Domestic Demand Growth Research Articles

Beyond privatization: Institutional innovation and growth in China's large state-owned enterprises

This article demonstrates that China's large state-owned enterprises (SOEs) are not stagnant fossils waiting to die. Under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy, the impact of market forces, rapid growth of domestic demand for upstream products, strategic integration with the world economy and the state's policy to promote large businesses. China's large SOEs are developing new institutional forms that do not neatly fit into existing patterns. China is experimentally changing its institutions through a combination of central policy, local initiative and interaction with international investment. This presents a challenge to the “transitional orthodoxy” and to ideas concerning property rights in development economics. There is not a universal model of property rights and government action that works best in all circumstances. China's experience with the reform of large SOEs shows the diverse possibilities for effective industrial institutions.

How High do UK Interest Rates Need to Rise?

The Bank of England has inherited the responsibility for monetary policy at a difficult time. The UK economy has picked up strongly over the last year, but the pound has surged ahead. Consumer windfalls are also boosting the growth of domestic demand though their impact is uncertain. In this article, Andrew Sentance and Geoffrey Williams sift through the evidence relating to the Bank of England’s interest rate dilemma. At present, interest rates appear close to their peak. But that judgement needs to be kept under review as new evidence unfolds about the momentum of domestic demand and the impact of the strength of the pound.

Le modèle américain : « une reconversion réussie mais inachevée»

The American model : a successful but unfinished transition Hélène Baudchon At the mid-year of 1997, the dynamism of the American economy remains very strong. After a slow take-off, the current business cycle seems to go on and on, benefiting from the growth of domestic demand, strong job creations and weak inflation. Despite the paradoxical features of these success in the business cycle logic, it can be explained by the successful reconversion of the American economy, now engaged for more than ten years. The United States have moved from a sclerosed situation due to the dollar appreciation to a situation where the market forces play whithout any constraints. This evolution is not a structural revolution of the American society. Indeed, both the current position of the United States in the international economic environment and the control of the public deficit have been made possible thanks to renewed trade and fiscal policies. But, fundamentally, behaviors have not changed at all. The American standard remains based on a free market economy and the American people are still very optimist. The American economy is now in a transient situation : the reconversion is not yet complete but things seem to have got off to a good start. That is why it is quite difficult to gauge it through the national accounts. The monetary policy is both actor and witness of this evolution : it has contributed to create this stable nominal environment and benefits from it now. The keystone of the current dynamism is the American capacity to create different kinds of jobs, generating incomes and supporting debt. Of course the quality of these jobs and the households solvability remain in debate, but it is partly compensated by the high level of consumer confidence. The only failure is the persistence of the trade deficit. The sectoral specialization, in accordance with the resources allocation, translates into a strong penetration of imports which is not completely balanced by the export growth although the geographical composition of the foreign trade looks more balanced and even if the United States benefit from the NAFTA zone. The bi-par- tisan agreement concluded between the Clinton Administration and the Congress on the way to a balanced budget in the year 2002 can be considered as the perfect final touch. It results both from the structural reduction of the deficit, under way since 1993, and from the strong growth. The credibility of the plan suffers nevertheless from two critics : the fundamental reforms, needed to strengthen the current path of fiscal consolidation, are postponed and the expected effect (lower interest rates and higher private saving) are not guaranteed at all.

Pricing to Market in a Small Open Economy

The determinants of Norwegian import prices of manufactures are investigated over the period 1970(1)-1991(4). Multivariate cointegration analysis establishes a long-run relationship between import prices, foreign prices, the exchange rate and domestic unit labour costs. Normalized on import prices, the long-run elasticities are 0.63 (foreign prices and the exchange rate) and 0.37 (domestic costs). Deviations from this relationship are highly significant in a structural import price equation, which also contains positive effects of growth in domestic demand and inflation, as well as a negative effect from the Norwegian unemployment rate. The estimated parameters appear reasonably stable within the sample.

