The world economy [November 1987]

Recent events have been dominated by a major collapse of share prices in the world's stock markets followed by instability in the foreign exchange markets and a significant downward movement in the exchange value of the dollar. By the end of the first week of November, the stock markets in London, Frankfurt, New York and Tokyo had fallen by 32 30 25% and 15 respectively, since the middle of October. Uncertainty about the attempts to cut the US Budget deficit, the course of the dollar and the future of the Louvre accord on exchange rate stabilisation , continued to have a depressing effect on share prices. While the depressing effects on trade and growth in the world economy of a once-and-for-all fall in share prices of this magnitude should be limited and not of recessionary proportions, continued uncertainty could seriously damage business confidence making a major recession more likely