Tuesday, June 24, 2014

May 2014 Consumer Prices

Inflation? What inflation? (log annual and monthly changes; 2000=100):


The annual rate of increase across all three of my inflation measures appears to have peaked – the monthly rate of increase for May is virtually zero i.e. there’s been precious little price changes between April and May.

Monday, June 16, 2014

The Meaning Of Innovation

Malaysia is pretty poor at doing R&D. Spending relative to GDP is by any standards low; so are the number of researchers relative to the population. Patent applications, in absolute terms, in relative terms, and in the ratio of local to foreign applications, are in a word: pathetic. The government has all kinds of programs to get R&D and innovation going, the latest of which is MaGIC. Much of these ideas revolve around the invention and commercialisation of new products.

While this is certainly one way to get innovation off the ground, it’s not the only – or even the best – way of increasing productivity, incomes, and local value added. Getting to and sustaining high levels of development involves much more than that. I think we really need to put as much emphasis on process innovation and managerial innovation as well.

Thursday, June 12, 2014

April 2014 Industrial Production: Steady As She Goes

The numbers aren't as spiffy as the out-of-this-world export growth numbers, but they’re pretty respectable (log annual and monthly changes; seasonally adjusted):


Industrial output rose by 4.0%, coming off last month’s 4.3% in log terms, with a pickup in mining helping to offset a pullback in manufacturing and electricity production.

Tuesday, June 10, 2014

Right Conclusion; Wrong Analysis

A commentator sent me this link (excerpt):

How our Winner Take-All Market Deepen Income Inequality while Decaying Our Education System?

Are we better off than we were 10 years ago? I am sure the majority of us will answer with a resounding ‘NO’. Why is this so? There are many reasons that contributed to this, among them are the following.

  • Increased in income inequality
  • Rising costs of living
  • Income not catching up with inflation
  • Longer working hours and less recreation
  • More indebted than before
  • Less opportunity for self-improvement due to time constraint
  • Society is getting more competitive
  • Crime on the rise
Wonder what caused the above? Listed above are the consequences or the price of economic development that are caused by forces that shaped our social economic fabric. We are living in a world where resources such as land, labor and natural resources are in limited supply or scarce. To maximize the usage we not only have to limit wastages but also need to efficiently allocate these scarce resources to the most important part of the economy.

April 2014 External Trade: Up, Up and Away

I’m not going to tire of saying this – the first few months of last year were so awful that all the numbers coming in this year look great by comparison (log annual and monthly changes; seasonally adjusted):


To be fair, part of the reason is that we are indeed seeing real growth, it’s just that it’s not as strong as the yearly growth numbers seem to imply.

Thursday, June 5, 2014

Tax Compliance: Giving Voice, By Giving Choice

Here’s a tip for Inland Revenue – even giving the illusion of choice will reduce tax avoidance and under-declaration of income (excerpt):

Can giving taxpayers a voice increase tax compliance?
Cait Lamberton, Jan-Emmanuel De Neve, Michael I. Norton

Non-compliance with tax costs governments billions, in part because people really don't like paying taxes. This column reports two experiments designed to see if it's possible to make people hate taxes a little less and raise tax compliance. The results indicate that if people are given the opportunity to express a preference (though not actually make the final decisions) on how their taxes are spent, they are much less likely to cheat….

Monday, June 2, 2014

Reinhart and Rogoff Were Wrong

I’ve always been somewhat leery of the notion that high public debt results in slower economic growth. Piketty’s “Capital in the Twenty-First Century” for example (which I’m in the process of reading), examines the historical record of the UK and France and generally finds this not to be true.

Here’s a more generalised result, using the very same data from the seminal Reinhart and Rogoff study that sparked off austerity-mania in the Western world (excerpt; emphasis added):

Determinants of the growth and sovereign debt correlation
Matthijs Lof, Tuomas Malinen

Since the outbreak of the financial crisis, the relationship between debt and growth has been an issue of heated debate among both academics and policymakers. Reinhart and Rogoff (2010a) showed a negative correlation between sovereign debt and economic growth, and argued that countries could be confronted with a considerable decline in their growth potential after the debt-to-GDP ratio exceeds 90%.

While the research by Reinhart and Rogoff had a substantial influence in policy circles, their results are controversial….