The Unassuming Economist

From a new IMF country report:

“Sri Lanka has a compelling growth story. The economy has grown at an average of 5 percent over the last four decades, amidst the 30-year civil conflict, weather calamities, and swings in economic policy orientation depending on ruling parties’ ideology. Sri Lanka seesawed between protectionist and liberalization strategies: state control and import substitution in early 70s; two waves of liberalization in early 80s and 90s; closing up again in early 2000s at the height of the war; and then opening up again since the end of the war (text table below).”

“Strong economic growth has led to a significant decline in poverty rates (text table below). While a recent IMF study (IMF, forthcoming) finds that emerging markets experienced a significant increase in average growth rates in the 2000s, particularly in Asia, only half of these emerging markets are converging with developed countries in per capita income levels. Remarkably, Sri Lanka has halved its poverty gap over the last decade. Nevertheless, challenges in terms of inclusiveness, regional disparities, quality of education, and gender equality remain.”

“The government has ambitious plans to achieve upper middle-income country status in 2025 by transforming Sri Lanka in an Indian Ocean Hub for trade, investment, and services. Unlike the 70-80s when investment in the tradable sectors led the productivity boost, the post-war capital deepening was mainly driven by mega-scale public-financed infrastructure projects, which did not seem to result in immediate productivity gains, as reforms to enable the business environment lagged. Sri Lanka’s static export structure signifies an absence of competitive forces to drive trade dynamism, innovation, and diversification: for over two decades exports have remained concentrated on garments, tea, and rubber products with a declining share in global trade. Introduction of para-tariffs barriers during the last decade has effectively doubled the protection rate, making the present trade regime one of the most complex and protectionist in the world. Despite operating a complex and an expensive system of tax incentives to promote investment, FDI remains low.”

A new post by David Beckworth summarizes a new paper by James Bullard and Ricardo DiCecio:

“This paper builds upon the risk-sharing view of NGDP targeting. The basic idea is that in a world of fixed-price nominal debt contracts (i.e. the real world), a NGDP level target provides better risk sharing among creditors and debtors against economic shocks than does a price stability target.

This is because a NGDP level target makes inflation countercyclical. During recessions, inflation rises and causes creditors to bear some of the unexpected pain by lowering the real debt payments they receive from debtors. During booms, inflation falls and allows creditors to share in some of the unexpected gain by increasing the real debt payments they receive from debtors. Debtors, in other words, bear less risk during recessions but also share unexpected gains during expansions.

NGDP level targeting, in other words, causes a fixed-price nominal debt world to look and feel a lot like an equity-world. In a similar spirit, some observers have called for a risk-sharing mortgages as a way to avoid another Great Recession. The point of this paper is that the same benefit that such risk-sharing mortgages would bring can be had by having a central bank target the growth path of NGDP.”

A new post by Timothy Taylor discusses Bangladesh’s growth, declined poverty, gender equity, and financial sector: “Bangladesh has over 160 million people, which makes it the eighth most populous country in the world (just behind Pakistan and Nigeria, just ahead of Russia, Mexico, and Japan). I can’t claim that I’ve been paying close attention to its economy, but I was nonetheless started to see that Bangladesh has shifted (in the World Bank’s classification) from being a “low-income” to a “middle-income” country.”

A new IMF working paper proposes “a measure of the exposure to routinization—that is, the risk of the displacement of labor by information technology—and assemble several facts that link the exposure to routinization with the prospects of polarization”, and finds that “(1) developing economies are significantly less exposed to routinization than their developed counterparts; (2) the initial exposure to routinization is a strong predictor of the long-run exposure; and (3) among countries with high initial exposures to routinization, polarization dynamics have been strong and subsequent exposures have fallen; while among those with low initial exposure, the globalization of trade and structural transformation have prevailed and routine exposures have risen.

A new IMF report provides a thorough overview of practices and resources on operationalizing gender issues:

“Reducing gender gaps can have important economic benefits. Gender gaps remain significant on a global scale, both with respect to opportunities and outcomes. For example, gender-based legal restrictions in many parts of the world, as well as barriers in access to education, healthcare, and financial services, prevent women from fully participating in the economy. In turn, labor force participation rates are lower among women than men. Gender equality can play an important role in promoting economic stability by boosting economic productivity and growth, enhancing economic resilience, and reducing income inequality.

The Fund has begun operationalizing gender issues in its work. Staff has contributed to the economic literature through country-level and cross-country analytical studies, confirming the macro-criticality of gender issues in a broad set of circumstances. Gender issues are also increasingly becoming an integral part of capacity development though technical assistance and training. And in country work, two waves of gender pilots have been completed—encompassing both surveillance and Fund-supported programs and covering all regions of the world and all levels of income—and a third wave is under way.”