and when normal conditions of supply and demand resume in the bond market.

My calculations keep leading me to a 10-year bond rate of 7 percent, and a mortgage rate of 8.5 percent — with a substantial possibility that the numbers will be even higher. Current rates are about 4.3 and 5.8 percent, respectively; you can see why the I.M.F. is worried about "financial market disruption."

Why 7 percent? Well, in the past 20 years the average yield on 10-year bonds has, in fact, been about 7 percent. Why shouldn't we think of that as the norm?

Some people say that unlike past interest rates, future interest rates won't include a premium for expected inflation. Indeed, over the past 20 years the average inflation rate was 3 percent, considerably higher than recent experience. But in the first three months of 2004, prices rose at an annual rate of more than 5 percent. That number included soaring gasoline prices, but even the "core" price index, which excludes food and energy, rose at a 2.9 percent rate.

More to the point, investors expect considerable inflation over the next 10 years. The spread between "inflation protected" bonds, whose payments are indexed to the Consumer Price Index, and ordinary bonds indicates an expected inflation rate of 2.5 percent during the next decade.

So you can't claim that interest rates will be far below historical levels because inflation is gone. And on the other side, we need to think about the impact of budget deficits.

That last sentence will send the deficit apologists to battle stations (sorry, I can't avoid politics completely). For many years, advocates of tax cuts have insisted that the normal laws of supply and demand don't apply to the bond market, and that government borrowing — unlike borrowing by families or businesses — doesn't affect interest rates. But there's no argument among serious, nonideological economists. For example, a textbook by Gregory Mankiw, now the president's chief economist, declares — in italics — that "when the government reduces national saving by running a budget deficit, the interest rate rises."

The Congressional Budget Office estimates this year's structural budget deficit — what the deficit would be if cyclical factors like a depressed economy went away — at 3.9 percent of G.D.P. That's almost twice the average during the past 20 years. Standard estimates say this should push up 10-year interest rates by around one percentage point.

Finally, there's the upside risk. As I've pointed out before, the twin U.S. budget and trade deficits would set alarm bells ringing if we were a third world country. For now, America gets the benefit of the doubt, but if financial markets decide that we have turned into a banana republic, the sky's the limit for interest rates.

Now for the obvious point: many American families and businesses will be in big trouble if interest rates really do go as high as I'm suggesting. That's why the I.M.F. is urging the Fed to get the word out.

And one suspects that the fund, which, like Alan Greenspan, tends to convey messages in code, is firing a shot across Mr. Greenspan's bow. A number of analysts have accused Mr. Greenspan of fostering a debt bubble in recent years, just as they accuse him of feeding the stock bubble during the 1990's. Just two months ago, Mr. Greenspan went out of his way to emphasize the financial benefits of adjustable-rate, as opposed to fixed-rate, mortgages. Let's hope that not too many families regarded that as useful advice.

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What do markets expect about the future course of monetary policy? The question is important to policymakers, not because we are concerned necessarily that we should meet the market's expectations--such a strategy quickly degenerates into a hall of mirrors--but as a check on the efficacy of our communication. If the policy expectations of the market differ significantly from the policy expectations of central bankers, then the two leading possibilities are, first, that the policy committee has not accurately communicated its outlook and objectives or, second, that the market hears the policy committee's message but is skeptical of it.


(問) 1月20日の日銀当預残高引き上げの決定については正しい理解が得られているのか。

(答) 既に間接的に答えたと思っているが、ある行動を採った後、誤解を含む様々な解釈が出て来るということ自体まだ我々のコミュニケーションが不十分であるということを示しているのではないか。我々としては、もう少し市場とのコミュニケーションを図っていく必要があると思っている。

(問) 市場の理解が得られていないということのデメリットは何か。

(答) 今、具体的に申し上げることは難しいが、例えば、金融緩和継続に対する条件をさらに変えていくような場合、その解釈について、我々の意図するところと違う解釈が出てくる可能性がある。そうした誤った解釈がマーケットにネガティブ・インパクトを与える可能性もある。また、我々が、景気の現状判断とか物価見通しを公表しても、必ずしも額面通りに受けとってもらえなくなるような可能性もあろう。

(問) 1月20日の決定については、市場関係者から正しい理解を得られなかったというように感じておられるのか。

(答) そういう側面もあるのではないか。個人的にはマネーサプライやマネタリーベースのコントロールのためにやったものではないと思っているが、そういう解釈をする人もいるし、為替相場対策だと理解している人もいる。量的緩和効果について誤った解釈もある。このように解釈の幅がかなり広いということは、我々の努力が今少し足りないのかなと思う。

