The Unassuming Economist

From a new paper by Dani Rodrik:

“The resulting system — variably called the Bretton Woods compromise or embedded liberalism was a great success. It fostered a large increase in global trade and investment and saw rapid economic development in both the advanced and developing economies. Perhaps it was too successful for its own good. By the late 1980s, policy makers and economists thought they could make it work even better by pushing for deeper economic integration. Trade agreements became more ambitious and reached beyond the border into domestic regulations. The removal of restrictions on capital mobility became the norm rather than the exception. In the process, the “embedding” or “compromise” that had made the earlier regime such a success was overlooked.

The rise of populism forces a necessary reality check. Today the big challenge facing policy makers is to rebalance globalization so to maintain a reasonably open world economy while curbing its excesses.”

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From a new post by Robert Shiller:

“My own theory about today’s stagnation focuses on growing angst about rapid advances in technologies that could eventually replace many or most of our jobs, possibly fueling massive economic inequality. People might be increasingly reluctant to spend today because they have vague fears about their long-term employability – fears that may not be uppermost in their minds when they answer consumer-confidence surveys. If that is the case, they might increasingly need stimulus in the form of low interest rates to keep them spending. ”

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From a new IMF working paper by JaeBin Ahn and Romain Duval:

“We analyze the impact on productivity in advanced economies of fast-growing trade with China between the mid-1990s and late-2000s, separately identifying the export and import channels. We use country-sector-level data for 18 advanced economies and, similar to Autor, Dorn, and Hanson (2013), exploit exogenous variation in trade with China in a given country-sector by instrumenting imports from (exports to) China in a given country-sector with the average imports from (exports to) China in the same sector in other advanced economies. Our estimates point to large productivity gains from trading with China—the (exogenous) rise of China in global trade may have increased the level of total factor productivity by about 1.9 percent, or 12.3 percent of the overall increase over the sample period, in the median country-sector. By contrast, using a similar empirical strategy, we find adverse employment effects of Chinese imports in exposed country-industries, consistent with previous studies. Taken together, these findings point to large gains from free trade, while underscoring the scope for a more active policy role in redistributing them, particularly by easing workers’ transition between jobs and industries.”

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From a new IMF Regional Economic Outlook on Sub-Saharan Africa

“After nearly two decades of strong growth, average economic activity in sub-Saharan Africa has decelerated sharply, against the backdrop of lower commodity prices, a less-supportive global environment, and, in the hardest-hit countries, a delayed policy response (Chapter 1). However, the full picture is more complex, with considerable heterogeneity across countries. Against this backdrop, two related questions arise: How can growth be revived in the hardest-hit countries? And for countries that are still growing fast, how can growth be sustained?

This chapter tries to answer these questions by examining the growth performance of sub-Saharan African countries through the lens of growth turning points and periods of sustained growth episodes using a sample containing data from 1950 to 2016.1 To that effect, the chapter first documents the stylized facts of growth turning points—defined here as growth accelerations (up-breaks) and decelerations (down-breaks)—and sustained growth episodes (growth spells) across the region and vis-à-vis the rest of the world. The chapter then examines the changes in both the external and domestic environment (including policies) that coincided with turning points in sub-Saharan Africa. Finally, the chapter investigates how some episodes of growth acceleration become periods of sustained growth, and what influences the duration of these episodes.”

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A nice paper comparing basic macroeconomic relationships in Hong Kong (SAR) and Singapore to those in the United States and the United Kingdom.

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