North-South Linkages and International Macroeconomic Policy

Recent years have witnessed a substantial development of global macroeconomic modelling in which researchers have applied techniques developed to consider the industrialized countries to analyse North-South interactions in the world economy. This collection of papers uses these advances to analyse the implications for the South of macroeconomic developments in the North, to examine international policy questions in a genuinely global context, and to consider the design of policy packages for the Third World (aid versus trade, growth oriented adjustment) in an empirical context. The book begins with papers that model trade linkages and look at recent progress in the 'elasticities debate', specifically in the context of the dynamic economies of the Asian Pacific Rim. It goes on to consider linkages through trade in commodities and the impact of commodity prices on the performance of the world economy; and growth linkages and convergence between North and South with an examination of the speed and scale of the transfer of technology and knowledge between North and South. A further section presents two rather different ways of modelling macroeconomic adjustment in the South in response to external shocks emanating from the North. The final and largest section contains a number of exercises in global scenario analysis, where the interactions are both from North to South and from South to North. These include an examination of global responses to a US deficit reduction package, a reduction in global military spending, and a rise in world real interest rates. This book provides a useful overview of the flourishing and important research area relating to interactions between North and South, and also highlights areas where future research is needed.