Two-Speed World Growth To Continue Amid Policy And Price Uncertainties

Recent World Economy Dynamics

Since last fall a number of risks to the world economic conjuncture have emerged or gained in intensity but, at the same time, there have been growing signs that the recovery in advanced countries has finally reached escape velocity and that persistently rapid growth has virtually eliminated spare capacity in large emerging market economies (EMEs). Not surprisingly, advanced economies have increasingly focused their attention on strategies for exit from very accommodative monetary and fiscal policies whereas EMEs have repeatedly tightened their monetary and prudential policies to stem growing inflationary pressures and financial risks. So far the latter have achieved little apparent success in part because the resistance of many of them to letting their undervalued currencies appreciate has deprived them of an effective tool for reducing imported inflation. This is all the more damaging in view of the recent, marked pick-up in