In many cases, however, the root cause of deficient demand seems to be more structural than cyclical in nature, and would thus call for more micro-oriented measures. Combined, these policy initiatives on the part of our trading partners should yield higher productivity growth, generate more vigorous spending abroad, raise rates of return on their capital investment, and ease their adjustment to smaller U.S. deficits.
These changes, in turn,  BIS Review 28/2005  5  would boost the demand for U.S. exports and could shift portfolio preferences away from dollar-denominated assets. Other public policies here and abroad can have an important influence on the transition process by working with markets and facilitating adjustment. For example, governments should strive to maintain and enhance the flexibility of markets.