Reducing economic imbalances among industrial countries

Progress towards three goals is necessary to improve the economic outlook in both industrial and developing countries: reducing economic imbalances among industrial countries; restructuring economic policies in developing countries; reducing net transfer of financial resources from developing countries. Concerted and credible change is needed to reduce the imbalances among industrial countries (and the East Asian newly industrialized economies) and lessen the risks of a recession.

As of mid-1988, three steps were recommended: 1. Credible action to reduce the USA federal budget deficit, leading to a lasting reduction in the country's current account deficit and to lower real interest rates. 2. Maintenance by Japan and acceleration by Germany of the growth in domestic demand through appropriate macroeconomic and structural policies. 3. Further action by the newly industrialized economies of East Asia that were running sizeable current account surpluses to accelerate the growth of domestic demand, appreciate their currencies against the dollar and reduce the degree of protection of their domestic producers.