Wednesday, November 28, 2012

Jomo On Jobs

I’m sorry to say I never took Jomo’s class when I was doing my masters. I regret that even more deeply now (excerpt):

Stronger recovery, more jobs for all
Comment by Jomo Kwame Sundaram

GREATER international cooperation and coordination is urgently needed for a more robust and sustained recovery, with benefits far more widely shared. The United Nations (UN) has long argued that only a sustained commitment to prioritising economic recovery can overcome the short termism dictated by financial markets.

Recovery priorities should emphasise job creation as well as enhancing national productive capacities through public investment in infrastructure, for example, which induces complementary private investments and creates the conditions for sustained growth over the longer term. This necessarily requires ensuring greater coherence of macroeconomic policies with structural transformation goals than seen thus far.

BNM Watch: Is Zeti A Closet Market Monetarist?

Perhaps not operationally, but philosophically it sure sounds like it (excerpt):

Zeti: Malaysia wants steady growth, it is necessary to sustain and improve economy

KUALA LUMPUR: Malaysia wants to have steady growth that will allow it to sustain and improve its economic position, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.

She said the country did not want high growth in one year and a very low one the following year.

Zeti said this on the sideline of the 2nd International Shariah Research Academy for Islamic Finance (ISRA) Colloquium 2012 here. She was asked whether the country could sustain strong growth next year.

She said the domestic economy was still strong and resilient…

…Zeti added that Malaysia was in a good economic position from its initiatives and reforms over the last decade after the Asian financial crisis. Nevertheless, she said it would have to do much more to prepare for future disruptions that might be experienced by international financial markets and possible economic slowdown in different economies of the world.

Friday, November 23, 2012

September 2012 Employment Report

Unemployment took a hit in September, as the end of Ramadhan meant more people looking for work, but not quite enough jobs to go around (‘000):


Thursday, November 22, 2012

3Q2012 National Accounts: Defying Gravity

Well, I’m back from my break, and what an interesting bunch of numbers to come back to. The national accounts data released last Friday showed the economy chugging along at 5.2% in 3Q2012 (log annual and quarterly changes, seasonally adjusted):


There really hasn’t been much variation in the growth numbers either on an annual or quarterly basis since the beginning of 2011, indicating a trending economy.

Wednesday, November 21, 2012

Masters of Money Part III

[I’m on annual leave from 17-21 November. This post is scheduled as a filler]

There’s a three-part documentary on the BBC entitled the Masters of Money, looking at the lives, ideas and times of three great economic thinkers – John Maynard Keynes, Friedrich August Hayek and Karl Heinrich Marx.

This is part III on Marx:

[H/T: The Social Democracy For The 21st Century: A Post Keynesian Perspective blog]

Tuesday, November 20, 2012

Masters of Money Part II

[I’m on annual leave from 17-21 November. This post is scheduled as a filler]

There’s a three-part documentary on the BBC entitled the Masters of Money, looking at the lives, ideas and times of three great economic thinkers – John Maynard Keynes, Friedrich August Hayek and Karl Heinrich Marx.

This is part II on Hayek:

[H/T: The Social Democracy For The 21st Century: A Post Keynesian Perspective blog]

Monday, November 19, 2012

Masters of Money Part I

[I’m on annual leave from 17-21 November. This post is scheduled as a filler]

There’s a three-part documentary on the BBC entitled the Masters of Money, looking at the lives, ideas and times of three great economic thinkers – John Maynard Keynes, Friedrich August Hayek and Karl Heinrich Marx.

This is part I on Keynes:

[H/T: The Social Democracy For The 21st Century: A Post Keynesian Perspective blog]

Friday, November 16, 2012

Alvin Roth, Game Theory And Economic Policy Design

In case you missed it, Alvin Roth, recent co-winner of the 2012 Nobel Prize in Economics, was interviewed this Wednesday past on BFM:

Blessed with Beautiful Minds, Engineering 'Stable Outcomes'

What's the relevance here? One of the problems with designing public policies is that most of the outcomes in the areas of interest that are being targeted aren't within functioning markets where prices provide signals and coordinate the allocation of resources. While economic theory can and does provide some guidance, just trying to reproduce a functioning market within milieus that don't support them has, shall we say, met with mixed results.

