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The London Business School Gower Publishing
Author(s) -
Allen Chris,
Dicks Geoffrey
Publication year - 1989
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/j.1468-0319.1989.tb00264.x
Subject(s) - economics , inflation (cosmology) , recession , boom , productivity , investment (military) , slow growth , distribution (mathematics) , interest rate , current account , publishing , monetary economics , international economics , market economy , macroeconomics , exchange rate , mathematical analysis , physics , mathematics , environmental engineering , politics , theoretical physics , political science , law , engineering
The worldwide monetary tightening, which was necessary to contain the inflationary effects of last year's cyclical upturn, is close to having run its course. The boom is giving way to a period of slower but more sustainable growth, while the distribution and structure of demand has turned out to be more favourable than could have been anticipated. The US economy has successfully slowed (but recession seems unlikely), whilst Japan and Europe are still expanding rapidly. The world economy thus continues to grow at a rate of around 2.75 per cent, allowing modest reductions in international current account imbalances. The impact of interest rates has been felt mainly by consumers and in the housing market, and has had only a limited effect on investment and trade. So demand has been reduced but not at the expense of a capacity expansion which will, through productivity gains, dampen inflationary pressures. We expect world inflation to fall slowly front a little above 4 per cent currently to around 3 per cent by 1992. This is above the declared objectives of policy makers but is as close to the hoped‐for soft landing as may be achievable.