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. MacroMania – David Andolfatto: ‘Who’s Afraid of Deflation?

    In this blog post, David Andolfatto questions the common idea that deflation is always associated with periods of depressed economic activity. Andolfatto looks at data from the US, Japan and the UK for a sample period that begins in 2009 and ends in 2013. Over this period, the price level in the US was up by 7.0% and in the UK by 11.0%, while in Japan the price level fell by 7.0%. Despite experiencing deflation, Japan has experienced a faster recovery following the recession in 2009. Over the 5-year period, Japanese real per capita GDP has been growing by 15.0%, well ahead of  the real per capita GDP growth rate in the US and UK. –  Dirina Mançellari

  2.  Money and Banking – Stephen G. Cecchetti and Kermit L.Schoenholtz: ‘The Yin and the Yang of Shadow Banking in China’

    By almost any measure, China saves more than virtually any country in the world. Over the past decade, gross national savings has amounted to about one-half of GDP.  Despite this, households in China until recently have had few attractive avenues for saving. In particular, regulatory caps severely limit deposit rates to a level far below the growth rate of the economy. This was part of a strategy whereby the government – through the large state-controlled banks – funneled an outsized proportion of savings to favored borrowers, typically state-owned enterprises (SOEs), at low interest rates (again, relative to the pace of economic growth). Chinese authorities could count on households to save due to powerful precautionary motives: as the “iron rice bowl” of welfare and employment guarantees eroded, households faced increased income volatility along with prospective new spending needs for education, health care, housing, and retirement. –  Angela Bouzanis

  3.  Open Europe – Raoul Ruparel: ‘What will the impact of the Russian retaliatory sanctions be?’

    In the context of Russian involvement in Ukraine and the annexation of the Crimea, the EU, US and other countries have announced sanctions against Russia. These include restrictions of access for Russian banks to EU and US financial markets, bans on military and “dual use” goods as well as travel restrictions for individuals close to the Russian government. Russia has retaliated by imposing bans on the import of food from Western countries. Open Europe analyses the exposure of European countries to Russia in agricultural trade. In aggregate terms, agricultural exports are about 7% of total EU exports. Of this, 10% goes to Russia and not all goods are affected by the sanctions. In terms of specific countries, the Baltic countries (Latvia, Lithuania and Estonia) will be hardest hit in terms of the trade as a share of GDP. In absolute terms, Poland, the Netherlands, Germany and Denmark will also face losses. On the Russian side, agricultural imports are 13.3% of total imports, equivalent to 1.2% of annual GDP. – Ricardo Aceves

  4. Stumbling and Mumbling – Chris Dillow: ‘The Referendum, & Risk Attitudes’

    Chris Dillow examines to what extent the Scottish referendum is about the expected advantages of independence and to what extent it is about people’s attitude towards risks. For this purpose, he analyzes Scottish independence as a risky investment. There are two scenarios when one would reject such an investment: firstly, when the expected payoff is negative and secondly, when the expected payoff is positive but too risky. Dillow points out that people’s preferences are important for the choice of investment decisions – and for the result of the Scottish referendum. Is it perfectly possible that two different people share one opinion on the expected payoffs and risks of an investment, or the referendum, but would decide differently due to their personal attitudes towards risk.  According to Chris Dillow, Thursday’s “no thanks” vote might also have been decided by people’s preference for lower risk. – Teresa Kersting

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