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The World Region

The Economy Slumbers as Power Eludes Bangladesh

Zahid Hussain's picture
Photo Copyright of Jugantor

Have you ever tried explaining to non-economists what the consequences of resource misallocation can be for the economy?

What will happen if you invest enough in some sectors and too little in others? The answer is likely to be that you have enough production in sectors where you got your investments right and too little in the under-invested sectors. That may be correct in some cases, but it ignores the interdependence between the adequately invested and underinvested sectors. As a result, you may have too little production in the sectors where you have invested enough because you have too little production in the sectors you have neglected to invest.

What Do Chinese Exchange Rates and German Wages Have in Common?

Jamus Lim's picture

They have both been blamed for being the primary mechanism that prevents the adjustment of their trade imbalances, of course.

What this (admittedly crude) caricature papers over, however, is the ultimate necessity for any proximate adjustment mechanism to operate on one of the levers that constitutes the real exchange rate. Recall, this real exchange rate (q) is defined as

q = ep*/p,

American Perso-national Financial Statements

Israel Osorio Rodarte's picture

Think about your family. Think about your work, your earnings, debts, credit cards, your children's education, your retirement and the unforgettable taxes. Now, imagine just for just a few moments that you have just received a sealed envelope from your Congressman working at Capitol Hill. Inside this envelope there is a letter: "CONGRATULATIONS! This is your New Citizen Account Bill (PDF) with the Federal Government of the United States." Immediately the letter will tell you very good news.

Why Global Coordination is Falling Short and Why We Should Be Worried

Merrell Tuck-Primdahl's picture

Lackluster global coordination, relatively weak international responses to the worldwide financial crisis, persistent problems of over-capacity, and the likely decimation of peasant agriculture in countries with huge populations to feed are all factors largely overlooked by most economists and policymakers. Giving these issues short shrift could ultimately lead us into a double dip recession, warned a diverse panel of experts who spoke on March 25 at Columbia University.

Geography and Aid

Soren Gigler's picture

Why can’t international donors and project managers think more in terms of the geography and location of their programs? Last week the Aiddata conference in Oxford discussed new approaches to enhance aid transparency and donor coordination. Key issues many panelists discussed were:

 

  1. To what extent aid flows are responsive to local needs?
  2. How to enhance the social accountability of development aid?
  3. How to improve the impact of aid on improving the well-being of poor communities?

The next Generation Web: Greater Choice and Voice for Citizens?

Aleem Walji's picture

 

 

Last Monday, Gordon Brown delivered a speech in which he laid out a fascinating and bold vision for how Britain could lead the world in knowledge industries and create a quarter of a million skilled jobs within 10 years. What I found most interesting in his remarks was how he linked leadership in the digital economy to leadership in public service delivery and increasing “voice and choice for citizens”.

Underlying his message was his palpable excitement in the next generation of the web: the semantic web or the web of linked data. The semantic web is a relatively new term popularized by the British scientist and early founder of the World Wide Web, Tim Berners-Lee. Tim suggest that the web of linked data has the potential to transform the way we manage knowledge, make decisions, and understand relationships between previously unconnected phenomena. Nearly a year ago, speaking at a TED conference in California, Tim issued a call to action to public agencies and data aggregators – Free Data Now. He argued that only by freeing data into easily searchable and downloadable formats could we expose relationships between issues like housing and crime, access to water and race, or government spending and the quality of public services. From the perspective of international development institutions, imagine if we could see relationships between aid flows and poverty or even poverty at a sub-national level (say through maps) and where development projects are located in a particular country?

Innovation as a response to scarcity

Kirsten Spainhower's picture

I am an aggie who is passionate about land use. When I started working at the Development Marketplace in 2008, I had the great good fortune to be starting a job that focused on my two favorite things as an international development specialist; grassroots responses to development challenges and agriculture. Because my first DM competition was on Sustainable Agriculture, I was in seventh heaven.

Re-regulating the Financial Sector

Raj Nallari's picture

The financial system, measured by assets, profits, contribution to GDP, stock market capitalization, employment etc, has expanded rapidly since 1990. For example, global financial assets were about 50 trillion in 1989 and increased to about 200 trillion by 2007, during the same period financial depth increased from 200% of world GDP to 400% in 2007. The financial crisis has raised a plethora of issues, many of which are inter-twined. There have been failures on all fronts – market failures in the form of financial firms innovating new instruments while neglecting risk management practices, credit rating agencies failing in rating assets without much thought to risk, private auditors not checking Lehman Brothers’ assets and liabilities, government failures in the form of central bank keeping interest rates low in the run up to the crisis, and government entities such as Fannie and Freddie involved in mortgage lending and making enormous losses, and failure by regulators for not checking the books of financial firms such as Lehman Brothers that were moving toxic assets of the balance sheets, and last but least the financial economists who failed to foresee to crisis. There is plenty of blame to go around but one thing is clear: State ownership of financial firms is back. After decades of rising foreign ownership of banks (shrinking state ownership) in almost all regions, except the Middle East and South Asia, the trend could be reversed especially in the developed countries.

The crisis has shifted focus from foreign private ownership to some state ownership, from micro to macro prudential regulations, to re-assessment of deposit insurance, lender of last resort, and implicit guarantees, to consumer protection and taxpayer protection, from mark to market accounting to mark to funding, to revamping of credit rating agencies, to crisis in corporate governance and questioning of remuneration in financial firms, and to strengthening of supervision. These and a number of related issues of interest to policy makers are discussed below.

Given the large set of issues arising from the crisis, the major challenges facing countries are essentially two: (i) Government entities which are subsidizing directed credit (e.g. Frannie and Freddie in USA; similar type of ‘chaebol’ lending to industrial firms triggered the Asian crisis of 1997); and (ii) universality of too big to fail entities, where systemic important firms, often politically powerful conglomerates that are controlled by elites, have to be bailed out, which in turn leads to the moral hazard problem, where the large entity is considered worthy saving at all costs, including use of lender of last resort facilities from the Central Bank and tax payers money from the Treasury. The too big to fail entities also then knowingly max-out on leveraged lending (40 to one in case of USA) and ‘gamble’ on financially innovative instruments (e.g. mortgage-backed securities and credit default swaps in case of USA). The large entities also have the political clout to suppress regulations and/or evade regulations. Successful regulation requires that the regulator should have information on exposure to systemic risks. Too big to fail institutions were exposed to CD swaps (e.g. AIG in USA) and we knew little about its exposure. The reason is that there is data on a firm by firm but there is no agency that can put it all together. But policy makers and politicians are reluctant to address these two problems head on. Instead the focus on a large set of problems, as detailed below, and obfuscate the issues.


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