Commodity prices are experiencing a lot of volatility right now, with food and oil prices nearing record highs. But what about the medium-term? The answer is fundamental for developing countries as commodity prices will be the key external variable for them to watch—perhaps even more than interest rates. Commodity prices are expected to stay high until at least 2015, before supply responses and lower relative demand by a burgeoning global middle-class moderate them.
A newsclip in the DECPG Daily dated April 19, 2010, noted: “After Greek aid talks were delayed by disrupted air travel, Greek bond premiums relative to German bunds spiked again on Monday. Air travel disruptions caused by Iceland’s recent volcanic eruption delayed the start of talks on a potential bailout package....
The devastating impact of the global financial crisis, which consequently turned into a global economic crisis, created a consensus that pre-crisis financial regulation didn’t take the “Big Picture” of the system as a whole sufficiently into account. As a result, according to the views of many, supervisors in many markets “missed the forest for the tress”.
Last week’s State of the Union underscored the debate surrounding public spending as a measure to stimulate economic growth. President Barrack Obama argued that to “win the future” the US needs to make significant public expenditures to update the country’s infrastructure, health, and educational systems. The opposite view is that economic growth can only occur through decreased public spending and private sector growth.
Such varied opinions on public expenditures do not exist in the US alone—the debate is global. From the US to the UK, from Europe to Africa, from Latin America to Southeast Asia, to spend or not to spend is a question faced everywhere.
Beyond the epicenter of the economic crisis—the US and Western Europe—public spending has had an indeterminate effect on
The 2008–09 crisis opened the door to a different kind of thinking in international macroeconomics—and closed it on some of the previous orthodoxy. Let’s take a look at some of the most obvious cases.
First, some now see a bit of inflation (perhaps as high as 5 percent per year) as desirable for countries that pursue inflation targets, because it would allow more space to reduce nominal interest rates when an economy falls in recession. In fact, what to target (e.g., consumer, producer, asset, housing, or other prices) is the question.
Second, regulatory parameters and practices in the financial sector have proved to be
Why is it that some countries are more developed than others? A country is “less developed” not only because it lack inputs (labor and capital) but because it uses them less efficiently. In fact, inputs are estimated to account for less than half of the differences in per capita income across nations. The rest is due to the inability to acquire, adopt and adapt better technologies to raise productivity. As an engine of growth, the potential of technological learning is huge—and largely untapped. Four global trends have begun to unlock that potential, and are bound to continue.
First, the vertical decomposition of production across frontiers allows less-advanced countries to insert themselves in supply chains by initially specializing in
This is the fourth in a series of blogs where we take a look at the issues and the countries that will be at the forefront of the development agenda, not now, not next year, but over the next 2 to 5 years—thus, “after tomorrow”.1
There is no evidence that the 2008-09 crisis changed citizens’ trust in the state, in either direction. Well before the crisis, that trust was already in long-term decline among advanced countries, and was stuck at a very low level among developing ones. And, while markets may have lost their shine, governments did not pick up the credit.
This is the third in a series of blogs where we take a look at the issues and the countries that will be at the forefront of the development agenda, not now, not next year, but over the next 2 to 5 years—thus, “after tomorrow”1.
There is now a budding consensus on what reduces poverty: it is