(問) なぜ、誤った解釈が市場で起こるのか。

(答) 我々の努力不足が原因と思う。

(問) 努力不足ということではなく、審議委員は1月20日の当預残高引上げが適当ではなかったとの立場をとっておられるものと理解している。そうであれば、「1月20日の決定は間違いであった」と言えるのではないか。

(答) 私の口から、1月20日の決定が間違いであったと申し上げることは出来ない。仮に皆さんがそう解釈するというのであれば、私は「ああ、そうですか」と言うだけである。

 田谷審議委員の意見は、当面はBernankeの基準を満たしているといえる。しかし、最後の質疑応答部分についてはこんな感想をもった。「マーケットが予測していない行動を中央銀行がすべきでない」と考えるとすれば、それはBernankeの基準に照らして異なった意見であるといえよう。つまり、上手にコミュニケーションが取れていないとすれば、田谷審議委員が言うように、それを直すのが重要であり、コミュニケーションが取れない可能性があること自体は政策判断の理由にはなりにくい。それは、結局、Bernankeの言うHall of Mirrorsに入ってしまうからである(初歩のゲーム論的に言うと、先導者から追随者になってしまうことも意味する)。この関連で、日銀総裁の財政金融委員会での発言を評価しなければならないと考える。すなわち、より洗練された議論を試みたということだろう。これをあまり大マスコミが注目していないのはなぜだろう?なぜかしら?

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Brazil's efforts to end the favela wars are misfiring

By Raymond Colitt
Published: April 16 2004 20:01 | Last Updated: April 16 2004 20:01

While tourists sipped caipirinhas in Rio de Janeiro's exclusive Leblon district during the Easter holidays, machine-gun fire echoed from the scenic hills above. A turf war raged between rival gangs trying to dominate the nearby Rocinha favela - and its drug market estimated at $3m per week - and at least a dozen people were killed. Since then the police have killed Luciano Barbosa da Silva, the drug lord known as Lulu, and 1,200 officers have been occupying Rocinha. ...

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Remarks by Governor Ben S. Bernanke

Before The Investment Analysts Society of Chicago, Chicago, Illinois
April 15, 2004

What Policymakers Can Learn from Asset Prices

Central bankers naturally pay close attention to interest rates and asset prices, in large part because these variables are the principal conduits through which monetary policy affects real activity and inflation. But policymakers watch financial markets carefully for another reason, which is that asset prices and yields are potentially valuable sources of timely information about economic and financial conditions. Because the future returns on most financial assets depend sensitively on economic conditions, asset prices--if determined in sufficiently liquid markets--should embody a great deal of investors' collective information and beliefs about the future course of the economy. ...

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John Berry、Fedはまだ金利を上げないと読む(Bloomberg)

Fed Is Likely Many Months From Raising Rates

John M. Berry

April 16 (Bloomberg) -- Federal Reserve officials likely remain many months away from any decision to raise their 1 percent target for overnight interest rates.

Recent data for March showing a strong payroll gain and unexpectedly sharp increases in retail sales and consumer prices have caused some analysts to predict a Fed rate move soon. One, speaking on CNBC this week, even said the Federal Open Market Committee would raise rates at its next meeting, May 4.

Recent data for March showing a strong payroll gain and unexpectedly sharp increases in retail sales and consumer prices have caused some analysts to predict a Fed rate move soon. One, speaking on CNBC this week, even said the Federal Open Market Committee would raise rates at its next meeting, May 4.

The reality is that Fed officials will need far more than a month or two of good payroll numbers and a month or two of figures showing rising inflation rates before they are ready to act.

Analysts ``always tend to make too much of a few numbers'' said Gary Stern, president of the Minneapolis Federal Reserve Bank, in an interview last week. ``We are not going to get carried away'' by two or three months' worth of numbers in either direction.

Fed Vice Chairman Roger W. Ferguson Jr. conveyed the same message in a speech in San Francisco last week.

Ferguson said that the 308,000 increase in payroll jobs in March ``was encouraging'' and the expectation by economic forecasters that employment will continue to improve is ``a reasonable assessment.''

