The Unassuming Economist

From a paper by Afees Salisu and Etsubdink Sileshi:

“In recent decades, many African countries have been experiencing structural transformation. During
this same period, these countries were witnessing unfavorable external balance. This has challenged
conventional wisdom as these two are considered to be moving in opposite directions. This study
examines the effect of the shift in sectoral composition of African economies on their external balance
position. Using balanced panel data for 38 countries from 2000 to 2022, we estimate the effect of
structural change measured by sectoral shares in value added to GDP on external balance (% GDP).
Our methodology includes both static and dynamic panel models. However the dynamic panel models(GMM) are found to be the appropriate ones. The results show that agricultural sector’s share of
GDP has a negative effect on external trade balance, while the industrial sector is found to have a
positive impact. These results are robust to various model specifications. For additional robustness
check, we also used control variables- foreign direct investment to GDP ratio and official exchange rate.
Our results are consistent in sign, magnitude of coefficients and significance levels. As far as external
trade balance is concerned, African countries should give the necessary support to the expansion of
industrial sector. We also advise future researches to examine the composition of the each sector in
Africa and its implication for the external balance.”

From a book chapter by Matthew Cole:

“We live in a world where services dominate employment and form an ever-greater share of GDP. What does the relative decline of manufacturing and the rise of services mean for the present and future of work? There is much debate regarding this question. Recent advances in ICT infrastructure, datafication and artificial intelligence have allowed for a degree of technological substitution in service work that was previously impossible. This chapter argues that recomposition of capital at both the national and global scales has reorganised production and expanded production networks to place certain services as a crucial engine of growth. It proceeds by introducing the concept of services in the classical political economy and labour process tradition. It then addresses one of the key debates around the nature of services under capitalism and deindustrialisation. The chapter concludes that how technological and institutional change will impact the future of work will ultimately depend on the balance of power between capital and labour.”

From a paper by Belen Chocobar, Peter Claeys, and Marcos Poplawski-Ribeiro:

“Macroeconomic theories attribute rigidities in expectations formation to two mechanisms: sticky or noisy information. Recent advances in testing time variations in forecast dispersion—using the fluctuation rationality test—allow detecting departures from forecaster rationality over time. Relating individual forecaster behavior to economic or political factors on a panel of budget balance forecasts from Consensus Economics, a large panel of individual expert forecasters in four major OECD countries between 1993 to 2023, we find evidence for forecaster behavior in line with noisy information. Traditional full-sample tests show that forecasters are not rational, but this is due to an overly pessimistic reaction to sudden big shifts, like the global financial crisis or the pandemic. In normal times, forecasters do systematically incorporate economic and political news in budget forecast revisions.”

From a paper by Bertrand Candelon and Francesco Roccazzella

“This paper evaluates the informative value of the ECB inflation forecasts vis-à-vis other institutional and model-based forecasts in the euro area using ex post optimal combinations of forecasts and nonnegative weights. From a methodological perspective, we adapt the corresponding forecast encompassing test to the constrained parameter space, showcasing its superior performance over traditional encompassing tests in both size and power properties. Empirically, the combining weights and the forecast encompassing test reveal that the ECB was the most informative forecaster of euro area inflation over the 2009–2021 period. This changed in 2022: The ECB lost its position as the most informative forecaster, and when using rolling windows to estimate the combining weights using a rolling window, we find an important decline in the ECB’s weight over time. This time dependency can be associated with the economic environment and, in particular, the level of uncertainty, the monetary policy, and the macro-financial conditions in which the ECB operates.”

From a paper by Claudio Borio:

“From its tentative beginnings, inflation targeting has spread to become the de facto global monetary standard. Historically, only the Gold Standard has had a longer lifespan. Inflation targeting has done its job: helping to hardwire a low-inflation regime, even in the face of the post-Covid inflation surge. But the journey has been far from easy. Inflation targeting had to contend with the rise of financial instability, most spectacularly in the form of the Great Financial Crisis. In the wake of that crisis, it struggled to push inflation back up to point targets, and it saw a historical erosion in the room for policy manoeuvre. This paper assesses these challenges and considers possible adjustments to the framework. These include more systematic consideration of the longer-term damage that financial factors can cause to the economy and of the importance of safety margins in the conduct of policy. And all this should be grounded on a clear recognition of what monetary policy can and cannot deliver.”