BLOG MASH-UP OF THE WEEK

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!

  1. Baker Institute Blog – Russell A. Green: ‘BRICS bank: Not yet fully baked

    Brazil, Russia, India, China and South Africa—the so-called BRICS—announced that they will set up a New Development Bank with the aim to finance infrastructure projects in developing countries. In addition, the BRICS decided to create a USD 100 billion reserve currency pool, which will be activated should a currency crisis occur. This move represents another step toward reshaping the international financial system, which is currently dominated by developed countries. This post sheds some light on the problems that these new institutions may face in the future. For example, the BRICS countries might be comfortable with lowering lending standards, thus posing risks to transparency and loan repayment. Moreover, the equal voting rights among participants has the potential to bring the institution to a standstill. ” –  Ricard Torné

  2.  Stumbling and Mumbling – Chris Dillow: ‘On crowding out’

    Chris Dillow’s argument that increased public sector spending did not lead to a downturn in private investment in Great Britain during the mid 2000s provides interesting insights on the concept of crowding out. He points out that crowding out can take place through three different mechanisms. First, financial crowding out occurs when government borrowing leads to increasing interest rates, which may reduce private spending. Second, according to the Ricardian equivalence, increased government borrowing may trigger lower firm investment as companies anticipate a lower future post-tax return. Finally, according to the wage-squeeze argument, increased government spending drives up labor demand and wages, which will reduce corporate profits and thus investment.  Nevertheless, Chris Dillow clearly points out that these mechanisms do not take place necessarily and provides insights on why they do not apply to the case of Great Britain during the mid 2000s.   Teresa Kersting

  3.  Conversable economist – Timothy Taylor : ‘The Next Wave of Technology?’

    Timothy Taylor discusses how technology will affect jobs and the economy going forward. He considers that speaking about technology in one-dimensional terms is an extreme oversimplification. Taylor refers to Erik Brynjolfsson, Andrew McAfee, and Michael Spence, who offer some informed speculation on how they see the course of technology evolving in the article titled “New World Order: Labor, Capital, and Ideas in the Power Law Economy,” which appears in the July/August 2014 issue of Foreign Affairs. These authors argue that the main force of information and communications technology has been to tie the global economy together, so that production could be moved to where it is most cost-effective. But looking ahead, however, they argue that the next wave of technology will not be about relocating production around the globe, but changing the nature of production–and in particular, automating more and more of it.” – Ricardo Aceves

  4. Adam Smith Institute Blog – Tim Worstall: ‘Ahhrgh! Terror! The robots are coming to take our jobs!’

    From a very liberal point of view, the author criticizes the notion that technological progress is going to affect employment capacity in the economy. According to Worstall, the solution for preventing rapid technological progress to enlarge unemployment figures is to deregulate the creation of new, small firms, since these are the ones that create new job positions. This view somehow contrasts the common idea that big companies are the ones that create more new jobs. –  Enrique Jorge

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