Hiring Could Fall Short

``Nonetheless,'' he cautioned, ``one cannot definitively rule out the possibility that hiring will fall short of expectations over the next several months as it had up until the most recent report. In particular, the lackluster performance we have seen in the labor market, even as real GDP has been moving up strongly, raises the question of whether an unusually large portion of the job cuts implemented by firms in recent years represent permanent layoffs that will only gradually be offset by job creation elsewhere in the economy.''

The words of Stern and Ferguson aren't those of policy makers about to pull the trigger on a rate increase anytime soon. Nor is there any reason to think that their analysis isn't generally shared by most other FOMC members.

While Stern isn't a voting member of the committee this year, he otherwise participates fully in the meetings, and his views and those of other non-voting reserve bank presidents carry as much weight as that of those who do vote.

Not Ignoring Data

None of this means Fed officials are ignoring any incoming data. The March payroll figures eased a concern that even with all the monetary and fiscal stimulus flowing into the economy, growth might falter once more.

On the other hand, with interest rates so low, policy makers know they don't have a lot of traditional ammunition left to use if growth isn't sustained at a healthy pace.

So, in Fed Chairman Alan Greenspan's risk-management approach, the cost of being wrong on the downside would be much higher than if growth and inflation were to exceed expectations. And with inflation so low, the officials have been and are still willing to wait to raise rates until the evidence of the need to do so is unmistakably clear.

As Stern put it, ``Once you have achieved price stability, you don't want inflation to go lower.''

In terms of assessing the outlook for inflation, Fed officials tend to look at fundamentals, particularly the trend in unit labor costs, which represent about 70 percent of all costs for an average U.S. company. For non-farm businesses, unit labor costs fell 1.2 percent last year after being down 2.4 percent in 2002. Moreover, they probably dropped a bit more in the first quarter of this year.

`Benign' Inflation Outlook

With labor costs falling, growth in other industrial countries sluggish and China and India rapidly expanding their production capacity, Stern said, ``I do think the inflation outlook is certainly benign for the next year at least.''

Given his reasoning, it isn't likely he has changed that view since the release of the March consumer price index.

Nevertheless, Greenspan and probably every other Fed official who has spoken publicly in recent months have said that at some point they will raise their 1 percent target, which is much too low to be consistent with continued low inflation and a healthy economy operating close to its potential.

Well before that happens, Fed officials undoubtedly will begin to recognize how the economic landscape is gradually changing and moving them toward a higher rate.

The May 4 Meeting

The first such change could appear in the FOMC statement issued after the May 4 meeting. In their description of the economy, the officials certainly will note the improvement in the payroll figures, and probably that inflation appears to have stabilized.

In keeping with the latter point, the committee may also decide it's time to say that the risk of a further decline in inflation is now balanced with that of a rise in inflation.

Some analysts expect the FOMC to drop the language saying the committee ``believes that it can be patient in removing its policy accommodation.'' That seems much less likely.

When It Raises Rates

Perhaps the key thing to keep in mind about Fed policy in coming months is this: Unlike any other time since the early 1960s, when it starts to raise rates, the central bank won't have in mind the goal of reducing inflation. It will only want to keep it at a low level, and many if not all of the policy makers would actually be a bit more comfortable with an inflation rate closer to 2 percent than 1 percent.

That means that the Fed not only will have been patient about when it starts to raise rates, but it may also choose to be patient about how fast and how far it raises them, though that will depend what policy makers see happening after the first rate increase.

Greenspan's testimony before Congress' Joint Economic Committee on Wednesday may help clarify some of the Fed's intentions.

Last Updated: April 16, 2004 00:02 EDT

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Brazil's da Silva Becomes Victim of High Expectations

April 16, 2004; Page A8

RIO DE JANEIRO -- Just 16 months into a presidency that promised to remake Brazil with a tropical-style New Deal, Luiz Inacio Lula da Silva finds himself besieged on all fronts and with very few answers. ...

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Agrada a Mercosur inclusión de México

Durante una gira que realiza por Sudamérica, el Canciller mexicano Luis Ernesto Derbez hizo un llamado a profundizar la integración continental

Por Orly Keller

Ciudad de México (15 abril 2004).- El presidente de la Comisión de Representantes Permanentes del Mercosur, el ex Mandatario argentino Eduardo Duhalde, consideró hoy que es "una buena nueva" que México haya pedido su incorporación plena al bloque sudamericano. ...

