And that is the adjustment path that the others now have in front of them".
It added: "In the UK, where recovery is weak owing to lacklustre demand, consideration should be given to greater near-term flexibility in the fiscal adjustment path".
Mervyn King, the governor of Britain's central bank, said China was pursuing structural reforms slowly while countries like the United States and Britain, facing the prospect of high unemployment, favor a quicker adjustment path.
But yesterday the multilateral Washington-based institution spelled out a reversal of this support, saying the UK recovery was weak and that "consideration should be given to greater near-term flexibility in the fiscal adjustment path".
Through his cointegration analysis, Granger showed that the dynamics in exchange rates and prices, for example, are driven by a tendency to smooth out deviations from the long-run equilibrium exchange rate and short-run fluctuations around the adjustment path.
On Monday night, Olli Rehn, the EU's economic and monetary affairs commissioner, hinted that the austerity programme may have to be relaxed: "If there has been a serious deterioration in the economy, we can propose an extension of a country's adjustment path … That's what we did last year in the case of Spain".
If Greece were not part of a common currency area, it would almost certainly follow the successful adjustment path of other developing economies from a deep financial crisis — official assistance from the I.M.F. or another source of public funds; austerity; debt restructuring; and a massive nominal and real depreciation of its currency to boost its competitiveness and growth.
The subsequent studies in the field usually followed a different fiscal adjustment path.
Finally, we present the asymmetric adjustment path for the 3-month rates.
Figure 1 presents the symmetric adjustment path for all retail rates, as well as the asymmetric adjustment path for the 3-month rates.18 Fig. 1 Timing of one percentage point change in the monetary policy rate (percentage points).
