Economics Malaysia

November 2011 Employment

2012-01-26T15:30:00.000+08:00

I’m settling in and having fun at my new workplace, so I should begin blogging a bit more regularly soon. To be honest though, I might not have as much time to do that as I might wish. It’s been a pretty hectic couple of days, even without dealing with the (non-existent) city traffic – which by the way means that January economic numbers aren’t going to look good, as very few people are actually

December 2011 Consumer Prices

2012-01-19T10:30:00.000+08:00

I’ll be quite busy until the end of next week – as much as taking as break as adjusting to a new working environment (moving jobs!). So postings will be a bit sporadic until I settle down, hopefully before the end of January. On to last month’s CPI numbers, released yesterday: inflation slowed in December 2011 as core prices actually dropped while increases in food and transport costs slowed (

More On Dropping The Petrol Subsidy

2012-01-13T16:00:00.000+08:00

There is, as one commentator put it, more than one way to kill [sic] a cat. I’ve been open about my support for dropping petrol subsidies in favour of taxes which cover the overall costs to society imposed by fossil fuel use i.e. a Pigovian tax. There’s actually some method to my madness. While a petrol tax would cause hardship to some segments of the population, the savings from abolishing

Labour Bargaining Power: Its Different At The Top

2012-01-12T17:00:00.000+08:00

Last month I highlighted a working paper on calculating the optimal tax rate, especially with reference to top income earners. One of the channels identified by the authors in which top income earners have increased their share of the income pie over the past few decades is through their stronger wage bargaining power – when marginal tax rates are low, it pays for CEOs and senior managers to

Do Teachers Matter?

2012-01-12T16:00:00.000+08:00

According to this new paper at the NBER, yes they do (abstract): The Long-Term Impacts of Teachers: Teacher Value-Added and Student Outcomes in Adulthood Raj Chetty, John N. Friedman, Jonah E. Rockoff Are teachers’ impacts on students’ test scores (“value-added”) a good measure of their quality? This question has sparked debate largely because of disagreement about (1) whether

Petrol Subsidies: Time To Go

2012-01-12T11:30:00.000+08:00

I read this last night, and I wholeheartedly agree (excerpts): For Global Gasaholics, Ending Subsidies Is the First Step: View Jan. 10 (Bloomberg) -- Fuel subsidies are the crack cocaine of global economic development: easy to get hooked on, hard to give up. And as every addict knows, there are good and bad ways to try to kick the habit. Consider Nigeria and Iran. In Nigeria,

Markets In Everything: What Determines The Supply Of Politicians?

2012-01-12T10:00:00.000+08:00

And now for something completely different…fresh from the NBER is this seriously scholarly paper, but which I had to read with my tongue firmly in my cheek (abstract): Labor Supply of Politicians Raymond Fisman, Nikolaj A. Harmon, Emir Kamenica, Inger Munk We examine the labor supply of politicians using data on Members of the European Parliament (MEPs). We exploit the

November 2011 External Trade: Within Expectations

2012-01-11T16:00:00.000+08:00

Mean reversion, here we come. As expected, November export numbers tripped up a bit (log annual and monthly changes; seasonally adjusted): Even though annual growth exceeded 8.1%, it’s primarily due to lousy trade numbers last year and not because there’s any real growth here, as the levels make clear (RM millions): In the larger scheme of things, it looks like Malaysia’s trade growth has

Horror Stories In Education: A Cautionary Tale

2012-01-11T14:30:00.000+08:00

From the World bank blogs (excerpts; emphasis added): Seeing a child like a state: Holding the poor accountable for bad schools Guest post by Lant Pritchett In the early 20th century Helen Todd, a factory inspector in Chicago, interviewed 500 children working in factories, often in dangerous and unpleasant conditions. She asked children the question: “If your father had a good

November 2011 IPI: A Setback

2012-01-11T01:00:00.000+08:00

The November industrial production numbers provides some ammunition for pessimists regarding Malaysia’s economic prospects (log annual and monthly changes; seasonally adjusted; 2000=100): Industrial production has been essentially flat for the last couple of months, pretty much across the board. In fact, looking at the levels, it’s been flat for most of the second half of 2011 (index

