United States.

161 Pages·1988·9.328 MB·English

by  OECD

^.vU.',^, -iJiNr-' a.*
1.1.(.. .... <-..
~'-*7'
OECD
. y>
URVEY!
->..
**«.-
II . ,
RLAND/TURKEY A.
GERMANY
fSWEDEN / . v-t-
NLAND/FRANCE/G -r. ,-.
PORTUGAL/SPAIN/SWEDEN i < 'T'C " ' ' ' ' * '
DA/ /
kLAND/NORWAY/PORTUGAL/SPAIN/SWEDEN /
/BELGIUM/CANADA/D /FINLAND/FRANCE/G /G / -
LANDS/NEWZEALAND/NORWAY/PORTUGAL/SPAIN/SWEDEN
LAVIA/AUSTRIA/BELGIUM/CANADA/DENMARK/FINLAND/FRANCE/G
BOURG/NETHERLANDS/NEWZEALAND/NORWAY/PORTUGAL/SPAIN/
DSTATES/YUGOSLAVIA/AUSTRIA/BELGIUM/CANADA/
ITALY/IAPAN/LUXEMBOURG/NETHERLANDS/NEWZEALAND/NORWAY/roRTUGAL/SPAIN/SWEDEN/
DKINGDOM/UNiTEDSTATES/YUGOSLAVIA/AUSTRIA/BELGIUM/CANADA/D / / /G
/IRELAND/ITALY/IAPAN/ G/NETHERLANDS/NEWZEALAND/NORWAY/ / /
©ECO
ECONOMIC SURVEYS
T,:. :
*»
0 $*t H*p^
UNITED STATES
ORGANISATION FORECONOMICCO-OPERATIONAND DEVELOPMENT
Pursuanttoarticle 1 oftheConventionsignedinParison I4lh December,
1960,andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachieve the highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to the development ofthe
world economy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in the process ofeconomic development; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland. Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey, the United Kingdomand the United
Stales. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28ihJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
The Socialist Federal Republic ofYugoslavia takes part in some ofthe
workofthe OECD (agreement of28thOctober, 1961).
Publiéégalement en français.
©OECD, 1988
Application forpermission toreproduce ortranslate
allorpartofthispublicationshould be made to:
HeadofPublicationsService, OECD
2,rue André-Pascal, 75775 PARIS CEDEX 16, France.
Contents
Introduction 9
I. Thedomesticeconomy 11
Theeconomyin 1987 11
Thecurrentexpansioninperspective 23
II. Thebalanceofpayments 26
Theriseand fallofthedollar 26
Currentaccountdeterioration 28
Themacroeconomicoriginsofthetradedeficit 29
Thepersistenceofthedeficit 33
Fundamentals 39
III. Thepolicyenvironment 40
Monetaryandexchangeratepolicies 40
Theresponsetothestockmarketcrash 49
Monetarypolicyindicators 49
Budgetarypolicy 51
Medium-termfiscal trends 54
TheFederaldeficit, domesticsavingand externaladjustment 58
IV. Short-termprospectsandmedium-termadjustment 62
Short-termprospects 62
Riskstotheoutlook 65
Medium-termadjustment 69
V. Financialmarkets:innovationandstability 75
Introduction 75
Overviewofthefinancialsystem. 79
Strainsinthebankingsystem 84
Bankingsystemcompetitors: institutionsandsecuritisation 89
Efficiencyandstability 96
Innovationand monetarycontrol 104
Debt,savingsandinvestment 107
VI. Conclusions 115
Notesandreferences 121
Annexes
I. Stockmarketwealthand thepersonal savingratio 130
II. Accounting forthereal tradedeficit 133
III. Importelasticities 135
IV. Glossaryoffinancialmarketterms 138
V. Recentdevelopmentsinthebankingsystem 143
Statisticalannex 147
Tables
Text
1. ThesourcesofGNPgrowth 14
2. TheTaxReformActand investment 14
3. Domesticandforeignsaving 15
4. Accountingforthegrowthinprivateconsumption 17
5. Costs,profitmarginsandprices 21
6. Movementsinthedollar 27
7. Currentaccountandbilateraltradebalances 28
8. Exportandimportperformance 29
9. Accounting forthecurrentaccountdeficit 32
10. "J-curve" effectsonthemerchandisetradedeficit 34
11. Productivityandlabourcostincreasesinmanufacturing 36
12. International investmentposition 38
