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Macroeconomics

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.


Middle-Class Heroes: The Best Guarantee of Good Governance
Center for Global Development

The two economic developments that have garnered the most attention in recent years are the concentration of massive wealth in the richest one percent of the world’s population and the tremendous, growth-driven decline in extreme poverty in the developing world, especially in China. But just as important has been the emergence of large middle classes in developing countries around the planet. This phenomenon—the result of more than two decades of nearly continuous fast-paced global economic growth—has been good not only for economies but also for governance. After all, history suggests that a large and secure middle class is a solid foundation on which to build and sustain an effective, democratic state. Middle classes not only have the wherewithal to finance vital services such as roads and public education through taxes; they also demand regulations, the fair enforcement of contracts, and the rule of law more generally—public goods that create a level social and economic playing field on which all can prosper.

The State of Broadband: Broadband catalyzing sustainable development
Broadband Commission for Sustainable Development/UNESCO

The report finds that global broadband connectivity shows strong growth, with 300 million more people connected in 2016 than in 2015, putting the number of people online by the end of 2016 to 3.5 billion. However, more than half the world’s population (some 3.9 billion people) remains offline. The report highlights that offline populations, who are now found in more remote, rural areas, consist disproportionately of poorer, minority, less educated, and often female, members of society. The report traces the progress made towards achieving the Broadband Commission’s targets for broadband. Progress has been mixed.

Stalled productivity, stagnant economy: Chronic stress amid impaired growth

Christopher Colford's picture

Call it “secular stagnation,” or the disappointing “New Mediocre,” or the baffling “New Normal” – or even the back-from-the-brink “contained depression.” Whatever label you put on today’s chronic economic doldrums, it’s clear that a slow-growth stall is afflicting many nation’s economies – and, seven years into a lackluster recovery from the global financial crisis, some fragile economies seem to be lapsing into another slump.

As policymakers struggle to find a plausible prescription for jump-starting growth, a tug-of-war is under way between techno-utopians and techno-dystopians. It’s a struggle between optimists who foresee a world of abundance thanks to innovations like robot-driven industries, and pessimists who anticipate a cash-deprived world where displaced ex-workers have few or no means of earning an income.

To add a bracing dose of academic rigor to the tech-focused tug-of-war, along comes a data-focused realist who adds a welcome if sobering historical perspective to the debate. Robert J. Gordon, a macroeconomist and economic historian at Northwestern University, takes a longue durée perspective of technology’s impact on growth, wealth and incomes.

Gordon’s blunt-spoken viewpoint has caused a sensation since his newest book, “The Rise and Fall of American Growth,” was launched at this winter’s meetings of the American Economic Association. His analysis injects a new urgency into policymakers’ debates about how (or even whether) today’s growth rate can be strengthened.

When Gordon speaks at the World Bank on Thursday, March 31 – at 11 a.m. in J B1-080, as part of the Macrofiscal Seminar Series – economy-watchers can look forward to hearing some ideas that challenge the orthodoxies of recent macroeconomic thinking. His topic – “Secular Stagnation on the Supply Side: Slow Growth in U. S. Productivity and Potential Output” – seems likely to spark some new thinking among techno-utopians and techo-dystopians alike.

To watch Gordon’s speech live via Webex – at 11 a.m. on Thursday, March 31 – click here. To dial in to listen to the audio, dial (in the United States and Canada) 1-650-479-3207, using the passcode 735 669 472. For those telephoning from outside the United States and Canada, the appropriate numbers can be found on this page.

Testing times for South Africa

Marek Hanusch's picture

 Steven Hall, World Bank Group

Concerns about South Africa’s economy have been rising, after years of slowing growth following the post-financial crisis peak of 3.2% in 2011. South Africans lament the plunge of the Rand—a 30% depreciation against the U.S. dollar over the year 2015. They fear the potential of South Africa losing its high-prized investment grade credit rating. Many, especially the youth, live with high and largely chronic unemployment, currently at 25.5%, or 36% when including those who have given up looking for a job. Not surprisingly unemployment is the top concern for 72% of South Africans according to the 2015 Afrobarometer. Growth and job creation are crucial for sustaining the impressive economic and social progress the country has achieved since the end of apartheid—and to eliminate extreme poverty by 2030, as envisioned by the National Development Plan (NDP).

A simple model to assess the economic impacts of large projects

Kandadji Dam site in December 2012


It’s the classic conundrum that governments typically grapple with. Which projects are most beneficial in the long-term? How do large, expensive projects impact on the debt dynamics and macroeconomic stability? While there is a need for large infrastructure investment in the developing world it is often difficult for governments to determine the most beneficial projects.

The infinite loop failure of replication in economics

Markus Goldstein's picture
In case you missed it, there was quite a brouhaha about worms and the replication of one particular set of results this summer (see Dave's anthology here).   I am definitely not going to wade into that debate, but there is a recent paper by Andrew Chang and Phillip Li which gives us one take on the larger issue involved:  the replication of published results.   Their conclusion is nicely captured in t

Weekly wire: The global forum

Roxanne Bauer's picture
World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

 
Exporting corruption: Progress report 2015: Assessing enforcement of OECD Anti-bribery Convention
Transparency International
Transparency International’s 2015 Progress Report is an independent assessment of the enforcement of the Organisation for Economic Co-operation and Development’s (OECD’s) Anti-Bribery Convention. The Convention is a key instrument for curbing global corruption because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost 90 per cent of total foreign direct investment outflows. This is the 11th annual report. It has been prepared by Transparency International’s International Secretariat working with our national chapters and experts in the 41 OECD Convention countries. This report shows that there is Active Enforcement in four countries, Moderate Enforcement in six countries, Limited Enforcement in nine countries, and Little or No Enforcement in 20 countries. (Two countries were not classified.)