Fast-track development of space technology in China

China's space industry faces challenges from the rapid growth in domestic demand for satellite services, international competition from the other members of the space club and infiltration of its domestic markets by foreign space companies. To counter this the country is making space a priority in current plans to improve national economic and social development, paying particular attention to applications satellites. Policies aimed at accelerating development include increasing state support for space, improving management - especially of invested funds - creating a better infrastructure and aiming for serial production of satellite components. It is acknowledged that much can be learnt from other countries and China is keen to pursue cooperative endeavours, but it intends also to retain its independence.

The supply and demand outlook for energy in the Asia—Pacific region

Years of strong economic growth in the Asia—Pacific region have resulted in unprecedented increases in energy demand in the region, particularly for oil and gas. The supply of oil and gas to the region will become more problematic as the decade progresses. Already 50% dependent on imported oil, this figure will rise to nearly 65% by 2000. Because high rates of domestic oil demand growth among traditional petroleum exporters ‐ Indonesia. China and Malaysia ‐ will absorb exportable surpluses, the region will find itself dependent on the Middle East for at least 90% of its imported oil needs by 2000. Currently linked to oil, LNG prices cannot justify the investments needed to bring new greenfield projects on line. With demand expected to exceed 67 million tonnes (Mt) in 2000 and 100 Mt in 2010. over 50 Mt of new capacity will be needed; satisfying this demand will necessitate a new pricing structure for LNG, raising the price substantially above the relative price of crude oil.

The yen appreciation and the Japanese economy

The Endaka recession of 1986 was the short-term impact of the yen appreciation but thereafter the Japanese economy adjusted to it with remarkable ease. Appreciation caused sweeping structural changes in the economy which, in turn, led to highly successful economic adjustment. For instance, an export-oriented economy made a U-turn to become a domestic-demand- oriented one. The experiences of the corporate world were clearly polarized, while one set of firms benefitted from the strong growth in domestic demand, the other suffered from the deflationary impact of the currency appreciation.

Chapter I. The Home Economy

The decision to join the exchange-rate mechanism had been expected, with increasing confidence, for several years. Nevertheless the actual announcement on 5th October came as something of a surprise. Up to that point the authorities, both the Bank of England and the Treasury, had been encouraging the view that interest rates should be kept high for the foreseeable future so as to cut back the growth of domestic demand and to curb inflation. Joining the ERM implies that interest rates must be set mainly with a view to the foreign exchange market and are no longer fully available as an instrument to control the domestic economy. The decision to join the ERM in October, and the associated 1 percentage point cut in interest rates were probably the result of a reassessment of the state of the economy—as well as being a move in the complex game of European and domestic politics.

Japan's adjustment miracle and its implications for the yen

As a result of the yen's sharp appreciation over the past three years, somemeasures of purchasing-power parity (PPP) now show that it is surpassing the U.S. dollar's peak level, achieved in early 1985 (see fig 1). Although this performance suggests that the yen could be overvalued from a longer-term perspective, the Japanese economy appears to have adjusted successfully: Growth of real domestic demand during fiscal 1987 (ended March 31, 1988) is estimated to be the highest of this decade; yet, Japan's massive current account surplus declined little in U.S. dollar terms. Moreover, the Ministry of International Trade and Industry projects no change in Japan's massive trade surplus for the current fiscal year.

Growth and Changes in the Structure of the US Agricultural Economy, 1972–82: an Input–Output Perspective

This paper analyses the growth and structural change of the agricultural sectors in the US economy. Growth and structural changes are examined from the perspective of how increases of output of agricultural sectors can be apportioned between: (1) the effect of growth and structural changes in domestic final demand and exports; (2) changes in the domestic supply ratios of sector output; and (3) interdependencies between industries. The paper also examines what are the most important interdependencies between industries and how much they have changed. The analysis of structural changes relates to the growth of the economy in quite different circumstances of the 1970s and the 1980s.

Is Monetary Policy Too Tight?

