The Unassuming Economist

From a paper by Robert Gmeiner:

“Monetary expansion can lead to inflation. Using economy-wide measures, such as the all item CPI or the GDP deflator, these effects can be quantified, but this leaves open the question of which prices are inflating more, and thus whether monetary expansion is more harmful to the rich or poor, depending on their respective consumption patterns. This paper constructs quarterly consumer price indices specific to each income quintile in the United States from 1990 to 2022. Using transfer function autoregressive moving average models with exogenous regressors (ARMAX), significant inflationary effects of monetary expansion CPIs for the lowest income quintile are observed that are independent of changes in the CPI for higher income quintiles. More generally, households that are likely to spend a higher proportion of income on goods with inelastic demand experience higher inflation rates. These effects, which are robust to specification, are caused by monetary expansion from Federal Reserve purchases of government debt, but not other assets.”

From a paper by Pierre-Richard Agénor:

“This chapter provides an overview of the literature on middle-income traps, and draws policy lessons for African countries that have successfully crossed to middle-income status in recent years. The first part examines the descriptive and statistical evidence on these traps. The second discusses the various arguments that have been put forward to explain their existence and persistence. These arguments include diminishing returns to physical capital, exhaustion of cheap labor and imitation gains, insufficient quality of human capital, inadequate contract enforcement and intellectual property protection, distorted incentives and misallocation of talent, lack of access to advanced infrastructure, and lack of access to finance, especially in the form of venture capital. The third and fourth parts draw together the lessons that can be learnt from countries that have successfully transitioned from middle-to high-income status, and discuss how these lessons can help to prevent today’s middle-income countries in Africa from falling into a trap.”

From a paper by Khoirina Cahyani Rahmawati & Widita Kurniasari:

“This study aims to determine the implementation of Okun’s Law, namely the effect of economic growth on the unemployment rate in 30 countries on the Asian continent in the period 2016-2022. The independent variable in this study is economic growth while the dependent variable is the unemployment rate and in this study has control variables namely foreign direct investment, inflation and trade openness. This research uses secondary data obtained from the World Bank. The analysis method in this study uses the panel data regression analysis method on 30 countries on the Asian continent in 2016-2022 using the Stata application. The best model at this stage of the research is the Random Effect Model (REM). Based on the results of the research conducted, it can be seen that (1) the economic growth variable shows a negative and significant relationship with the unemployment rate, (2) the foreign direct investment variable shows a negative relationship and has no significant effect on the unemployment rate, (3) the inflation variable shows a positive and significant relationship with the unemployment rate, (4) the trade openness variable shows a negative and significant relationship with the unemployment rate.”

From Devdiscourse:

“The Confederation of Indian Industry (CII) has urged for employment-centered initiatives in the upcoming FY26 budget to enhance job creation and foster inclusive growth across India. Notably, the CII has proposed a comprehensive seven-point strategy to harness India’s demographic potential effectively.

Among the key recommendations, CII suggests establishing an integrated national employment policy and bolstering labour-intensive sectors. It proposes creating new short-term employment through government internships for the youth in rural areas to bridge the gap between education and job skills. It also emphasizes boosting female workforce participation through dormitory construction and the formalization of sectors like the care economy.

Moreover, there’s a call for an international mobility authority under the Ministry of External Affairs to help young Indians access overseas employment opportunities. This authority aims to collaborate on skill development aligned with global prospects, including language and cultural preparation. CII underscores the need for enhanced productivity alongside job growth, urging for strategic measures to lower India’s Incremental Capital Output Ratio (ICOR).”

From a paper by Sohei Kaihatsu, Shogo Nakano, and Hiroki Yamamoto:

“This paper examines the impact of shifts in long-term inflation expectations on economic activity and price dynamics in Japan using a time-varying parameter vector autoregressive (TVP-VAR) model. Our empirical findings demonstrate that exogenous positive shocks to long-term inflation expectations improve the output gap and generate upward pressure on inflation rates. These results suggest the existence of an “expectations channel” in Japan, whereby higher inflation expectations stimulate private sector spending through mechanisms such as reducing real funding costs. Looking at the analysis by period, it indicates that during the deflationary phase of the 2000s, declining long-term inflation expectations likely contributed to persistent downward pressure on prices, potentially serving as one factor that hindered Japan’s exit from sustained deflation. However, following the introduction of the “price stability target” and Quantitative and Qualitative Monetary Easing (QQE) in 2013, this contribution reversed, appearing to exert upward pressure on inflation rates. In this respect, the findings suggest that the “management of expectations” intended by monetary policy during this period demonstrated some effectiveness. Nevertheless, as inflation rates subsequently declined, the upward contribution of inflation expectations to the inflation rate diminished, failing to anchor expectations to the price stability target. This outcome suggests the inherent difficulty in maintaining a sustained influence on long-term inflation expectations.”