That's where game theory comes in - it's a way to look at the responses of participants to particular situations and stimuli. Or as Mankiw would probably put it, people respond to incentives. Game theory is thus a way to model and look at non-price incentives, although that's probably too narrow a definition (I'm looking at it purely in policy terms).

In policy design, what I think is that policies for non-market based environments (for example reducing government red tape or getting teachers more involved with their students where there is little to no monetary incentive), should have game theoretic foundations. Too often I think, policies are based on the gut feeling of the policy makers involved, or whichever consultant or management fad happens to be the flavour of the day (*cough* Blue Ocean Strategy *cough*).

I'm not knocking the good intentions of the people involved, or their expertise, but I think game theory has a lot to offer if we're only willing to leverage on its capabilities.

Lars Christensen on Malaysia

I haven’t got much time today, but I got an email from Lars last night on his post, and I thought it would be of interest to many (excerpt):

Malaysia should peg the renggit to the price of rubber and natural gas

The Christensen family arrived in Malaysia yesterday. It is vacation time! So since I am in Malaysia I was thinking I would write a small piece on Malaysian monetary policy, but frankly speaking I don’t know much about the Malaysian economy and I do not follow it on a daily basis. So my account of how the Malaysian economy is at best going to be a second hand account.

However, when I looked at the Malaysian data something nonetheless caught my eye. Looking at the monetary policy of a country I find it useful to compare the development in real GDP (RGDP) and nominal GDP (NGDP). I did the same thing for Malaysia. The RGDP numbers didn’t surprise me – I knew that from the research I from time to time would read on the Malaysian economy. However, most economists are still not writing much about the development in NGDP.

In my head trend RGDP growth is around 5% in Malaysia and from most of the research I have read on the Malaysian economy I have gotten the impression that inflation is pretty much under control and is around 2-3% – so I would have expected NGDP growth to have been around 7-8%. However, for most of the past decade NGDP growth in Malaysia has been much higher – 10-15%…

I won’t comment much on this…yet…because like Lars I’m due for a holiday, and won’t be back til late next week. But this is an interesting outsider’s perspective and an application of market monetarist views to monetary policy in Malaysia.

I have some substantive thoughts on the subject, but with work and the GDP release due this afternoon, I’ll have to leave it until I get back on Thursday next. Suffice to say, I’m not that keen on using the Ringgit as the primary monetary policy instrument.

Wednesday, November 14, 2012

The Spread Of Islam: An Economic Perspective

Given the holiday tomorrow in conjunction with the Islamic New Year, this new NBER research paper is really appropriate (abstract):

Trade and Geography in the Origins and Spread of Islam
Stelios Michalopoulos, Alireza Naghavi, Giovanni Prarolo

This research examines the economic origins and spread of Islam in the Old World and uncovers two empirical regularities. First, Muslim countries and ethnic groups exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically higher along the pre-Islamic trade routes. We discuss the possible mechanisms that may give rise to the observed pattern and provide a simple theoretical argument that highlights the interplay between an unequal geography and proximity to lucrative trade routes. We argue that these elements exacerbated inequalities across diverse tribal societies producing a conflictual environment that had the potential to disrupt trade flows. Any credible movement attempting to centralize these heterogeneous populations had to offer moral and economic rules addressing the underlying economic inequalities. Islam was such a movement. In line with this conjecture, we utilize anthropological information on pre-colonial traits of African ethnicities and show that Muslim groups have distinct economic, political, and societal arrangements featuring a subsistence pattern skewed towards animal husbandry, more equitable inheritance rules, and more politically centralized societies with a strong belief in a moralizing God.

Monday, November 12, 2012

September 2012 External Trade

Last week’s trade numbers (released Friday) show the same bounce that affected industrial production (log annual and monthly changes; seasonally adjusted):


Friday, November 9, 2012

The Importance Of Early Education: More Evidence

From last month’s round of NBER research (abstract, emphasis added):

The Production of Human Capital: Endowments, Investments and Fertility
Anna Aizer, Flávio Cunha

We study how endowments, investments and fertility interact to produce human capital in childhood. We begin by providing empirical support for two key features of existing models of human capital: that investments and existing human capital are complements in the production of later human capital (dynamic complementarity) and that parents invest more in children with higher endowments due to the complementarity between endowments and investments (static complementarity).