AbstractMonetary policy has steadily become tighter over the past twelve months. In various statements, the Government has indicated its view that monetary policy needs to be tight in order to subdue an ‘excessively high’ rate of growth of domestic demand. This article asks whether the current stance of monetary policy is now too restrictive and, if so, what the consequences might be for the pattern and growth of economic activity during 1989‐90. A number of scenarios based on alternative settings of monetary policy in 1989‐90 are derived from a short‐term simulation model of the Australian economy. The scenarios suggest that, if monetary policy remains at the current degree of tightness, the Australian economy may well experience a recession in 1989‐90. Some easing of monetary conditions is mandatory if a sharp and unnecessary slowdown of economic activity is to be avoided. Exactly how far monetary policy should be eased depends crucially on the rate of growth of autonomous investment.

A Macroeconomic View of the 1989 Budget

This year the Chancellor introduced a quiet Budget, but not a dull one. In macroeconomic terms, the modest tax cuts that the Chancellor introduced represent a slight tightening of the stance of fiscal policy. This was very much in line with our pre-Budget forecast, and was largely dictated by inflation prospects and balance of payments concerns. Our view, both-pre and post-Budget, is that this stance of fiscal policy, together with continued tight monetary policy, will slow domestic demand growth and inflation, and avert a continued deterioration in the balance of payments. The outlook, therefore, is for a soft landing for the UK economy.

Savings and the Budget

The fall in the personal sector savings ratio to a record low last year has been a major factor behind the rapid growth of domestic demand in the past two years and the associated deterioration in the current account. It is also a major uncertainty in the Chancellor's Budget judgement. Existing econometric relationships for the consumption function have failed to predict the fall in personal savings over the past few years. Possible explanations include statistical error, the effects of financial deregulation, the housing boom, expectations of higher growth in incomes, and demographic influences. In this Viewpoint, we report on a new consumption function that successfully explains the decline in savings. It provides evidence of a major demographic influence resulting from the decline in the proportion of the population in the 45–64 age cohort, the main savers in society. Subsidiary effects arise from the boom in house prices, and statistical mis‐measurement. The equation predicts an appreciable revival of savings over the next few years as the 45–64 age cohort grows again. These shifts in demographic structure reflect the after‐effects of the Second World War. This new evidence suggests that the Chancellor has done quite enough to ensure a slowdown in consumption, and that he would be ill‐advised to heed calls for special measures to boost savings. By contrast, well conceived tax changes that remove microeconomic distortions in the tax system (perhaps moving in the direction of an expenditure tax) would improve the tax structure, and may well increase the scope for tax cuts in future budgets. Our new consumption function also lends weight to the Chancellor's argument that the current account deficit is not a source of concern, insofar as it arises from a shift in savings associated with demographic changes that will be reversed in due course.

Decline in national product despite continuing growth in domestic demand

Decline in national product despite continuing growth in domestic demand

La croissance confisquée

La croissance confisquée

THE WORLD AND UK ECONOMY: ANALYSIS AND PROSPECTS

The different rates of growth of domestic demand in the US, Japan and Germany together with past exchange rate misalignments have led to massive current account imbalances. The US is estimated to have had a current account deficit of almost $140 billion in 1986 whereas Japan is expected to have achieved a surplus of over $80 billion and Germany a surplus of some $35 billion. The US administration has argued that these imbalances can be rectified by reflationary policies elsewhere, as well as by a fall in the dollar. However, they are acutely aware that if the current account deficit does not fall quite quickly then protectionist sentiment in the United States may become irresistible. Therefore, in the absence of expansionary policies in Japan and Germany, the US administration has appeared willing to let the dollar continue to fall thus putting direct pressure on these other countries to reflate. In Section II of this article the likely outcome for the international economy is described. This is followed in Section III by the latest O.E.F. forecast for the UK economy. Finally, in Section IV the causes and possible cures for the US current account deficit are examined in detail.

