EMEs should meanwhile focus on reforms to foster domestic demand-driven growth. One example would be pension reform, which could help to reduce precautionary saving. Financial reforms and integration could also yield better resource allocation and productivity growth. But national efforts alone are not sufficient, and may take time to yield results.
In this highly interconnected world, the economic growth of an individual nation is no longer a purely domestic issue. Rather, it is an international issue, that deserves attention from a generalequilibrium perspective. Indeed, the biggest challenge for the world economy at this juncture is that of avoiding local and unstable solutions, and of instead seeking a solution that is global and sustainable.