Everyday the blogosphere offers an enormous amount of in-depth analysis on any imaginable topic. The world of macroeconomics and economic forecasting is no exception. To keep themselves updated on the latest information, our in-house team of economists scan the world wide web and gather what they consider the most interesting, appealing, informative or just curious blog posts from experts in the field of global economics. Here’s the list of the Top 4 posts from this week. Check it out!
- Stumbling and Mumbling – Chris Dillow: ‘OSBORNE’S SPENDING PARADOX‘
In his latest blog post, Chris Dillow comments on the statements made by the chancellor George Osborne while he presented the Budget for 2014. Osborne’s quote that “we need to cut spending to reduce the deficit” and “a smaller share of government spending in GDP would be a good thing” intrigues Dillow is explaining that the claims are not that “nonsensical”. He points out to the evidence that smaller government can promote growth, which in turn will promote happiness. By giving the example of Japan and Korea, he argues that the combination of smaller state with reasonable income equality can be an argument in favor of a smaller public sector and a larger private sector. – Dirina Mancellari
- NIESR Blog – Angus Armstrong: ‘Plan B: dollarization?’
In this post, Angus Amstrong provides an interesting analysis of one of the many monetary alternatives that are being discussed in the case Scotland proclames its independence from the United Kingdom. Amstrong focuses on the consequences of “dollarization”, which would imply that the Scottish economy would adopt a currency issued by a foreign central bank in order to have easier access to international capital markets. The author considers that a dollarization would reduce drastically the currency risk of Scotland, but increase the country risk, as it could not fund itself. The article provides some detail about the implications for the future of the current scottish pound as well as an interesting discussion on the possibility of a lender of last resort for the banking system. – Enrique Jorge
- Bonddad Blog – Hale Stewart: ‘Chinese Rebalancing: A Work in Progress’
Since the new Xi-Li administration took power in 2012, China has initiated a slow but steady rebalancing process towards an economic model more focused on consumption rather than investment and exports. In this post, Hale Stewart highlights some data that support this view. China posted strong growth rates in the aftermath of the financial crisis due to a massive economic stimulus plan. But since then, economic activity moderated markedly. The current account surplus narrowed from the 10.1% of GDP recorded in 2008 to 2.3% of GDP in 2013, thus supporting the notion that China is less reliant on external demand. Despite the overall economic deceleration, retail sales have remained relatively strong throughout this period. – Ricard Torné
- Conversable economist – Timothy Taylor: ‘Will the U.S. Dollar Remain the World’s Reserve Currency?‘
Timothy Taylor argues that the U.S. dollar is holding its position as the world’s dominant reserve and transaction currency, and expects that this will be the case for many years to come. While many countries were forced to spend reserves to avoid currency problems during the recent recession there wasn’t a major drop-off and there has been a rebuilding of stockpiles since. Today, more than 60% of global reserve holdings are still in U.S. dollars. Moreover, although the dominance of the dollar has declined somewhat over the past decade and increasingly integrated financial markets are making it easier to carry out transactions without using the US dollar, the majority of financial transactions, international investments and foreign exchange conversions are still typically done in U.S. dollars. Moreover, Taylor argues that there is no clear alternative available. China is on route to becoming the worl’s largest economy but , limited financial, political, and legal institutions “make it unlikely that the renminbi will become a major reserve asset hat foreign investors, including other central banks, turn to for safekeeping of their funds.” – Carl Kelly
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