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Published online by Cambridge University Press: 26 March 2020
Production in the industrial countries has been increasing a little faster than we suggested in May—notably in the United States, where there was a sharp rise in the rate of economic growth in the second quarter. But our forecast of the growth in the aggregate real output of the members of OECD is still in the 5-5½ per cent range for this year. We put it a little higher for 1973, when we expect a slightly slower rate of expansion in North America to be outweighed by faster growth in Japan and Western Europe.
page 28 note (1) This involves action in the monetary and trade fields intended to stimulate domestic business, promote imports, slow down exports, step up foreign aid, liquidate foreign debts, and encourage new investments abroad.
page 33 note (1) OECD, Economic Outlook no. 11, July 1972, pages 12-15.
page 34 note (1) 0ur calculations suggest that a standard rate of 10 per cent for VAT might raise United Kingdom prices by 1-2½ per cent (depending on the extent of any compensating cuts in excise duties)-see National Institute Economic Review no. 60, May 1972, page 21. Our current forecast of inflation in the United Kingdom appears on pages 4-5 of this issue.
page 36 note (1) Since the Smithsonian realignments last December, the interpretation of the figures for the value of international trade has, of course, become difficult. An increase in the dollar value of trade of countries which revalued against the dollar no longer simply indicates some combination of increases in volume and in their own currency prices, as formerly, but also an accounting element of increase introduced by conversion into dollars at the new exchange rates. But to calculate this element even for trade covered by contracts in existence at the time of the realignment it would be necessary to know in what currencies the prices were expressed. (For prices expressed in dollars the accounting element is nil.) Besides this, the price terms in any subsequent contract are, of course, likely to have been influenced by the realignment, in an upward direction if they are expressed in dollars and in a downward direction if they are expressed in other currencies. The difficulty is not really overcome by valuing trade in some unit other than dollars, such as SDRs. Even SDR values will not be what they would have been (except by a highly unlikely fluke).
page 36 note (2) These predictions are based partly on use of the OECD trade model (F. Meyer-zu-Schlochtern and A. Yajima, ‘OECD Trade Model: 1970 Version’, OECD Economic Outlook no. 8, December 1970, Occasional Studies).
page 38 note (1) Countries with currencies already pegged to the dollar or to gold were: Australia, Ghana, Iceland, Jordan, Kenya, New Zealand, Nigeria, Pakistan, Tanzania, Uganda, Western Samoa, and Zambia. When sterling was floated they were joined by: Cyprus, Kuwait, Malaysia, Oman, and Singapore.