The Science of Inequality- What the numbers tell us
Special issue of Science Magazine
This special issue uses these fresh waves of data to explore the origins, impact, and future of inequality around the world. Archaeological and ethnographic data are revealing how inequality got its start in our ancestors. New surveys of emerging economies offer more reliable estimates of people's incomes and how they change as countries develop. And in the past decade in developed capitalist nations, intensive effort and interdisciplinary collaborations have produced large data sets, including the compilation of a century of income data and two centuries of wealth data into the World Top Incomes Database.  It is only a slight exaggeration to liken the potential usefulness of this and other big data sets to the enormous benefits of the Human Genome Project. Researchers now have larger sample sizes and more parameters to work with, and they are also better able to detect patterns in the flood of data.

One question, eight experts, part one: Isabel Rial

Isabel Rial's picture

Some public-private partnerships (PPPs) fail. That’s a fact. But when the lessons these failures impart are integrated into future projects, missteps have the potential to innovate — energizing the learning cycle and setting the stage for long-term success. To gain a better understanding of how innovation in PPPs builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process.

This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our first response in this eight-part series comes from the International Monetary Fund's Isabel Rial.

For centuries, PPPs have been used by governments as an alternative to traditional public procurement for the provision of public infrastructure, although results have been mixed. If properly managed, PPPs can deliver substantial benefits in terms of mobilizing private financial resources and know-how, promoting efficient use of public funds and improving service quality.

Yet in practice, PPPs have not always performed better than traditional public provision of infrastructure. The reasons for this vary across countries.

Indonesia’s GDP revision: a crisper snapshot

Alex Sienaert's picture



Indonesia’s national statistics agency (Badan Pusat Statistik, BPS) released quarterly national accounts statistics on February 5. Any quarterly data release creates a flurry of interest (well, at least amongst macroeconomists and economy-watchers hungry for the latest update on near-term growth trends). But this is a particularly important release because, as well as providing data for the final quarter of 2014, it also incorporates two significant revisions to Indonesia’s GDP statistics: (1) it  shifts the basis of the computation from the year 2000 to 2010, and (2) it adopts a significantly updated methodology and presentation of the statistics (updating Indonesia’s national accounts from the 1993 System of National Accounts [SNA] to SNA 2008).[1]

What do these revisions tell us about Indonesia’s economy that we didn’t know before? One change immediately stands out: total output in current prices is about 4.4 percent larger than previously estimated in 2014 (and 5.2 percent larger on average over 2010-2014). This is a significant change, adding IDR 448 trillion, or about USD 35.5 billion at the current market exchange rate, to the estimated size of the economy as of 2014. Roughly a third of the extra measured output is due to the incorporation of new kinds of economic activity under SNA 2008, and about two-thirds comes from more accurate measurements of previously-measured kinds of output, according to BPS.  

Weekly Wire: The Global Forum

Roxanne Bauer's picture
These are some of the views and reports relevant to our readers that caught our attention this week.
 

Please Do Not Teach This Woman to Fish
Foreign Policy
Is there anyone out there who doesn't think small business is the lifeblood of any economy? From Washington to Warsaw, politicians and pundits just can't speak highly enough of plucky entrepreneurs. Even in poor countries, entrepreneurship is one of the most important forces underpinning economic growth, but the best way to raise living standards and reduce poverty is not necessarily to make everyone an entrepreneur. So why do so many costly development programs apparently ignore this fact? Once upon a time, people who wanted to fight poverty believed in direct approaches that solved identifiable problems one by one. If you wanted to make farmers more productive, you gave them fertilizer. If you wanted to boost manufacturing, you set up factories. To help both of these sectors grow and export goods, you built roads and ports. These kinds of investments quelled hunger and raised incomes in many countries. But recently, an indirect approach arose with promises of still greater benefits.

Where Next for Aid? The Post-2015 Opportunity
ODI/UNDP
This joint ODI-UNDP paper looks at whether development aid will remain important in the post-2015 era, and asks how the old aid model should change in response to a dramatically new world and new sustainable development challenges. The paper suggests that the label “international public finance for sustainable development” – or IPF4SD – is a more accurate description of the types of interventions that need to be funded in the post-2015 era. This finance will also be needed over the long-term. The authors suggest ways in which these funds could reliably be raised over the long-term, as well as how the architecture which mediates IPF4SD could be improved.

Nepal's Paradox: When Good is Not Good Enough

Johannes Zutt's picture

Nepal needs to fix its budget process, remove hurdles to infrastructure development and cut down excess liquidiity.



At first glance Nepal’s economic fundamentals appear sound. Economic growth this year is expected to recover to 4.5%, after a lackluster FY13. On the fiscal and external fronts, indicators are well in the green. This year again, Nepal is likely to be the only country in South Asia to post a budget surplus (0.3% of GDP). Continued growth in revenue mobilization and higher grants will more than make up for the increase in government spending. In FY14, public debt is expected to fall below 30% of GDP, and Nepal’s risk of debt distress may fall from a “moderate” rating to “low”.

Unlike other South Asian countries, Nepal has remained largely unscathed by global monetary tightening, reflecting its limited integration into global financial markets as well as its healthy external balances. Nepali analysts often highlight the growing trade deficit as a cause for concern, but remittances (projected at over 30% of GDP) should push the current account to a comfortable surplus position of 2.4% of GDP.

The only apparent dark spot is inflation, which remains stubbornly high. With inflation close to double digits in January (year-over-year), it appears unlikely that the NRB’s target of 8.5% will be reached.

In short, Nepal appears to be doing well.  Many European countries today can only dream of posting similar growth, fiscal or debt numbers. So what is the problem?


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