September 2012 Industrial Production

Well, well, thing are looking a bit brighter now. September 2012 industrial production numbers hint that 3Q2012 growth is likely to be stronger than originally anticipated (log annual and monthly changes; seasonally adjusted):



Monetary Policy Update: OPR Maintained At 3%

No surprises from yesterday’s announcement, and the press release for the announcement was probably the briefest this year in terms of describing economic conditions (excerpt):

Monetary Policy Statement

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.

The global economy is expected to continue to experience slow growth…

…In the Malaysian economy, the sustained expansion in domestic activity has offset the weaknesses in the external sector. Looking ahead, private consumption will be supported by the income growth and stable employment conditions. Investment is expected to remain firm, led by increased capital spending in the domestic-oriented sectors, the oil and gas sector and the on-going implementation of infrastructure projects.

Headline inflation is expected to remain moderate for the remainder of 2012. While inflation may increase in 2013, it is expected to remain modest given the excess capacity in the economy…

There’s not much that can be added to that, though it does suggest somewhat that the MPC is looking at growth being sustained at current levels over the near term, which I interpret to mean in the 4.5%-5.5% region which is about where Malaysia’s medium term potential output path is.

Wednesday, November 7, 2012

The Redskins Rule: First (Second) Failure

Well, most of the results are in and it appears that Obama has won a second term as the President of the US, and beaten the Redskins rule.

This is just the second time the Redskins rule has failed to predict the winner (the first was in 2004), though a previous modification to the rule might still be valid – that the Redskins rule predicts the popular vote, but not necessarily voting in the electoral college.

Whatever the case, I’m pretty happy with the result. Whatever his other virtues might have been, Romney as president would have likely have meant a more aggressive (and populist) US foreign and trade policy and worsening income inequality in the world’s biggest economy. Neither is to be wished for.

Tuesday, November 6, 2012

FT Looking For Researchers

The UK based business paper the Financial Times is looking for a researcher to cover the Malaysian market:

The role will require candidates to analyse investment trends in their countries of coverage and be adept at handling and analysing data.

Candidates must write well, have an excellent command of English and be fluent in the local language in the city where they will be based. The successful candidates will be part of a small team and must be reliable and diligent. They must also show initiative and be able to work to tight deadlines.

Candidates who are passionate about economics and finance, and can write well are preferred. Salaries will be competitive.

If you’re interested, click through this link to apply. Deadline’s November 22 so you’d better hurry.

Race Discrimination In Hiring Part III

Continuing on from Friday’s post, the following speaks for itself:

Letter to the Editor — Lee Hwok Aun and Muhammed Abdul Khalid

NOV 6 — Dear Sir

Your headline, “Malaysian employers practise racial bigotry, study shows” (November 2nd, 2012), grossly misrepresents our study. It is unfortunate that you projected a sensationalised, emotive and reckless headline that vastly deviates from our objective, methodical and dispassionate work.

September 2012 Monetary Conditions

I haven’t done one of these in quite a while, mostly through sheer lack of time, but given the upcoming Monetary Policy Committee meeting this Thursday, now is as good time as any to reboot.

Over the last quarter, broad money supply growth has fallen off (log annual and monthly changes; seasonally adjusted):


Race Discrimination Part II

As a follow up to the other day's post, one of the authors of the study on race discrimination in hiring, Lee Hwok Aun, was on BFM radio yesterday. So if you want the nitty-gritty, straight from the horse's mouth so to speak, have a listen:

Race and access to job interviews

Monday, November 5, 2012

Newsflash: The Redskins Lost, So Probably Will Obama

Here’s a statistical oddity that has held mostly true over the past century – the result of the last home game of the Washington Redskins has been almost perfectly correlated with the outcome of the US Presidential election for the last 80 years.

If the Redskins won, the incumbent party has also won. If the Redskins lose, the challenging party won.

This weekend’s home game result? Carolina 21, Washington 13.

If the correlation runs true, I’m afraid the Obama experiment is over. Voting starts Tuesday in the US (Wednesday here in Malaysia).

Friday, November 2, 2012

Race Discrimination In Hiring Practices In Malaysia

You’ll probably read about this in the papers tomorrow or Sunday (the Malaysian Insider has the scoop today – just ignore the headline, it’s not accurate), but I attended a very interesting seminar this morning at Universiti Malaya.

The topic: “Does race matter in getting an interview? A field experiment of hiring discrimination in Peninsular Malaysia”