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The World Economy

Published online by Cambridge University Press:  26 March 2020

R. Barrell ,
R. Anderton ,
G.M. Caporale  and
J.W. in't Veld
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Extract

The deepening recession in Europe during the first half of 1993 has resulted in increasing pressure on the stability of exchange rates. The Exchange Rate Mechanism went through a crisis in late-July/early-August., and very wide fluctuation bands were adopted on the 2nd of August. Table 1 presents our forecast for output and inflation, which helps put the turmoil on the exchanges in context. Output is expected to fall in Germany and France in 1993, but the causes and consequences differ considerably. The recession in the former country may just take output back to a little below capacity whereas in France there has been a good deal of spare capacity for some time.

Type
Articles
Information
National Institute Economic Review , Volume 145 , August 1993 , pp. 43 - 63
Copyright
Copyright © 1993 National Institute of Economic and Social Research

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Footnotes

∗

We would like to thank Andrew Britton, Garry Young and Nigel Pain for helpful comments and Helen Finnegan and Catherine Dargent for statistical assistance. The forecast was prepared using our Global Econometric Model, NIGEM. The model is available from the Institute. It was developed by the Institute and is now jointly maintained with the London Business School. The forecast was completed on 3rd August.

References

Notes

(1) Our position was spelt out in a number of places, but the most complete version is in the National Institute Economic Review, no. 135, February 1991, World Economy chapter.

(2) FEERs and the ERM, National Institute Economic Review No. 137 August 1991.

(3) R. Barrell and J.W. in't Veld, ‘FEERs on the path to EMU’, National Institute Economic Review, No. 137, August 1991.

(4) See ‘The World Economy’, R. Barrell, R. Anderton, G.M. Caporale and J.W. in't Veld, National Institute Economic Review, November 1992.

(5) R. Barrell, N. Pain and G. Young, ‘Structural differences in European labour markets’, National Institute Discussion Paper No. 46.

(6) R. Anderton, R. Barrell and J.W. in't Veld, ‘Forward-looking wages, nominal inertia and the analysis of monetary union’, National Institute Discussion Paper No. 42.

(7) We set out this argument in the August 1992 Review. Anderton, R., Barrell, R., In't Veld, J.W., and Pittis, N. National Institute Economic Review, No. 141 August 1992.