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. NEP-ARA Blog  – Nazli Karamollaoglu and M. Ege Yazgan: ‘Firm Exit and Exchange Rates: An Examination with Turkish Firm-Level Data

    How do exchange rate movements affect firms’ survival? Nazli Karamollaoglu and M. Ege Yazgan present their research to address this question. An appreciation of the real exchange rate has a similar effect as a rise in foreign tariffs and leads to higher costs for the domestic producers compared to the international ones, which drives the least competitive enterprises to leave the market. Testing the relationship between a currency appreciation and the survival of Turkish firms between 2002 and 2009, the blog authors found that a 1% real appreciation of the Turkish Lira reduces the probability of a firm’s survival by 5%. Furthermore, the authors found that firms’ probability of survival is higher for high-productivity firms than for low-productivity ones. –  Teresa Kersting

  2.  longandvariable – Tony Yates: ‘On raising the inflation target to combat secular stagnation’

    Tony Yates comments on the response by Tim Hardford on the recent book on secular stagnation. This book has been circulated by the Center for Economic Policy Research (CEPR) in its VOX portal and according to its authors, Coen Teulings and Richard Baldwin, the recovery is still anemic six years after the global financial crisis, despite years of virtually zero interest rates. The call it “secular stagnation”. Harford responds that economic history has always suggested that after a severe economic crisis, recovery tends to be slow. Moreover, Harford deduces that raising the inflation target would help combat or avoid it. But Tone Yates responds that, “at least through the lens of modern macro, yes and no.” The book is worth reading as well as Tim Hardford’s article in the FT. –  Carl Kelly

  3.  Vox – Abhijit Banerjee, Xin Meng, Tomasso Porzio, Nancy Qian: ‘Will Chinese household savings plummet with the end of the one-child policy? Maybe, maybe not….’

    As China relaxes its one-child policy, policymakers are worried how the resulting increase in fertility will affect the economy. The draconian fertility law was introduced in mid 1970s and coincided with a rapid increase in household savings. In fact, during the 1990s, the saving rate reached highs of 34%. Research has found evidence that the one-child policy is the cause of the rise in saving rates for two main arguments. First, Chinese increased their private saving rate as they were unable to save via children, who are seen as an important source of old age support. Second, since saving is the difference between income and expenditure then having more children will reduce saving. The authors of the articles argue that not accounting for other changes due to the change in fertility could lead to overstate the negative effect of an increase in aggregate fertility on saving. Factors like the percentage of income transferred to elderly parents changes when an adult has more siblings, could change the magnitude of the policy effect. – Dirina Mançellari

  4. Economics in Business Blog – John Hawksworth: ‘Escaping the middle income trap – what’s holding back the Fragile Five?’

    In the first decade of this millennium, there was a consensus around the idea that economic power was shifting from developed nations to emerging markets. However, in recent years, economic developments showed that there were diverging trends among emerging-markets countries. In this regard, Morgan Stanley coined the term the “Fragile Five”—namely India, Indonesia, Brazil, Turkey and South Africa—to englobe the emerging markets that were failing to keep growth on track. Moreover, PwC launched the PwC ESCAPE Index in order to evaluate how well different economies are performing to break the middle income trap. According to their analysis, the front-runners seem to be Saudi Arabia, Malaysia, Chile and China. –  Ricard Torné

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