Re: Japan 1973 Re: Concept of a "Growth Equilibrium"

[mosler@xxxxxxxx]

How about the oil shock.

On Fri, 8 Mar 1996, Leigh Harkness <leigh@xxxxxxxxxxx> wrote:
>Gernot Kohler wrote:
>
>>The same source (Economist. Guide....) has the following additional data:
>>
>>                  Japan, average annual growth rates
>>
>>                       1960-68 68-73 73-79 79-89
>>Consumer expenditure     9.0    8.4    3.9   3.1
>>Real fixed investment   15.2   12.5    1.5   5.3
>>
>>Real GDP                10.1    8.8    3.6   4.1(=79-90)
>>
>>
>>The 1973 drop in investment growth is from 12.5 to 1.5% per annum.
>>Which theory explains such a drop in investment growth,
>>considering the fact that similar changes occurred throughout OECD?
>
>
>This is a good question.
>
>I suspect that, for this to have occured, there must have been a deline in
>the rate of growth of national income/national expenditure/aggregate
demand
>since 1973.
>
>Whatever caused the change, it has not been reversed since 1973.  Whatever
>the change was, it had a widespread impact.  The change must have been of
>magnitude 10+ on the scale of economic shocks or earthquakes.
>
>The only change that could be in this order of magnitude in 1973 was the
>collapse of the fixed exchange rate system and the adoption of the
floating
>exchange rate system.
>
>Under the fixed exchange rate system, countries could increase their
>national incomes and money supplies by raising exports.  After the
>introduction of the floating exchange rate system, countries could only
>export as much as they imported and invested overseas.  This constrained
the
>growth of national incomes, even in Japan.
>
>With a lower level of growth of aggregate demand, the rate of growth of
>production (income) declined, investment declined and many countries
started
>experienced rising unemployment.
>
>Is there any other explanation for these events?
>
>
>Regards
>
>
>
>Leigh
>
>
>
>
>__________________________________________________________
>Leigh Harkness                    leigh@xxxxxxxxxxx
>
>
>
Warren B. Mosler
Director of Economic Analysis
III Finance


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