The Costs of Inequality

2012-01-09T23:50:00.000+08:00

If you can spare just 16 minutes of your time, watching this video will be worth your trouble: Spare me from all those who think we need to be like Singapore. What’s interesting to me from a policy perspective is that Wilkinson mentions that societies have approached achieving greater equality by either having incomes not too different, or through welfare-state-style tax and transfer. That’s

Demographics And Development

2012-01-06T12:30:00.000+08:00

World Bank Chief Economist Justin Lifu Yin writes a concise article on the demographic transition and development policy (excerpt; emphasis added): Youth Bulge: A Demographic Dividend or a Demographic Bomb in Developing Countries? The youth bulge is a common phenomenon in many developing countries, and in particular, in the least developed countries. It is often due to a stage of

“More Schooling, But Too Little Learning”

2012-01-05T11:00:00.000+08:00

From the World Bank’s Education for Global Development blog (excerpt, emphasis added): When an exclamation point is warranted At the High-Level Forum on aid effectiveness (known as HLF4) a few weeks ago in Busan, South Korea, I had the pleasure of participating in a panel on education and aid...what we saw in our panel on aid for education, and in the one-day pre-conference that

LTV and DTI: Taming Housing Speculation

2012-01-05T09:00:00.000+08:00

Now that BNM’s revised guidelines on consumer lending are now in force, the question arises as to how effective they will be. The reduced loan to value (LTV) ratio of 70% for a third housing loan (implemented in 2011) appears to have had some effect on housing speculation, if house prices are any indicator – price increases have moderated across the board in 3Q 2011. In KL for instance, house

November 2011 Monetary Conditions

2012-01-03T17:00:00.000+08:00

Quite unlike October, money supply in November rose largely based on higher FD’s but saw currency in circulation and current deposits fall (log annual and monthly growth; seasonally adjusted): There was also a pretty sharp jump in banking system forex deposits (log annual and monthly changes): At the equivalent of RM71.6 billion, that’s the highest level recorded…ever. It’s also more than

This Is NOT How You Calculate Inflation (UPDATED)

2011-12-30T16:11:00.001+08:00

I wrote about DS Anwar’s speech regarding the ETP a week ago, but my comments were based entirely on the coverage by the Malaysian Insider, and not the speech itself. I stumbled on that via JMD’s blog. Just so you know, PEMANDU have issued a rebuttal (without naming names). But what caught my eye in the original speech was this paragraph that wasn’t mentioned in the news coverage: The

November 2011 CPI: Prices Sticking

2011-12-21T17:30:00.000+08:00

Some nice news for once – prices in November barely budged over October (log annual and monthly changes; 2000=100): Increases in core prices remained uncomfortably high, both on annual and monthly measures, but overall increases in prices decelerated, mainly as aggregate food prices didn’t increase at all (log annual and monthly changes; 2000=100): Looking at the monthly chart, this isn’t

Someone Talking Sense About Exchange Rates, For Once

2011-12-21T17:00:00.000+08:00

Nobel Laureate Michael Spence on CNYUSD: The Exchange-Rate Delusion MILAN – If one looks at the trade patterns of the global economy’s two biggest players, two facts leap out. One is that, while the United States runs a trade deficit with almost everyone, including Canada, Mexico, China, Germany, France, Japan, South Korea, and Taiwan, not to mention the oil-exporting countries, the

October 2011 Employment

2011-12-21T16:45:00.000+08:00

Maybe someone at DOS is reading this blog – this month’s report on October 2011 employment is much better written than the last. In any case, the economy added another 53,400 jobs in October (‘000): That’s not a whole lot, but well above the average for the last three years. With the labour force itself increasing by just 17.5k, the unemployment rate dropped…again: It’s now just a little

Illicit, Illegal, Not Quite Right

2011-12-21T13:00:00.000+08:00

Ok, second speech, this time from Lim Guan Eng: Pakatan blames BN for turning Malaysia into ‘king of black money’ KUALA LUMPUR, Dec 16 — Pakatan Rakyat (PR) leaders faulted the Barisan Nasional (BN) government today for bleeding the country’s coffers through corruption, saying its mismanagement of the economy had turned Malaysia into the “king of black money”. Pointing to the

