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Regional financial arrangements and monetary integration in East Asia and Europe have made considerable progress in recent years. This paper discusses whether governments in both regions, Japan and Germany as the most advanced regional economies in particular, can use the new dynamics as levers to raise their status vis-à-vis the United States. It will be argued that activities are defensive rather than offensive, aiming at protecting the respective region from financial risk. Japan, in particular, would find it difficult to raise its status vis-à-vis the United States significantly by promoting regional financial and monetary integration, principal reasons being actor heterogeneity, the role of China, hesitation to bear burden and risk, and the historical legacy of a bank-oriented system. [ABSTRACT FROM AUTHOR]

We analyse the empirical effects of credit easing and quantitative easing on inflation expectations and exchange rates. Both monetary policy strategies are summarised in measures for composition and size of the central bank balance sheet and are included in a VAR model. The results show that changes in balance sheet size had positive, albeit weak effects on inflation expectations in Japan, while the effects were negligible in the euro area. By contrast, an increasing balance sheet size is associated with reduced short-term inflation expectations in the US and UK, pointing at negative signalling effects. Shocks to balance sheet size or composition have no substantial effects on long-term inflation expectations in the euro area, US and UK. An expanding balance sheet size is associated with a depreciation of the euro, pound sterling and Japanese yen. [ABSTRACT FROM AUTHOR]

Global activity and trade are projected to strengthen gradually in 2014 and 2015, but the recovery is likely to remain modest. This modest acceleration is due to the feed-through of past improvements in financial conditions, continued support from accommodative monetary policies and reduced drag from fiscal consolidation. However, unemployment is set to remain stubbornly high in several OECD countries. Growth in the large emerging market economies (EMEs) is expected to remain subdued by past standards, held back by supply-side constraints, recent policy actions and the recent tightening of financial conditions triggered by expectations about US monetary policy,. The slowdown in EMEs is likely to exert some modest drag on activity in advanced economies, with the United States relatively sheltered from such feedbacks. The strengthening recovery in the United States should gradually reduce unemployment and erode economic slack, with inflation rising close to target, while the muted pick-up in the euro area will make little dent in high levels of joblessness and ample slack will keep inflation very low; in Japan, core inflation is set to turn positive but, abstracting from indirect tax effects, still remain well below its target. Monetary policy needs to remain very accommodative, especially in the euro area, where deflation risks have risen, and Japan, where asset purchases should be continued as planned. In the United States, should unemployment continue to fall and inflation strengthen as projected, asset purchases should be wound down in 2014 and policy interest rates start to be raised in 2015. The planned slowing in the pace of fiscal consolidation in the United States and the euro area is appropriate given the state of public finances and the economic outlook; a strong fiscal tightening in Japan is necessary to slow public debt accumulation and eventually reduce debt. Structural reforms are critical for exiting the crisis, notably in Japan, the euro area and many EMEs, to strengthen growth prospects, debt dynamics, and facilitate global and euro area rebalancing. Sizeable long-standing downside risks still remain and new concerns have emerged. In the short term, if the debt ceiling in the United States became binding early in 2014, it could have large adverse effects on the stability and growth of the world economy; to prevent the possibility of such disruptive effects from weighing on confidence and investment, the legislated nominal debt ceiling should be abolished. The turmoil following the tapering discussions in mid-year has revealed how sensitive some EMEs are to US monetary policy. This may involve turbulence when actual tapering takes place as needed, with negative feed-back effects on advanced economies. In the euro area, still weak bank balance sheets, fragile public finances and the uncertain political situation in some vulnerable countries could unsettle financial markets. To guard against this, the establishment of a fully-fledged banking union needs to be expedited and weakness in bank balance sheets must be credibly identified in the coming stress tests and asset quality review of euro area banks and swiftly corrected. [ABSTRACT FROM AUTHOR]

The world economy grew strongly again in the first half of the year 2000. Up to the summer, economic activity was not noticeably dampened by the sharp increase in the price of oil since the beginning of 1999. In particular, the upturn in the USA persisted. Demand and output also expanded significantly in western Europe, while Japan showed marked production growth once again. World trade grew dynamically in the course of the significant upturn in the world economy. However, growth now appears to have passed its peak. A number of early indicators suggest that the dampening effects of a tighter monetary policy and the significantly higher oil price are now gaining the upper hand. The increase in oil prices continued this year, in contrast to the expectations of the Institutes this spring. After the price per barrel had risen from around 10 US-dollars at the beginning of 1999 to approximately 25 US-dollars in spring 2000, it rose again to up to 35 US-dollars this autumn. The increased price of oil imports in Japan has been alleviated by the appreciation of the yen, and the increase in the oil bill is similar to that in the USA. The industrial sector is hit harder in Japan than private households, because private petroleum consumption is lower in Japan than in the other industrialised countries.