13. Monetaryanddebtaggregates 43
14. Interestratetrends 43
15. Financingofthecurrentaccountdeficit 47
16. Interestratedifferentials 47
17. Realinterestratemeasures 50
18. TheimpactoftheTax ReformActonreceipts 52
19. Budgetdeficitprojections 54
20. AccountingfortheFederaldeficit 56
21. TrendsinFederaldebt 57
22. Internationalcomparisonofbudgetdeficits 59
23. Domesticsavingflows 60
24. Averagemarginalratesonlabourincome, capital incomeandoutput 60
25. Household savingratio 63
26. Demandandoutputprojections 64
27. Balanceofpaymentsprojections 65
28. Bearmarketsand economiccycles 66
29. Recenttrendsinmanufacturingcapacityutilisation 67
30. Effectsofdollardepreciation 71
31. Reinforcing fiscalpolicy 73
32. Macroeconomicforcesand financialinnovation 76
33. Assets andliabilitiesofnon-financialsectors 80
34. Assetsand liabilitiesoffinancialinstitutions 82
35. Internationalcomparisonsofbankconcentration 83
36. Assetgrowthoffinancial institutions 87
37. Compositionofthriftinstitutionportfolios 88
38. Internationalcomparisonsofforeignshareofdomesticbanking 91
39. Costsofbondissues 97
40. Debtofthenon-financial sectors 107
41. Debtquality 109
Statisticalannex
Selectedbackgroundstatistics 148
A. Nationalproductandexpenditure 149
B. Labourmarket 150
C. Costsandprices 151
D. Householdincomeandexpenditure 152
E. Monetaryindicators 153
F. Balanceofpayments,OECDbasis 154
Diagrams
1. RealGNP,domesticdemand and netexports 12
2. Therecoveryinmanufacturing 13
3. Fixedinvestment 16
4. Employmentperformance 18
5. Wageand pricetrends 20
6. Shareprices andbond yields 22
7. Exchangeratesofthedollar 26
8. Indicatorsofcompetitiveness 30
9. Theeffectsofrelativepricechangesonmanufacturedtrade 31
10. Monetarygrowthand velocity 41
11. BankreservesandFederal fundsrate 42
12. Interestratesandthetermstructure 44
13. Yield differentialsondollarassets 46
14. Structural budgetdeficit 55
15. Monthlytradebalance 68
16. Financialsavingsand investment 78
17. Profitabilityofdepositoryinstitutions 84
18. Thegrowthofsecuritisation 93
19. Volumeoftradingonsecurities markets 95
20. Securitisationgains: changes in interestratespreads 99
21. Housingcyclesand real interestrates 105
22. Netsourcesoffundsforcorporatebusiness 111
23. Netequityissuesfornon-financial corporations 112
24. Changesin consumerratespreads 113
BASIC STATISTICS OFTHE UNITED STATES
THELAND
AreacontinentalUnitedSlatesplus Populationofmajorcities,includingtheir
HawaïandAlaska(ihous.sq.km) 9363 metropolitanareas(1.7.1985estimates):
NewYork 8466000
LosAngeles-LongBeach 8 109000
Chicago 6 177000
THEPEOPLE
Population,1987 243773000 Civilianlabourforce 1987 119849500
No.ofinhabitantspersq.km 26 ofwhich:
Population,annualnetnaturalincrease Employedinagriculture 3022500
(average1978-1987) 21 188000 Unemployed 7410 167
Annualnelnaturalincrease,percent, Nelmigration(annualaverage1978-1985) 629000
1978-1987 0.95
PRODUCTION
Grossnationalproductin 1987(billionsofUSS$)) 4488.5 Originofnationalincomein 1986(percent
GNPperheadin 1987(US$) 18413 ofnationalincome1):
Grossfixedcapitalformation: Agriculture,forestryandfishing 2.4
PercentofGNPin 1987 16.0 Manufacturing 20.0
Perheadin 1987(US$) 2940 Constructionandmining 6.5
Governmentandgovernmententerprises 14.5
Other 56.6
THEGOVERNMENT
Governmentpurchasesofgoodsandservices Compositionofthe99thCongress:
1987(percentofGNP) 20.6 House
RevenueofFederal,stateandlocalgovernments, of Senate
1987(percentofGNP) 34.7 Representatives
FederalGovernmentdebtaspercentofreceipts
