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New World Economic Outlook report is out

New World Economic Outlook report is out

This week we've had the IMF and World Bank spring meetings.

Economic heavy-hitters from around the world descend on DC to attend committee meetings, seminars, briefings, and other policy-maker fun. Also, the IMF's World Economic Outlook is released. Chapter 4 in the most recent edition looks at something I've written about a couple of times: low investment growth.

This chapter concludes, using some novel statistical techniques, that the disappointing performance of investment is just what we would expect given the disappointing performance of the global economy. In other words, it is not investment holding back the economy, it's the economy holding back investment. There are exceptions; in some European economies, uncertainty and credit constraints are weighing on investment. But for the most part, the report concludes, investment is not unusually weak, given the state of advanced economies.

Why are advanced economies weak? Part of the reason is covered in Chapter 3. Potential growth is lower than it used to be. Potential growth is the growth the economy can achieve under 'normal' conditions. It's influenced by productivity growth and labour force growth. So it's not special factors holding back investment. The mood of business isn't overly or unnecessarily pessimistic. It's something more fundamental.

Photo courtesy of Flickr user International Monetary Fund.

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