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January 2010

Food Prices and the Inflation Tax

Eliana Cardoso's picture

Oscar Wilde, suspecting that the relationship between price and value hides reasons that reason itself ignores, observes in the Lady Windermere’s Fan that a cynic is “a man who knows the price of everything and the value of nothing”. The economist will laugh at Wilde’s one-liner. But after a brief moment, she would protest. Theory tells her that value and price is one and the same thing. And she will insist that what matters for South Asians today is the difference between an increase in the price level and an increase in the inflation rate.

The price level increases when there is a supply shock, such as an increase in food and fuel prices. The initial increase in the price level tends to transmit itself to other prices when the economy operates close to capacity. If the price increase is accommodated by monetary policy, the supply shock transforms itself in a spiral of prices and wages and inflation goes up. Monetary authorities do right by not tightening monetary policy in response to the primary impact of supply shocks, but have to be attentive in case the increase in food prices begins to encourage secondary inflationary effects.

DM2009 Finalists Build Strong Presence on Blog

Tom Grubisich's picture

DM2009 finalists have been major participants in this blog.  Since the site re-launched on Oct. 27, 2009, 33 finalists from 25 countries have contributed 12 articles, been interviewed 14 times, quoted 18 times, and commented twice.  Here's a breakdown of finalist contributions by country.  The linked names will take you to the finalists' projects, and the linked titles to the finalists' contributions.

 

Bangladesh

 

Belize

 

Ecuador

 

El Salvador

 

Ghana

 

India

 

Indonesia

 

Kenya

 

Laos

 

Maldives

 

Mali

 

Mexico

 

Mozambique

 

Nepal

 

Nicaragua

 

Nigeria

 

Peru

 

Philippines

 

Russia

 

Samoa

 

Serbia

 

Tanzania

 

Vanuatu

 

Venezuela

 

Vietnam

 

All finalists also contributed videos to the DM Channel on YouTube (featured on the upper-right-hand side of this page), and some participated in video interviews that are also included in the Channel.

 

Two Distinct Windows for Recent Emerging Market Currency Movements

Jamus Lim's picture

Two distinct phases have characterized the recent movement of emerging market currencies. The first phase was a sharp decline when the crisis first occurred, as capital flight into the safety of the dollar led to a significant depreciation of emerging market currencies vis-à-vis the dollar.

How to Help Least Developed Countries in Climate Crisis

Tom Grubisich's picture

Least Developed Countries, we know, will be heavily impacted by climate change.  Indeed, drought, storm-caused flooding, rising sea levels, and heat waves are already taking their tolls in those 50-some nations.  But LDCs don't have enough resources to adapt adequately to adverse weather that regularly devastates communities and their ecosystems, reinforcing poverty.   The International Institute for Environment and Development details this mounting problem on its website.  It's not just the costs of adaptation for LDCs, but also a shortage of human resources, which, as the Institute says, are needed for "pressing and clearly definable issues such as health, employment, housing and education."

One way out of this bind is what the Institute is doing through its climate-change initiative -- "supporting, increasing and utilising the capacity of development practitioners, government agencies, NGOs and community-based organisations to enhance resilience to climate change."

DM2009 and its finalists are a perfect fit.

The IIED was founded in 1971 by economist Barbara Ward, a pioneer in promoting sustainable development, who frequently wrote about the disparities she saw in global wealth distribution.

The above graphic -- from the IIED -- lists LDCs, including Small Island Developing States (SIDS), which are especially vulnerable to rising sea levels.

The UNESCO Prize on ICT use in education

Michael Trucano's picture

UNESCO King Hamad Bin Isa Al-Khalifa Prize for ICT use in Education | image copyright UNESCO, please see bottom of posting for attributionThe UNESCO King Hamad Bin Isa Al-Khalifa Prize is perhaps the highest profile international award given to acknowledge excellence in the use of ICTs in education around the world.  Created in 2005 following a donation made by the Kingdom of Bahrain, it is meant "to reward projects and activities of individuals, institutions, other entities or non-governmental organizations for excellent models, best practice, and creative use of information and communication technologies to enhance learning, teaching and overall educational performance".

The winners for 2009, announced back in December, will receive their awards in a ceremony at UNESCO headquarters in Paris next week. The latest winners are Dr. Alexei Semenov, Rector of the Moscow Institute of Open Education, Russian Federation, and Jordan's Ministry of Information and Communications Technology  (acknowledging its work in leading the Jordan Education Initiative). 

In its short history, the Prize has has done a good job in drawing attention to important work being done related to the use of technologies in the education sector that is, in many cases, largely unknown outside the borders of the host country.

Mobilizing the diaspora for reconstruction of Haiti - via diaspora bonds

Dilip Ratha's picture

With Sanket

In addition to the temporary protected status and facilitation of remittances - see my earlier post, when government offices and banks resume functioning, Haiti could usefully tap its large diaspora's wealth for the reconstruction of community infrastructure and social projects. This could be done via the issuance of "diaspora bonds". By diaspora bond, I mean not only bonding between the diaspora and the homeland, but more specifically a financial instrument for attracting investment from the diaspora.

In the past diaspora bonds have been used by Israel and India to raise over $35 billion of development financing (see my article with Suhas Ketkar). Several countries - for example, Ethiopia, Nepal, the Philippines, Rwanda, and Sri Lanka - are considering (or have issued) diaspora bonds recently to bridge financing gaps. Besides patriotism, diaspora members are usually more interested than foreign investors in investing in the home country. Not only Haitians abroad, but also foreign individuals interested in helping Haiti, even charitable institutions, are likely to be interested in these bonds. Offering a reasonable interest rate - a 5% tax-free dollar interest rate, for example - could attract a large number of Haitian investors who are getting close to zero interest rate on their deposits.

If 200,000 Haitians in the US, Canada and France were to invest $1,000 each in diaspora bonds, that would add up to $200 million. If these bonds were opened to friends of Haiti, including private charitable organizations, much larger sums can be raised. If the bond rating were enhanced to investment grade rating via guarantees from the multilateral and bilateral donors, then such bonds would even attract institutional investors.


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