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Chapter IV. The World Economy
Published online by Cambridge University Press: 26 March 2020
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1972 proved to be the most buoyant year for the world economy since 1966. Growth was faster than expected a year ago in nearly all the industrial countries, but particularly in Japan, and for the OECD countries collectively the aggregate rise in output was probably about 5 3/4 per cent.
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page 57 note (1) Our forecasts nevertheless assume throughout that parities will remain as in 1972 (with sterling at an effective rate of $2.35).
page 60 note (1) These calculations use weights based on trade in manu factures in 1968-69 (see National Institute Economic Review, no. 59, February 1972, pages 69-70).
page 61 note (1) For a discussion of international monetary developments until 1971 and of the unsatisfactory way in which the Bretton Woods system has operated in recent years see National Institute Economic Review, no. 59, February 1972, pages 74-9. A survey of current issues is provided by the IMF in ‘Reform of the international monetary system’, 1972.
page 61 note (2) A background report on this theme (‘Policy perspectives for international trade and economic relations’) was published by OECD towards the end of last year.
page 62 note (1) All the ‘crawl’ proposals would limit the maximum rate of change within a period—say to 3 per cent a year. It is essential that a general crawling peg scheme should start with currencies approximately at their equilibrium parities. Otherwise, the per mitted small parity changes might be thought to be so inadequate as to induce large speculative capital flows.
page 62 note (2) If changes are not automatic, but are left to the discretion of the government, they may well be just as delayed and dis ruptive as in the 1960s.
page 62 note (3) The speculation would be self-fulfilling if reserve changes were the indicator.
page 62 note (1) F. Hirsch, ‘The exchange rate regime: an analysis and a possible scheme’, IMF Staff Papers, July 1972.
page 62 note (2) But if national currencies retain an important role in reserves, the proliferation of bilateral or multilateral credit arrangements as in the 1960s could relieve the pressure on a deficit country if its trading partners had an interest in defending its parity.
page 63 note (1) For example, the so-called Barber plan (‘International Monetary Co-operation’, Central Office of Information Refer ence Pamphlet 106, HMSO, pages 36-8).
page 63 note (1) Only if SDRs were privately held could there be intervention directly in SDRs. The disadvantage of such a private market would be the danger of destabilising shifts between official and private holdings.
page 63 note (2) Five years after the first allocation and at the end of each calendar quarter thereafter, the average of a participant's daily holdings of SDRs over the most recent five-year period must be not less than 30 per cent of the average of its daily net cumulative allocation of SDRs over the same period.
page 63 note (3) See National Institute Economic Review, no. 51, February 1970, page 85 for details of the provisions regarding use and transfer of SDRs. In late 1972 no agreement on a further allocation for 1973 was reached.
page 63 note (4) The difficulties in operation and possible modifications of SDRs were discussed at length by J. M. Fleming, ‘The SDR: some problems and possibilities’, IMF Staff Papers, March 1971, and briefly by Rinaldo Ossola, ‘Reflections on new currency solutions’, Banca Nazionale del Lavoro Quarterly Review, March 1972.
page 63 note (5) Transactions between participants may be either with or without designation. In the former case, participants designated by the Fund are obliged to accept SDRs and give convertible currencies in exchange. In the latter case, a participant may use SDRs to redeem balances of its own currency by agreement with another participant.
page 64 note (1) Suggested by J. M. Fleming, ‘Towards a new regime for international payments’, Journal of International Economics, September 1972.
page 64 note (2) See H. G. Johnson, Inflation and the Monetarist Contro versy, North-Holland, 1972, pages 86-8.
page 64 note (3) As suggested by Fleming, Journal of International Economics, op. cit., and M. Stamp, ‘The reform of the international monetary system’, Moorgate and Wall Street, Autumn 1972.
page 65 note (1) These arguments are discussed in R. Triffin, ‘The use of SDR finance for collectively agreed purposes' and G. Haberler, ‘The case against the Link’ both in Banca Nazionale del Lavoro Quarterly Review, March 1971.
page 65 note (1) ‘The economic situation’, Phillips and Drew Market Re view, January 1973.
page 65 note (2) See National Institute Economic Review, no. 55, February 1971, page 70.
page 67 note (1) For a review of these measures and their consequences see National Institute Economic Review, no. 62, November 1972, pages 7-10.
page 69 note (1) OECD Economic Outlook, no. 12, December 1972, page 22.
page 70 note (1) See, for example, J. K. Bowers, P. C. Cheshire, A. E. Webb and R. Weeden, ‘Some aspects of unemployment and the labour market’, National Institute Economic Review, no. 62, November 1972.
page 70 note (1) As an illustration it is perhaps worth recalling that one commentator thought the figure of 6 1/2 per cent which we put forward in November 1971 so high as to be ‘almost fatuous’.
page 77 note (1) For an account of the new index see pages 88-91.
page 77 note (2) All prices quoted in this section are in terms of US dollars, which are assumed to maintain their 1972 value in terms of other currencies.
page 81 note (1) This view is based on results obtained by use of the OECD trade model (see F. Meyer-zu-Schlochtern and A. Yajima, ‘OECD trade model, 1970 version’, OECD Economic Outlook, Occasional Studies, December 1970).
page 81 note (1) National Institute Economic Review, no. 57, August 1971, pages 38-40.
page 81 note (2) The trade effects of EFTA and the EEC 1959-1967, Geneva, June 1972.
page 82 note (1) R. L. Major and S. Hays, ‘Another look at the Common Market’, National Institute Economic Review, no. 54, November 1970, pages 32-3.
page 82 note (2) See J. Williamson and A. Bottrill, ‘The impact of customs unions on trade in manufactures’, Warwick Economic Research Papers, no. 13.