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Anne KruegerによるBhagwatiの新著への書評(FT)

Educating globalisation's Luddites
By Anne Krueger
Published: April 15 2004 19:40 | Last Updated: April 15 2004 19:40

By Jagdish N.Bhagwati
Oxford University Press $28, £17.99

One of the great puzzles of contemporary politics is how globalisation came to have such a bad name. The end of the cold war left governments around the world struggling to find a new framework for international relations. It also seems to have left the protest movement in search of a new focus. ...

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NBER wp on Mexico

Aaron Tornell, Frank Westermann, and Lorenza Martinez (2004), "NAFTA and Mexico's Less-Than-Stellar Performance" (Cambridge: NBER Working Paper No. w10289)

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(問) 先程、デフレ脱却の時期について、なるべく早くとした上で「残りの1マイルは非常に厳しい」とおっしゃった。最近、武藤副総裁、春審議委員がそれぞれインタビューで、04年度についてはまだデフレが続くだろうけれども、05年度についてデフレの脱却を期待しているという期待感を表明されたのだが、福井総裁もそのような――同じような――期待をお持ちであるのか伺いたい。

(答) 次回の政策決定会合で、いわゆる展望レポートの新しいものをお示ししたいと思っており、今、各委員――私自身も――とも、それに向けて引き続き勉強を重ねているところである。従って、今の段階で明確なことは残念ながら申し上げられない。



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WSJ: アルゼンチン経済成長率=8.7% (2003)


Does Argentine Recovery Have Legs?

April 9, 2004; Page A7

BUENOS AIRES -- For foreign investors, there are two Argentinas.

One is an international pariah. It trashes property rights, blames foreign businesses for its own planning mistakes, makes extortionist threats to the International Monetary Fund and tries to force its creditors to accept pennies in the settlement of its defaulted dollar debts.

The other Argentina has managed a spectacular economic recovery. In defiance of nearly every economist's predictions in the wake of the 2002 financial crisis that induced a 10.9% economic contraction, Argentina grew 8.7% in 2003. It now is projected to expand by a further 7.1% this year. Meanwhile, annual inflation was at just 3.7% at year end and is down to 2.3% currently, while the country's cumulative first-quarter fiscal surplus is poised to double the IMF target. ...

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WSJ: 米国の病院、トヨタシステムを採用して費用削減


To Fix Health Care, Hospitals Take Tips From Factory Floor

Adopting Toyota Techniques
Can Cut Costs, Wait Times;
Ferreting Out an Infection
What Paul O'Neill's Been Up To

April 9, 2004; Page A1

PITTSBURGH -- In the factories of Toyota Motor Corp., any worker who spots a serious problem can pull a cord and stop the assembly line. Richard Shannon, chairman of medicine at Allegheny General Hospital, is applying the Toyota technique to an intensive-care unit here. ...

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 IMFのGlobal Financial Stability reportの発表を受けて、エコノミスト誌、米国景気回復の発展途上国への余波を恐れる記事を掲載した。1994年のメキシコ金融危機の一つの外的要因であった米国の景気回復→金利上昇→メキシコからの資金流出、という効果が今回も起こるかということである。火薬庫はブラジル?インドネシア?為替レートをペッグしている国は少ないので、二度同じことは起こらないか。とにかく、適切な記事であった。

Cash and carry

Apr 9th 2004
From The Economist Global Agenda

Good news on jobs in America may have troubling repercussions for emerging markets

IN FINANCE as in medicine, prevention is better than cure. The International Monetary Fund’s Global Financial Stability report, published on Tuesday April 6th, is the equivalent of a twice-yearly check-up for the international financial system. At the moment, the system seems to be in rude health, the report says. The IMF does worry, however, that proper precautions for the future are not being taken. Unfortunately, in finance as in medicine, no one listens to the doctor until nasty symptoms start to show. ...

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Corruption in Latin America

Harder graft

Apr 7th 2004 | MIAMI
From The Economist print edition

The “war on terror” has spawned a battle against corruption in Latin America

SINCE September 11th, the United States has become more sensitive about some threats that it once seemed resigned to living with. In its own backyard, one of the old enemies it has begun to engage more vigorously is Latin American corruption. The days when crooked leaders could launder their embezzled money in Florida with impunity may be coming to an end. Corrupt officials are also losing another asset, which many prize almost as highly as cash: their American visas. ...

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World Bank's Martin Ravallion comments on global poverty data


Pessimistic on poverty?