The ETP And The Distribution Of Income

2011-12-21T12:00:00.000+08:00

My apologies for the long silence over the past week – I’ve been on holiday, and haven’t checked my mail for a while, or been too bothered about blogging. The next couple of weeks won’t see much in the way of posting either, as I’m going through some major changes in my life. I might (or might not!) write about it, depending on how circumstances develop. In any case, I’ll be returning to a more

Malaysia’s European Sensitivity

2011-12-12T16:00:00.000+08:00

What would be the impact on Malaysia of a recession in Europe? To look at this question, I’ve come up with a few equations. First a single equation approach, taking just Malaysia and Europe. I’m using the annual GDP numbers from the IMF’s September 2011 World Economic Outlook database (available here), transformed into logs to translate the results into elasticities, with the following results:

October 2011 External Trade

2011-12-12T08:00:00.000+08:00

Friday’s trade numbers underscore the resilience of the economy as shown by industrial production. Not quite out of the forecast band, but about 1 standard deviation away from the predicted value (RM millions): Exports hit RM63.6 billion, the highest ever recorded in a single month (log annual and monthly changes; seasonally adjusted): Again, as in industrial production, actual realisation

Reforming Education: It’s Not Just the Teachers Or The Schools

2011-12-09T12:00:00.000+08:00

Interesting nugget from the World Bank blog (excerpt): Should developing countries shift from focusing on improving schools to improving parents? I travel to many developing countries in the context of my work for The World Bank. I visit schools that receive financial support and technical assistance from the Bank to improve the learning experiences and outcomes of students. Each time

October 2011 Industrial Production

2011-12-09T10:00:00.000+08:00

Why is everyone so pessimistic? I understand the concern over Europe, but that’s primarily a financial problem and not yet a real economy problem. It hasn’t come to the point that we need to jump the gun and declare the Malaysian economy is going down the tubes (excerpt): Slower IPI, export growth expected PETALING JAYA: There will be further indications of a slowdown in factory

3Q 2011 Government Debt Update

2011-12-08T11:00:00.000+08:00

Net government borrowing in 3Q 2011 fell to its lowest level in 3 years (RM millions): If you add in foreign borrowing as well, 3Q 2011 marks the first time since 2007 that the government actually reduced its overall debt level. It still looks pretty big though (RM millions): We’re still on pace to hit nearly half a trillion Ringgit by the end of next year. Scaled to the population, the

3Q 2011 Federal Government Budget

2011-12-08T10:04:00.001+08:00

After last quarter’s uncharacteristic surplus, things are now a bit more normal (RM millions): Revenue collection continued at a sustained high pace – don’t be deceived by the seeming drop, we’re still looking at double digit annual growth (log annual changes): The fiscal deficit increased largely because expenditure growth was even faster. Just a note though – based on the current trend,

Selling Gold

2011-12-06T16:00:00.000+08:00

The price of gold has been defying gravity for years now. There’s no doubt that some of it is due to fundamental factors, as before this run-up, it had been stuck in a 20 year bear market and was probably undervalued: new supply has been declining for years, and the rapid economic development of India and China brought millions of new buyers. It also helped to have a massive financial crisis,

October 2011 Monetary Conditions

2011-12-06T12:30:00.000+08:00

Money supply in October was a little schizophrenic – M1 growth rose sharply from higher demand deposits, but M2 growth dropped from lower FDs (log annual and monthly changes; seasonally adjusted): There’s a little less liquidity in the system, shown by BNM not rolling over some outstanding bills (RM millions): Forex turnover remains high (RM millions; log annual changes): …but

The Pros And Cons Of Privitisation

2011-12-02T11:00:00.000+08:00

In the latest issue of the IMF’s Finance and Development magazine, John Quiggan (author of Zombie Economics) takes through the arguments for and against privitisation (excerpt): To Sell or Not ...Although the push for privatization took different forms in different parts of the world, it was part of a broader movement aimed at reducing the role of government in the economy and at

