The Unassuming Economist

From a paper by Haryo Kuncoro:

“This paper aims at analyzing the exchange rate misalignment in the inflation-targeting regime. Different from the previous studies, the exchange rate misalignment is based on the purchasing power parity. We use the ASEAN-3, i.e. Indonesia, the Philippines, and Thailand as the case of the inflation-targeting countries. By applying probit and logit models for the monthly data over the period of 2001(1) to 2022(12), we found that central bank intervention is effective to correct exchange rate misalignment in Indonesia and the Philippines, not for Thailand. More specifically, the selling intervention enables to reduce Indonesian Rupiah overvaluation. Similarly, the Philippines Peso undervaluation can be effectively adjusted by the purchasing intervention. The symmetric behavior of purchasing and selling holds for the two countries. These findings suggest that the central banks in the two countries should be careful in managing foreign reserves in relation to their interventions. Without sterilizing them, any purchase/sale of foreign currency could affect the domestic money supply and thereby undermine the credibility of inflation targeting monetary policy. Further research is advisable to differentiate foreign reserves into sterilized and unsterilized states to analyze the exchange rate misalignment so that the currency stabilization will be more effective.”

From a paper by Davide Furceri, Swarnali A. Hannan, Jonathan D. Ostry, and Andrew K. Rose:

“The empirical evidence on the growth effects of import tariffs is sparse in the literature, notwithstanding strong views held by the public and politicians. Using an annual panel of macroeconomic data for 151 countries over 1963–2014, we find that tariff increases are associated with an economically and statistically sizeable and persistent decline in output growth. Thus, fears that the ongoing trade war may be costly for the world economy in terms of foregone output growth are justified.”

From a paper by Gerald Auten, and David Splinter:

“Auten and Splinter (2024) estimated national income inequality using tax data. This paper extends our estimates to cover the years 2020–2022. During the pandemic, fiscal relief offset all the increase in distribution-wide inequality and most of the increase in top 1% income shares. Once pandemic-era relief ended in 2022, however, after-tax income inequality increased. In addition, this paper incorporates several improved methods and uses recently revised national accounts data. Collectively, these updates have only modest effects on top income shares. Finally, sensitivity tests show a narrow range around our baseline top income shares. Top income shares declined in the late 1960s and increased in the late 1980s and 1990s with little net change. From 1962 to 2019, top 1% after-tax income shares increased only up to one percentage point. Since 2019, both pre-tax and after-tax top 1% shares increased another percentage point.”

From a paper by Alberto Botta, Danilo Spinola , Giuliano Yajima, and Gabriel Porcile:

“This paper studies the relationship between financial integration, external debt sustainability and fiscal balance in emerging and developing economies (EDEs). We do so by applying Pasinetti’s ‘geometry of debt sustainability’ to EDEs and analysing how it is shaped by exposure to global financial cycles. Through the lenses of Pasinetti’s theoretical framework, we study whether global finance opens ‘windows of opportunities’ or creates more constraints for EDEs in offering fiscal support for structural change, including green structural transformations. We suggest EDEs may face a ‘gridlock’. Global finance and pressures to keep external debt sustainable make them struggle to maintain vital public investment and enact counter-cyclical fiscal actions. This, in turn, exacerbates technological backwardness, which feeds back in the form of more binding external constraints and tighter ‘surveillance’ by international creditors. We support our theoretical analysis with an econometric study over a sample of 55 countries from 1980 to 2018. Capital controls and external macroprudential policy emerge as fundamental policies enabling EDEs to adeptly manoeuvre through debt challenges without falling into the pitfalls of stagnation and enduring technological underdevelopment.”

From a paper by Maridueña-Larrea, Ángel; Martín-Román, Ángel; Porras-Arena, Sylvina:

“This study analyses the relationship between unemployment and economic growth at the
international level, addressing the nature and decomposition of the Okun coefficient. Using World
Bank data from 173 countries between 1991 and 2019, econometric techniques including
decompositions and spatial dependence analysis are applied. First, the validity of Okun’s law is
confirmed, noting the heterogeneity of the coefficient across countries, suggesting the need for
context-specific approaches to improve labour dynamics. Second, the evidence underlines the
importance of labour productivity over labour supply as a key determinant of the unemploymentoutput relationship. Finally, the identification of spatial patterns highlights the interdependence
between neighbouring economies, justifying coordinated strategies at the regional level to boost
employment. These results provide valuable guidelines for the design of more effective public
policies, adapted to the productive and labour realities of each country and capable of exploiting
of the synergies arising from economic integration.”