Apr 7th 2004
From The Economist print edition

In our issue of March 13th we wrote about global poverty. Martin Ravallion, one of the World Bank's foremost researchers, replies

IN ITS issue of March 13th, The Economist argued that the World Bank has overstated the extent of absolute poverty in the world—that there is less poverty than the Bank claims and that it is falling faster. A methodological debate lies at the heart of this claim. The Bank relies as much as possible on nationally representative household surveys, typically done by governmental statistics offices following international standards. The Bank's latest estimates draw on interviews with about 1.1m randomly sampled households in 100 developing countries, representing 93% of the population of the developing world. ...

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Can Public Discussion Enhance Program Ownership?"

Allan Drazen* (Maryland and Tel Aviv University), Peter Isard (IMF)

"Can Public Discussion Enhance Program Ownership?"

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安達誠司が設備投資の余地を考えた。I/K ratioを見ている。

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Stephen Roach on Asia

悲観派エコノミスト(世界の武者陵司、高橋乗宣)とも言われるStephen Roachがアジアについても懸念している。

Global: Pondering Asia

Stephen Roach (New York)

I was unprepared for what I found in Asia over the past two weeks. The role of China appears to be on the cusp of an important transition, as pressure builds on its leadership to confront the mounting imbalances of an overheated economy. With the exclusion of India — where I was stunned by the solid and increasingly powerful dynamic of its IT-enabled services transformation — the rest of the region is far too China-centric for my liking. A likely slowing in the Chinese economy could unmask a new instability in Asia — an outcome that could prove quite vexing for a still-unbalanced global economy. ...

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Fiscal Dominance and Inflation Targeting: Lessons from Brazil

Fiscal Dominance and Inflation Targeting: Lessons from Brazil
Olivier Blanchard

NBER Working Paper No. w10389
Issued in March 2004

---- Abstract -----

A standard proposition in open-economy macroeconomics is that a central-bank-engineered increase in the real interest rate makes domestic government debt more attractive and leads to a real appreciation. If, however, the increase in the real interest rate also increases the probability of default on the debt, the effect may be instead to make domestic government debt less attractive, and to lead to a real depreciation. That outcome is more likely the higher the initial level of debt, the higher the proportion of foreign-currency-denominated debt, and the higher the price of risk. Under that outcome, inflation targeting can clearly have perverse effects: An increase in the real interest in response to higher inflation leads to a real depreciation. The real depreciation leads in turn to a further increase in inflation. In this case, fiscal policy, not monetary policy, is the right instrument to decrease inflation. This paper argues that this is the situation the Brazilian economy found itself in in 2002 and 2003. It presents a model of the interaction between the interest rate, the exchange rate, and the probability of default, in a high-debt high-risk-aversion economy such as Brazil during that period. It then estimates the model, using Brazilian data. It concludes that, in 2002, the level and the composition of public debt in Brazil, and the general level of risk aversion in world financial markets, were indeed such as to imply perverse effects of the interest rate on the exchange rate and on inflation.

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From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition

From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition
Dani Rodrik, Arvind Subramanian

NBER Working Paper No. w10376
Issued in March 2004

---- Abstract -----

Most conventional accounts of India's recent economic performance associate the pick-up in economic growth with the liberalization of 1991. This paper demonstrates that the transition to high growth occured around 1980, a full decade before economic liberalization. We investigate a number of hypotheses about the causes of this growth favorable external environment, fiscal stimulus, trade liberalization, internal liberalization, the green revolution, public investment and find them wanting. We argue that growth was triggered by an attitudinal shift on the part of the national government towards a pro-business (as opposed to pro-liberalization) approach. We provide some evidence that is consistent with this argument. We also find that registered manufacturing built up in previous decades played an important role in influencing the pattern of growth across the Indian states.

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Productivity Growth and Disinflation in Chile

Productivity Growth and Disinflation in Chile
Jose De Gregorio

NBER Working Paper No. w10360
Issued in March 2004

---- Abstract -----
This paper analyzes the role productivity growth had on disinflation in Chile during the 1990s. It argues that productivity growth was key in avoiding the output costs of stabilization in a highly indexed economy. Disinflation from the early 1990s through 1998 was costless. Among the many external and domestic factors that contributed to good macroeconomic performance, which combined simultaneously very high rates of growth and declining inflation, productivity stands high. The simulations presented in this paper illustrate this point.

