The Unassuming Economist

From a paper by Javier Bilbao-Ubillos and Ana-Isabel Fernández-Sainz:

“In line with the orientation of EU economic policy, the Spanish government has favoured a strategy of internal devaluation as a way of adjusting price levels within the currency union and offsetting the fall in competitiveness accumulated over time, as evidenced by the persistent trade deficit. The results of comparative empirical studies indicate that the internal wage devaluation applied in Spain as a crisis exit strategy (in the form of labour reforms and, in general, measures to contain labour costs) does not seem to have attained the desired goals in terms of reducing the relative prices of exports and consolidating a model of growth based on external demand. Indeed, the estimates drawn up show that tailwinds – the depreciation of the euro as a result of the measures taken by the ECB, greater economic activity by trading partners and the fall in the price of oil – exercised a decisive influence in the trends followed by the prices of exports and the balance of trade during the period of crisis management in Spain.”

From a paper by Andrea Ariu and Laura Ogliari:

“This paper shows that trade in services is still at its infancy in Africa; its growth started later than for other developed and developing economies and, so far, it involves mostly low-skilled services. Disentangling the different sources of trade growth, we find that demand and supply determinants have been relatively stable during the period 2002‒2016, while service diversification and trade policy are the main propellants. In particular, trade in goods liberalization increased service trade as well due to the complementarities between the two. In terms of geographical and industrial involvement, services produced in Africa are able to reach farther destinations than goods, but they are concentrated on industries close to final demand, thus missing high-skilled services which are more upstream, but represent higher value-added inputs. Therefore, there is still plenty of scope to consider trade in services as a potential source of growth and development for African countries.”

From a paper by Radek Dědeček:

“This paper examines the influence of cross-border capital flows on income inequality in both origin and recipient countries. Using bilateral flow data and a panel dataset spanning 63 countries from 2005 to 2018, we employ panel regression analysis to investigate the effects of different types of capital. Our findings indicate that FDI inflows reduce income inequality in advanced countries by creating jobs and raising wages in sectors that employ lower-income individuals. Conversely, in developing countries, FDI often targets capital-intensive and high-skilled industries, increasing inequality. Portfolio investments generally increase inequality by driving up asset prices and creating instability, but can decrease inequality in emerging markets by supporting financial inclusion and reducing government financing costs. Specific scenarios, such as investments in tax havens or differences in human capital, show distinct results. Policymakers should regulate international capital flows through financial regulations, progressive taxation and international cooperation to mitigate their impact on income inequality.”

From a paper by Jérôme Creel and Jonas Kaiser:

“This paper introduces a novel application of the Updated Okun Method to estimate fiscal multipliers. By leveraging Okun’s Law to compute potential output and the output gap, we construct a new measure of the fiscal stance that improves transparency and interpretability. Applying this approach to France and Italy, we find that both economies were operating below full potential for most of the sample period, and that fiscal policy was more contractionary than standard estimates suggest. Our analysis reveals significant differences in fiscal multiplier effects across the two countries, with evidence of state-dependence in France, where fiscal policy is more effective during periods of economic slack, while no such variation is observed for Italy. These findings underscore the importance of aligning fiscal policy with economic conditions, particularly in the context of public debt sustainability debates.”

From a paper by Zhining Hu, Linus Nyiwul, and Niraj P. Koirala:

“This paper investigates the impact of food price inflation on gender inequality based on a panel dataset of 130 developing countries from 1990 to 2022. Applying the dynamic panel estimation techniques, including the system generalized method of moments (system GMM) and fixed-effects panel instrumental variable (panel IV) approaches, we find that food inflation significantly increases gender inequality, especially in areas such as education, labor market, health, and food security. The inflationary impact on gender inequality is strongest for staple food items like potatoes, wheat, and eggs, which are most fundamental to household consumption and care work activities typically performed by women. Since gender inequality, defined as the unequal distribution of resources, opportunities, and rights between men and women across key social and economic dimensions, is shaped by structural, cultural, and institutional factors, we further conduct heterogeneity analyses. The results reveal that poorer countries and African region are more exposed to the gendered effect of food price inflation, whereas countries with stronger institutional frameworks, such as those in OECD and Latin America, have a buffering influence. Synthetic control studies further show that the 2007–2008 food crisis had a more profound and long-lasting effect on gender inequality compared to the 2021–2022 food crisis, which was mainly driven by labor market differentials in female participation and wage earnings. These consistent results call for gender-responsive policy interventions to mitigate the adverse effects of food price inflation on gender inequality and shield women from escalating burdens induced by food inflation.”