Wednesday, July 22, 2015

China, Gold and Reserve Currencies

In case you missed it, gold looks to be declining again (USD per troy ounce):

01_xau

But let’s keep some perspective:

02_xau

Tuesday, July 21, 2015

Assessing July

I’m back from my usual Ramadhan blogging break, and my, aren’t there lots of things to comment on. This will be a kind of omnibus blog post, covering some of the developments over the past month.

2Q2015 GDP Growth

A funny thing happened with the change in national accounts base year to 2010 – the economy all of a sudden got a lot harder to forecast. The usual indicators no longer seem to matter as much – for example, MIER’s confidence indices appear to have totally decoupled from GDP – which makes forecasting growth more than a little bit more difficult. IPI and trade remain good predictors, but their standard deviations have doubled and the forecasts are suggesting two completely different pictures of the economy.

Tuesday, June 16, 2015

Income Inequality In Perspective

A new IMF staff discussion note takes on global inequality (excerpt):

Causes and Consequences of Income Inequality: A Global Perspective

Widening income inequality is the defining challenge of our time…Not surprisingly then, the extent of inequality, its drivers, and what to do about it have become some of the most hotly debated issues by policymakers and researchers alike. Against this background, the objective of this paper is two-fold.

First, we show why policymakers need to focus on the poor and the middle class…Specifically, if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth….

Second, we investigate what explains the divergent trends in inequality developments across advanced economies and EMDCs, with a particular focus on the poor and the middle class…Our analysis suggests that

  • Technological progress and the resulting rise in the skill premium (positives for growth and productivity) and the decline of some labor market institutions have contributed to inequality in both advanced economies and EMDCs….
  • Policies that focus on the poor and the middle class can mitigate inequality. Irrespective of the level of economic development, better access to education and health care and well-targeted social policies, while ensuring that labor market institutions do not excessively penalize the poor, can help raise the income share for the poor and the middle class.
  • There is no one-size-fits-all approach to tackling inequality…More generally, complementarities between growth and income equality objectives suggest that policies aimed at raising average living standards can also influence the distribution of income and ensure a more inclusive prosperity.

Pretty self-explanatory I think, though the details are interesting, especially the role of financial market development in skewing the income distribution in developing economies. Something for weekend reading.

Friday, June 12, 2015

The Future Of LNG

Apropos to my previous post, the International Energy Agency has a downloadable report on the future of LNG in Asia. You can get it here.

A Case Of Gas

MISIF wants the government to maintain gas subsidies (excerpt, emphasis added):

Steel makers oppose gas price hike, wants govt to step in

KUALA LUMPUR: Malaysia’s iron and steel makers have opposed the proposed 10% hike in natural gas prices and they want the government to stop Gas Malaysia Bhd from going ahead with it on July 1.

The Malaysian Iron and Steel Industry Federation (MISIF) said on Thursday it was “utterly disappointed and deeply concerned” with the price increase as announced.

Friday, June 5, 2015

Coming Soon To Malaysia: It’s A Woman’s World

The Economist has an essay on one of the biggest social and demographic changes in history (excerpt):

Badly educated men in rich countries have not adapted well to trade, technology or feminism

…Tallulah may be an extreme example, but it is part of a story playing out across America and much of the rest of the rich world. In almost all societies a lot of men enjoy unwarranted advantages simply because of their sex. Much has been done over the past 50 years to put this injustice right; quite a bit still remains to be done.

The dead hand of male domination is a problem for women, for society as a whole—and for men like those of Tallulah. Their ideas of the world and their place in it are shaped by old assumptions about the special role and status due to men in the workplace and in the family, but they live in circumstances where those assumptions no longer apply. And they lack the resources of training, of imagination and of opportunity to adapt to the new demands. As a result, they miss out on a lot, both in economic terms and in personal ones.

Thursday, June 4, 2015

Commodity Prices and the Exchange Rate Again

My friend Lars Christensen has a good post (video here) on oil prices and Middle East currency regimes (excerpt):

Talking to my phone: The Gulf States should peg their FX rates to oil prices

Oops I did it again – this time I talk to my phone about monetary policy in the Gulf States and my suggestion that these countries should peg their currencies to the oil price or a basket of the oil price and the US dollar. This is of course what I have suggested should be termed the Export Price Norm (EPN).

I’m posting this due to a conversation I had yesterday, trying to explain optimal exchange rate policy in the face of a terms of trade shock.

Lars has an older post on the Ringgit as well (here), along with thoughts on monetary policy, price controls and inflation.

Wednesday, June 3, 2015

April 2015 Consumer Prices: GST and Inflation

Again, a couple of weeks late, but this is interesting enough to talk about, even at this late date.

With GST implemented in April, you can see the jump in the price level (log annual and monthly changes; 2000=100):

01_inflation

The key points here are that the drop in petrol prices dampened, but did not fully offset, the overall impact on prices. Year on year growth of the Pain Index was just 0.04% in log terms, after three straight months of declines. Core inflation (ex-food, ex-transport) however, hit 3.5% on the year, and a blistering 1.6% on the month.

Tuesday, June 2, 2015

A Journalist’s Advice To Economists

Lovely, lovely post (excerpt):

3 practical things, and one abstract thing economists could do to improve economic coverage in the media

This was written by CBC Radio's Matthew Lazin-Ryder

1. Pitch better stories

…If we want to move economics coverage towards research, and I believe we should, economists must do more to communicate their research to journalists….

…A solution to this is to skip all the baloney and pitch your research directly to journalists….

2. Help us find better commentators

…Deadlines haunt our lives. We start our day, and the countdown clock starts. You are doing us an enormous favour by saying “no” as firmly and quickly as possible…give us any tiny hint about who might be a better communicator on a subject that you’re not familiar with, or might have time. If you don’t have a name, scale up. A field of study, a department, another university. Anything that could lead to another human with something to say….

3. Be honest about your feelings during an interview

…if you find yourself on the phone with a journalist, and you feel they are pushing you in a direction you’d rather not go, say so….

4. (The abstract one) For god’s sake, be passionate

…I’m surprised, to be completely indelicate, at the number of interviews I’ve seen and heard with economists who don’t sound the slightest bit interested in their own research. I’m not sure if it’s a tradition of academic humility, of not wanting to rock the boat, or of nervousness, but there’s an unsettling absence of public passion in Canadian [sic] economics…..

I’ve been sometimes critical of the media, but there are times when the shoe (or is it the boot?) is on the other foot. There are lessons in here for me to learn, too.

Monday, June 1, 2015

11th Malaysia Plan: Quick Impressions

This was supposed to have come out a couple of weeks ago, but I ran out of time before leaving on a holiday. Just some quick thoughts on the 11MP:
  1. Overall, the 11MP underscores the shift in the government’s strategy. There’s been a gradual but noticeable shift from boosting growth to labour and social issues in the last few years. This means potentially accepting a lower rate of growth to making sure that what growth we do get is more equitably shared.

Thursday, May 21, 2015

1Q2015 GDP: Something Wicked This Way Comes

I haven’t had much of a chance to write this week, with various things on my calendar (I’ll have some thoughts on the 11MP tomorrow, along with the April CPI). But I wanted to very quickly touch on last week’s GDP report.

The published numbers look pretty good (log annual and seasonally adjusted quarterly changes; 2010=100):

01_rgdp