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SkidelskyによるJohn Maynard Keynes: Hopes Betrayed 1883-1920を読む

 Robert SkidelskyによるJohn Maynard Keynes: Hopes Betrayed 1883-1920を読んだ。ハロッドの有名な伝記を批判的に検討しており、非常に緻密な伝記でありながら、なかなか読ませる。父親のジョン・ネヴィル・ケインズ、マーシャルについても詳しく書かれており、興味深い。

Maynard never solved the problem of bringing these discussions propertly together. His historical vision, his technical expertise, his civil servant's concern for what was practical were expressions of three dfferent aspects of his mind. They remained largely unintegrated, like the three voices of Maria Callas. (p.275)

 これは、Indian Currency and Financeに関連して書かれた文章である。しかし、次の著作であるThe Economic Consequences of the Peaceについてはこう書いている。

The Economic Consequences of the Peace has a claim to be regarded as Keynes's best book. In none of his others did he succeed so well in brining all his gifts to bear on the subject in hand. (p.384)

 スキデルスキーは、ケインズを非常に多才な人物として描いている。さぁ、次はJohn Maynard Keynes: The Economist As Savior 1920-1937 : A Biographyだぁ。この時期には、A Treatise on Money (1930)も書いているし、General Theory of Employment, Interest, and Money (1935)も書いているぞ。

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Loan Growth Is Back (in Some Places)

Morgan StanleyのRobert Alan Feldmanが、財務省の法人企業統計調査を使って、銀行融資の動向を調べている。

Japan: Loan Growth Is Back (in Some Places)

Robert Alan Feldman (Tokyo)

The debate on the outlook for the Japanese financial sector continues to rage, and two issues are at the forefront. The first is the true level of non-performing loans (NPLs), and the second is loan growth. The semi-annual information on NPLs will not be available for another few weeks, and so investors will have to wait. However, no wait is needed for evidence on loan growth. The evidence is here already, and it is encouraging. ...

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Mexico's Ports Go Global


Mexico's Ports Go Global

Foreign Operators Now Dominate
Country's Growing Cargo Business
March 31, 2004; Page A13

COZUMEL, Mexico -- For a look at how Mexico's once-mighty have fallen, take a stroll along the piers of this busy vacation island just off the Yucatan peninsula. ...

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 IMFの季刊広報誌であるFinance and Developmentでは、「保健と経済学」を特集している。あのケネス・アローも寄稿している。特集の外では、アラン・テイラーがGlobal Finance: Past and Presentという記事を寄せている。

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MTM: 就職関連情報



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MTM: 日米経済の潜在成長力

ESRI Discussion Paper Series No.88

Dale W. Jorgenson(Samuel W. Morris University Professor Harvard University)
Kazuyuki Motohashi(Associate Professor, University of Tokyo and Senior Fellow, Research Institute of Economy, Trade and Industry)

 1990年代の日本経済は「失われた10年」と呼ばれることがあるが、その一方で企業による旺盛はIT投資が行われている。90年代を通して好調に推移した米国経済は、情報化投資によって生産性が加速的に上昇する現象が見られたが、日本においても同様のニューエコノミー現象が見られるかどうかについて実証分析を行った。また、情報技術革新の動向や労働人口構成の実態を踏まえて、供給サイドから見た日本経済の潜在成長率の将来推計を行い、米国との比較を行った。 …

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MTM: インフレ期待の計測

ESRI Discussion Paper Series No.91

堀 雅博(内閣府)
寺井 晃(東京大学大学院博士課程)

1.問題意識  生産、消費、投資、金利、為替など、マクロ経済変数の決定過程において人々の「期待」が重要な役割を果たすことは広く認識されている。しかし、期待それ自体は観察不能であり、データが存在しないことから、期待に関連する実証の試みは必ずしも成功していない。本研究ノートでは、そうした状況下、サーベイ・データを利用した期待インフレ率計測の試みとしてわが国でも利用例が散見されるカールソン・パーキン法(Carlson and Parkin [1975]、以下CP法)を取り上げ、日本の公表データに適用した結果を紹介するとともに、その過程で明らかになる幾つかの問題点を指摘する。 …

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Memo to myself on Bernanke's view on outsourcing

Remarks by Governor Ben S. Bernanke
At the Distinguished Speaker Series, Fuqua School of Business, Duke University, Durham, North Carolina
March 30, 2004

Trade and Jobs

Economists are often accused of not being able to agree on anything. Although we are indeed a contentious bunch, one proposition commands almost unanimous assent within the economics community. That proposition is that free trade among nations promotes economic prosperity. ...

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 地方産業育成としての公共政策(p.263)は、picking the winnerができるのかという産業政策の重荷が検討事項となるだろう。



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