Democrats 253 47
fromthepublic, 1987 222.1
Republicans 182 53
Independents
Undecided
Total 435 100
FOREIGNTRADE
Exports: Imports:
Exportsofgoodsandservicesas importsofgoodsandservicesas
percentofGNPin 1987 9.5 percentofGNPin 1987 12.2
Mainexports 1987(percent Mainimports 1987(percentof
ofmerchandiseexports): merchandiseimports):
Machinery 28.5 Food,feedsandbeverages 6.0
Transportequipment 16.0 Industrialsuppliesandmaterials 26.3
Foodandliveanimals 7.9 Capitalgoods(excl.cars) 21.1
Crudematerials(inedible) 8.4 Automobilevehiclesandparts 20.8
Chemicals 10.8 Consumergoods(non-food) 21.1
Manufacturedgoods 7.0 Allother 4.7
Allother 21.4
1. Withoutcapitalconsumptionadjustment.
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
preparedfortheannualreviewofthe UnitedStates by the
Economic and Development Review Committee on
22ndFebruary 1988.
After revisions in the light ofdiscussions during the
review, final approval ofthe Survey for publication was
givenbytheCommitteeon20thApril1988.
Theprevioussurveyofthe UnitedStateswasissuedin
November 1986.
Introduction
Trends in the real economy in 1987 stand in marked contrast to developments in
thefinancial sphere. On the real side, growth remained relativelystrong, employment
rose steadily and unemployment continued to decline. The expansion of the economy
becamemore balanced, with real net exports progressively taking over from domestic
demand as a source of growth. Despite substantial gains in production and employ¬
ment, underlying inflation remained moderate. On the financial side, however, there
was a further deterioration in the already-large imbalance between domestic saving
and investment, a trend resulting from the persistenceofa large Federal deficit and a
fall in household saving. The accounting counterpartwas found in a widening current
external deficit to a record level of$161 billion in 1987. In a context ofrapidly rising
external indebtedness, it became more difficult to attract private foreign capital in¬
flows at existing interest and exchange rate levels. The dollar came under strong
downward pressureattimes, andtherewaslarge-scaleofficial intervention.
Following the stock market crisis, the short-term outlook for the U.S. economy
remains uncertain, though prospects for an improvement of the current external
balance would seem to have increased as domestic demand growth is generally ex¬
pected to slow. Household saving should rise and the Federal budget deficit stabilise
as a result of the agreement reached between Congress and the Administration. A
continuing improvement in trade volumes, eventually showing up in a decline in the
nominal current account deficit, could help support the dollar, giving policymakers
more time for a medium-term solution to the problem ofimbalances. However, there
are, as always, risks attaching to the outlook. Domestic demand could weaken too
much, leading to a recession. On the other hand, domestic demand could remain too
strong, delaying the improvement in the trade deficit and increasing the inflationary
danger. The U.S. economy remains therefore faced with the task of unwinding
domesticand external imbalances,whilesustainingnon-inflationarygrowth.
After briefly reviewing trends in the domestic economy in Part I, the factors
behind the persistent current account deficit are analysed in Part II. Monetary, ex¬
change rate and fiscal policies are dealt with in Part III. Part IV presents the short-