Continuing rapid growth in domestic demand

Continuing rapid growth in domestic demand

Oil Substitution in ASEAN: Problems and Prospects

The increase in the price of internationally traded oil that took place during the 1970s gave rise to widespread problems of economic and energy adjustment throughout the world. In the oil-importing countries, oil imports made increasing claims on export earnings and caused balance-of-payments problems. In addition, the coupling of the energy system and the economic system led to accelerated infla tion, and lower economic growth rates, and almost every aspect of economic activity was affected because of the escalation in oil prices. Thus, reducing oil demand has become a matter of great urgency for these countries. The oil exporting countries, on the other hand, were beneficiaries of the rise in oil prices. However, they were faced with the problem of rapid growth in domestic oil demand resulting from the sudden increase in national income and, in many of these countries, the setting of domestic oil product prices at levels substantially lower than international levels. These countries have now also realized the need to reduce domestic oil demand, both for the purpose of channelling more of the oil produced for export and for conserving this depletable resource for the long-term future. The present uncertainty surrounding the world oil supplies is expected to remain unchanged in the foreseeable future. Internationally traded oil will con tinue to be the main balancing fuel to meet fluctuations in energy demand, and sudden changes in the price of oil due to scarcity or glut would in the future, as in the past, adversely affect economic growth.1 This further reinforces the need to reduce oil use and diversify the sources of energy supply, particularly in the coun tries which are highly oil-dependent. There are two possible ways of reducing oil use: to use it more efficiently, and to increase the use of alternative energy sources. This paper is concerned with the latter. More specifically, it is concerned with the problems and prospects of switching away from using oil as an energy source, or to find an oil substitute, in ASEAN.

US farm policy in perspective

At the end of 1981 the US Congress passed new farm legislation which was widely hailed as a success for the Reagan administration's efforts to contain the escalation of farm supports, it now appears, however, that it has created serious problems in a situation of rapid agricultural productivity growth in the face of slower growth of domestic and foreign demand. Despite subsequent amendments to limit budget outlays, farm support costs are now estimated at $12 billion each in FY 1982 and 1983 and $7 billion in FY 1984, as compared with original projections of less than $3 billion annually.

Changing Domestic Demand and Ability to Export

Previous articleNext article No AccessCommunicationsChanging Domestic Demand and Ability to ExportRobert C. HsuRobert C. Hsu Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 80, Number 1Jan. - Feb., 1972 Article DOIhttps://doi.org/10.1086/259875 Views: 2Total views on this site Citations: 7Citations are reported from Crossref Copyright 1972 The University of ChicagoPDF download Crossref reports the following articles citing this article:Yağmur Sağlam, Hüseyin Avni Egeli A Comparison of Domestic Demand and Export-led Growth Strategies for European Transition Economies, Foreign Trade Review 53, no.33 (May 2018): 156–173.https://doi.org/10.1177/0015732517734755yağmur sağlam, H. Avni egeli DOĞU ASYA İÇİN İHRACATA DAYALI BÜYÜME VE İÇ TALEP ÇEKİŞLİ BÜYÜME HİPOTEZLERİNİN AMPİRİK ANALİZİ, Uluslararası İktisadi ve İdari İncelemeler Dergisi (Jul 2017).https://doi.org/10.18092/ulikidince.309279Kunhui Ye, Liyin Shen, Jian Zuo Utilizing the linkage between domestic demand and the ability to export to achieve sustainable growth of construction industry in developing countries, Habitat International 38 (Apr 2013): 135–142.https://doi.org/10.1016/j.habitatint.2012.05.008Rolf Weder Comparative home-market advantage: An empirical analysis of British and American exports, Review of World Economics 139, no.22 (Jun 2003): 220–247.https://doi.org/10.1007/BF02659744Bankey L. Sharma International flow of manufactures purchasing power based analysis, European Economic Review 19, no.22 (Jan 1982): 387–394.https://doi.org/10.1016/S0014-2921(82)80061-5Jaleel AHMAD IMPORT SUBSTITUTION-A SURVEY OF POLICY ISSUES, The Developing Economies 16, no.44 (Mar 2007): 355–372.https://doi.org/10.1111/j.1746-1049.1978.tb01070.xJaleel Ahmad Domestic demand and ability to export in developing economies: Some preliminary results, World Development 4, no.88 (Aug 1976): 681–685.https://doi.org/10.1016/0305-750X(76)90048-6