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This is the sixth of a series of papers that are being written as part of a project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit to which economists have access for studying both own-country and cross-country linkages. In this paper, we add three more regions and make a number of other changes to a previously estimated small quarterly projection model of the US, euro area, and Japanese economies. The model is estimated with Bayesian techniques, which provide a very efficient way of imposing restrictions to produce both plausible dynamics and sensible forecasting properties.

Business & Economics --- Economic History --- Economic policy --- Economics --- Mathematical models. --- Economics, Mathematical --- Banks and Banking --- Foreign Exchange --- Inflation --- Production and Operations Management --- Model Construction and Estimation --- Price Level --- Deflation --- Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Macroeconomics --- Currency --- Foreign exchange --- Finance --- Banking --- Real exchange rates --- Output gap --- Real interest rates --- Central bank policy rate --- Production --- Financial services --- Prices --- Interest rates --- Economic theory --- United States

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Private consumption has been a key driver of growth in Brazil for more than a decade. Over this time, Brazilian consumers have benefited from a favorable policy environment, a rapid phase of development—dramatically increasing economic, financial and social inclusion— and a supportive external environment. Meanwhile, infrastructure gaps have widened and investment and productivity levels have fallen behind. The consumption-led growth model now appears to have run its course. The prospect of a period of macroeconomic adjustment presents an opportunity to adjust policy settings to ensure stronger, more balanced and sustainable growth over the medium term.

Consumption (Economics) --- Consumer demand --- Consumer spending --- Consumerism --- Spending, Consumer --- Demand (Economic theory) --- Banks and Banking --- Macroeconomics --- Macroeconomics: Consumption --- Saving --- Wealth --- Investment --- Capital --- Intangible Capital --- Capacity --- Macroeconomic Analyses of Economic Development --- Personal Income, Wealth, and Their Distributions --- Aggregate Factor Income Distribution --- Interest Rates: Determination, Term Structure, and Effects --- Finance --- Consumption --- Disposable income --- Income --- Real interest rates --- Private consumption --- National accounts --- Financial services --- Economics --- National income --- Interest rates --- Brazil

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This paper analyzes the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows is associated with higher growth, gross capital flows, and equity returns and with lower inflation and bank capital adequacy ratios. The effects vary depending on thresholds. As a potential application of these findings, the paper explores the possible effects of liberalization on China by applying the coefficients of explanatory variables to the corresponding variables of China in 2012–16.

Finance --- Business & Economics --- International Finance --- Capital movements --- Economic development --- E-books --- Banks and Banking --- Exports and Imports --- Finance: General --- 'Panel Data Models --- Spatio-temporal Models' --- Current Account Adjustment --- Short-term Capital Movements --- General Financial Markets: Government Policy and Regulation --- Other Economic Systems: Public Economics --- Financial Economics --- International Investment --- Long-term Capital Movements --- Financial Institutions and Services: Government Policy and Regulation --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Financial services law & regulation --- Capital account liberalization --- Capital flows --- Capital adequacy requirements --- Financial sector risk --- Real interest rates --- Balance of payments --- Financial regulation and supervision --- Financial sector policy and analysis --- Financial services --- Asset requirements --- Financial risk management --- Interest rates --- China, People's Republic of

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The financial crisis in the advanced countries that began in 2007 has led central bankers to adopt unconventional policy measures as policy interest rates neared the zero bound. One suggestion (Blanchard, Dell’Ariccia, and Mauro, 2010) has been to raise inflation targets to provide more room for policy rate easing during crises. This paper addresses a different issue: the relationship between inflation and welfare. The literature is surveyed and a model is developed. A key conclusion is that an increase in inflation targets gives rise to additional welfare costs, even after the extra room to maneuver above the zero lower bound for nominal policy rates is taken into account. Based on parameter values that fit U.S. data, the additional welfare costs of raising inflation targets from 2 to 4 percent are estimated at about 0.3 percent of annual real income. A rise to 10 percent would yield additional welfare costs of about 1 percent of real income. Other parameter values yield welfare costs as high as 7 (respectively 30) percent of real income for raising inflation targets from 2 to 4 (respectively from 2 to 10) percent. The full costs of raising inflation targets are likely to be higher because the model used to generate these estimates does not account for higher inflation-induced volatility.

Business & Economics --- Economic Theory --- Price regulation. --- Welfare economics. --- Government price control --- Government price regulation --- Price control --- Price regulation --- Price stabilization, Governmental --- Prices --- Pricing --- Regulation of prices --- Law and legislation --- Economic policy --- Economics --- Social policy --- Trade regulation --- Anti-inflationary policies --- Inflation (Finance) --- Interest rates --- Welfare economics --- Monetary policy --- Econometric models --- E-books --- Banks and Banking --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Mathematical Methods --- Price Level --- Deflation --- Demand for Money --- Money and Interest Rates: Forecasting and Simulation --- Monetary Policy --- Personal Income, Wealth, and Their Distributions --- Interest Rates: Determination, Term Structure, and Effects --- Monetary economics --- Finance --- Inflation targeting --- Demand for money --- Personal income --- Real interest rates --- Money --- National accounts --- Financial services --- Income --- United States

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Now close to 50 percent of GDP, this paper assesses the appropriateness of China’s current investment levels. It finds that China’s capital-to-output ratio is within the range of other emerging markets, but its economic growth rates stand out, partly due to a surge in investment over the last decade. Moreover, its investment is significantly higher than suggested by cross-country panel estimation. This deviation has been accumulating over the last decade, and at nearly 10 percent of GDP is now larger and more persistent than experienced by other Asian economies leading up to the Asian crisis. However, because its investment is predominantly financed by domestic savings, a crisis appears unlikely when assessed against dependency on external funding. But this does not mean that the cost is absent. Rather, it is distributed to other sectors of the economy through a hidden transfer of resources, estimated at an average of 4 percent of GDP per year.

Finance --- Business & Economics --- Investment & Speculation --- Investments, Chinese --- Economic development --- Econometric models. --- Development, Economic --- Economic growth --- Growth, Economic --- Chinese investments --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Econometric models --- E-books --- Banks and Banking --- Finance: General --- Macroeconomics --- Money and Monetary Policy --- Industries: Financial Services --- Investment --- Capital --- Intangible Capital --- Capacity --- Welfare Economics: General --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Macroeconomics: Consumption --- Saving --- Wealth --- General Financial Markets: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Institutions and Services: General --- Monetary economics --- Consumption --- Emerging and frontier financial markets --- Real interest rates --- Credit --- Financial sector --- Financial markets --- National accounts --- Financial services --- Money --- Economic sectors --- Financial services industry --- Interest rates --- China, People's Republic of