Taxing The 1%

2011-12-02T10:00:00.000+08:00

One of the stylised facts of the past quarter of a century is that there has been a general increase in the share of the income going to the top 1% of the population globally. Part of that has been blamed on a move towards lower top marginal income tax rates. The political rationale, exemplified by the Laffer curve, has been that lower tax rates stimulates economic activity and investment, thus

Anatomy Of A Recession

2011-11-30T08:00:00.000+08:00

What causes a recession? Sometimes it’s overinvestment, other times its debt burdened households. And sometimes, it’s just simple uncertainty (excerpt; emphasis added): Insight: In euro zone crisis, companies plan for the unthinkable (Reuters) - When Novo Nordisk's chief financial officer met marketing colleagues last Friday the conversation moved far beyond the usual discussion of

BNM and MAS: The Ties That Bind

2011-11-29T15:30:00.000+08:00

Bank Negara and the Monetary Authority of Singapore have just signed an agreement: Memorandum of Understanding between Bank Negara Malaysia and the Monetary Authority of Singapore The Monetary Authority of Singapore (MAS) and Bank Negara Malaysia (BNM) jointly announced today the signing of a Memorandum of Understanding (MoU) to establish a cross-border collateral arrangement aimed at

Analysing The ECB: The Costs And Benefits Of Inaction

2011-11-29T09:30:00.000+08:00

Watching the slow-motion train wreck that is the Eurozone debt crisis, it’s hard for anybody trained in finance or economics to grasp just why the ECB is refusing to act more decisively. As the Eurozone’s central bank and the only one with the authority to print Euros, only the ECB has the ability to offer unlimited support for indebted governments. Granted that there is a huge pitfall in

The Inflation Fallacy: Nick Rowe Explains What I Couldn’t

2011-11-25T10:00:00.000+08:00

I’ve been bothered for years by my inability to understand just why inflation is bad. You’re now going to say, “it’s easy you dunce, inflation reduces your purchasing power!!” But that’s not quite true – in aggregate, that simply doesn’t happen. In accounting terms, income always equals consumption and savings. There’s an element of wealth and income transfer involved between individual agents

Economic Analysis That Doesn’t Add Up

2011-11-24T23:00:00.000+08:00

I don’t know who Baradan Kuppusamy is and I don’t want to give him any more exposure than necessary, but this article he wrote had me laughing (excerpt): Economic policies that do not add up Analysis By Baradan Kuppusamy The lack of economic expertise in Pakatan Rakyat underlines the many difficulties the Opposition would encounter if it captures Putrajaya. WHILE

October 2011 CPI: Mixed Bag

2011-11-24T00:30:00.000+08:00

Wednesday’s CPI report shows core inflation finally – finally! – pulling back (log annual and monthly changes; 2000=100): It’s still at a dangerously high rate of increase though at 2.4% in log annual terms, but month on month, prices dropped slightly. Unfortunately, any relief this might bring was completely offset by higher food prices, pushing the pain index higher (log annual and monthly

September 2011 Employment: Unemployment Ticking Up

2011-11-22T16:00:00.000+08:00

After the employment losses of August, the labour market rebounded slightly in September, adding a marginal 7k jobs (‘000): Since the labour force expanded by 26k, that meant an uptick in the unemployment rate to nearly 3.3%: As callous as it sounds, this levels probably more sustainable, as it’s much closer to Malaysia’s long term average. Of more immediate interest is that structural

Crime, Income Inequality, And The Economy: It’s All Related

2011-11-22T11:30:00.000+08:00

In the mailbox today (abstract): Skill-biased Technological Change, Earnings of Unskilled Workers, and Crime Naci H. Mocan, Bulent Unel This paper investigates the impact of unskilled workers' earnings on crime. Following the literature on wage inequality and skill-biased technological change, we employ CPS data to create state-year as well as state-year-and (broad) industry

It’s A Woman’s World

2011-11-22T10:00:00.000+08:00

From this weekend’s news (excerpt): Why it pays to invest like a woman DID you ever think testosterone could be a setback in successful investing, risk taking and trading among other aspects? According to a recent research, apparently too much of it is detrimental. A man with an inlfated [sic] ego who asserts his alpha male dominance isn't a fantastic trader or investor.

BNM Clampdown

2011-11-21T12:53:00.001+08:00