The Unassuming Economist

From VOXEU:

“When it comes to solving externalities like pollution, efficiency standards are more popular than taxes. The rationale behind this is that the burden of taxes would fall disproportionately on the poor. This column argues that standards are in fact more regressive than taxes. Given their lower cost, the results suggest that tax solutions should be favoured over efficiency standards.”

 

From Francis Diebold’s Blog:

“There is little doubt that climate change — tracking, assessment, and hopefully its eventual mitigation — is the burning issue of our times. Perhaps surprisingly, time-series econometric methods have much to offer for weather and climatological modeling (e.g., here), and several econometric groups in the UK, Denmark, and elsewhere have been pushing the agenda forward.

Now the NYU Volatility Institute is firmly on board. A couple months ago I was at their most recent annual conference, “A Financial Approach to Climate Risk”, but it somehow fell through the proverbial (blogging) cracks. The program is here, with links to many papers, slides, and videos. Two highlights, among many, were the presentations by Jim Stock (insights on the climate debate gleaned from econometric tools, slides here) and Bob Litterman (an asset-pricing perspective on the social cost of climate change, paper here). A fine initiative!”

From Natural Resource Governance Institute: 

“Fiscal rules—permanent quantitative constraints on government finances—are an important tool to help mitigate the macroeconomic challenges associated with managing natural resource revenues. Partly inspired by successes in managing resource revenues in countries such as Chile, Peru and Norway (countries that have established fiscal rules and have abided by these budgetary constraints for over a decade), more countries have been adopting such rules.

The authors of this paper reviewed the use of fiscal rules across countries assessed in the Resource Governance Index (RGI). For each of the 34 RGI countries with fiscal rules, they reviewed the evidence on the rule’s characteristics, the compliance with the rule, and oversight of this compliance. They analyzed levels of compliance in 2015 and 2016, the years directly following the commodity price crash. The research provides new insight into how these fiscal rules performed during serious economic shocks.

The analysis sheds light on large gaps in compliance and oversight of fiscal rules, and the paper provides policy recommendations on how fiscal rules can be further strengthened.”

Continue reading here.

From a new IMF working paper:

“Global temperatures have increased at an unprecedented pace in the past 40 years. This paper finds that increases in temperature have uneven macroeconomic effects, with adverse consequences concentrated in countries with hot climates, such as most low-income countries. In these countries, a rise in temperature lowers per capita output, in both the short and medium term, through a wide array of channels: reduced agricultural output, suppressed productivity of workers exposed to heat, slower investment, and poorer health. In an unmitigated climate change scenario, and under very conservative assumptions, model simulations suggest the projected rise in temperature would imply a loss of around 9 percent of output for a representative low-income country by 2100.”

 

From the IMF’s latest report on Sri Lanka:

“Sri Lanka has been prone to weather-related natural disasters, possibly reflecting climate change. While the government has started to build up resiliency against disasters by introducing disaster insurance schemes and increasing mitigation spending, it can further improve disaster preparedness by undertaking policy measures in the near term. First, a contingency budget for emergency cash support and infrastructure rehabilitation can be introduced within the budget. Second, the planned introduction of an automatic pricing mechanism for electricity, combined with well-targeted safety nets, can contain fiscal risks from droughts. Third, the risk management of disaster insurance schemes can be improved to maximize its effectiveness for post-disaster reconstruction while minimizing costs. Beyond the near term, there is a need to develop a comprehensive disaster risk financing strategy that is consistent with Sri Lanka’s debt sustainability, and build up capacity for innovative risk transfer approaches such as parametric insurance.”