From the East Asia Forum (excerpt):
The missing piece in the puzzle of Japan’s lost decades
Ippei FujiwaraJapan’s average GDP growth rate was around 9.5 per cent between 1955 and 1970, and 3.8 per cent between 1971 and 1990.
But in the past two decades it has dropped to just 0.8 per cent a year. This big drop in the growth rate is synonymous with ‘Japan’s two lost decades’…
Now here’s something that ought to be used as input into the National Education Blueprint (abstract):
Teacher Quality Policy When Supply Matters
Jesse RothsteinRecent proposals would strengthen the dependence of teacher pay and retention on performance, in order to attract those who will be effective teachers and repel those who will not. I model the teacher labor market, incorporating dynamic self-selection, noisy performance measurement, and Bayesian learning. Simulations indicate that labor market interactions are important to the evaluation of alternative teacher contracts. Typical bonus policies have very small effects on selection. Firing policies can have larger effects, if accompanied by substantial salary increases. However, misalignment between productivity and measured performance nearly eliminates the benefits while preserving most of the costs.
It’s that time of the year again. This year’s award is again shared:
Press Release
15 October 2012The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2012 to
Alvin E. Roth
Harvard University, Cambridge, MA, USA, and Harvard Business School, Boston, MA, USAand
Lloyd S. Shapley
University of California, Los Angeles, CA, USA"for the theory of stable allocations and the practice of market design".
Businessweek is highlighting the IMF’s nervousness over the impact of fiscal austerity in Europe (excerpt):
More From Olivier Blanchard, the IMF's Dovish Economist
Under Olivier Blanchard, its chief economist, the International Monetary Fund has transformed itself from a strong voice for strict austerity to a strong voice against strict austerity. The latest example is an explanatory box in the IMF’s World Economic Outlook. In it, Blanchard and IMF economist Daniel Leigh present research showing that deficit reduction has harmed growth far more than is commonly understood.
The research (in box 1.1) is technical, but the big idea is that Blanchard and Leigh compared forecasts of nations’ economic growth with what actually happened after countries tightened their belts. They found consistently that growth came in worse than expected, which means that the belt-tightening was more harmful than economists believed it to be—by a lot. Economists have assumed that cutting the government deficit by 1 percentage point cuts about half a percentage point off economic output, but the actual decline is more like 0.9 percentage points to 1.7 percentage points, Blanchard and Leigh write.
From the Star today (excerpt):
Will Bank Negara cut interest rates next month?
PETALING JAYA: Will Bank Negara seriously look into cutting benchmark interest rates in November's monetary policy committee meeting given the deteriorating external conditions and moderating domestic front in recent months or will it continue to signal a stable rates outlook?
Most economists expect the central bank to continue keeping the overnight policy rate (OPR) on hold at 3% in November (the last meeting of the year), although a hint of caution has entered into its policy statements since July on the external environment amid signs of moderation on the domestic front…
It took me a minute to realise that this new paper I was reading wasn’t a tract about Quantitative Easing, but about Qualitative Easing.
What’s the difference? Quantitative easing refers to the creation of new money that is then used to purchase risky bonds and other securities, thus expanding a central bank’s balance sheet and injecting liquidity into the financial system. Qualitative easing on the other hand refers to the purchase of risky bonds and other securities with higher quality securities such as government bonds or central bank papers. In this case, there’s no increase in a central bank’s balance sheet, and no additional injection of liquidity into the system.
Three months back, I highlighted some issues raised by Prof Christopher Balding regarding Singapore’s public finances. Somewhat unusually, the Singapore government has deigned to publish a public rebuttal (excerpt):
Is there something wrong with our Reserves?
From time to time, there are claims that the Singapore Government is covering up losses in our reserves, or that Singaporean CPF monies are not safe. Some recent online postings have even claimed that GIC and/or Temasek are reporting false returns to cover up losses, or that the Government siphons monies from its Budget or from Government borrowings so as to pad up GIC and Temasek’s books.
The Government does not publish the size of assets managed by GIC, although the asset size of MAS and Temasek are published. On the basis of the information that the Government has published, as well as the full system of checks and balances, these recent claims are baseless. Indeed, they are fantastical, but let’s look at some basic facts…
The IPI report is early this month, but that’s not necessarily good news. Apart from mining, the numbers are all looking down (log annual and monthly changes; seasonally adjusted):
There’s been a lot of criticism about the economics profession in the last 5-6 years. Why didn’t we forsee the Great Recession coming? Why is there continued debate on the best way out of this mess? Why is there such disagreement over specific policies, and for that matter, what has happened and is happening now? Is there in essence, something fundamentally wrong with economics?
There’s a new debate on VoxEU that aims to realise that old adage – physician, heal thyself – especially with reference to the teaching of economics and young economists (excerpt; emphasis added):
What’s the use of economics? Introduction to the Vox debate
Diane Coyle, 19 September 2012If economics emerges from the Global Crisis unchanged, it will lose all credibility. That is certainly not the view of all economists, but many do think so…
…However, it is not obvious what shape an effective response to even well-founded criticisms could take…
…One starting point…is the teaching of economics, beginning with the undergraduate level…
As I foresaw last month, the changing structural composition of Malaysia’s imports means that the long-standing statistical relationship between exports and imports has broken down this year.
With capital goods taking on a greater weight in the import breakdown, the export forecasts generated by imports as an explanatory variable is now consistently higher than realisation (RM millions):
This was supposed to come out a couple of days ago, but I was just to busy to write this post. Better late than never I suppose.
In any case, what follows is a look at both the official and opposition budget proposals head to head (hereinafter called OB and AB). First, in terms of revenue:
I’m frankly suffering from budget fatigue. There’s a lot of analysis in the news, and many conflicting opinions based on very different perspectives. For my part, this is more a commentary of the commentary, rather than talking about the budget directly. That analysis I’m planning to look at tomorrow.
One thing in the commentary that’s struck me, is the rather strange expectation that the budget is some kind of policy and strategy platform. You hear people expressing disappointment that industrial and SME development isn’t being touched on, or the absence of strategies to combat corruption, or the lack of info on how we are going to improve education.
This betrays a fundamental misunderstanding of what the budget is and supposed to do: allocate government expenditure for the year ahead.
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