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. Conversable economist  – Timothy Taylor: ‘Beyond Foreign Aid

    High income nations gave USD 134.9 billion in development aid to help the world’s poor in 2013, according to the OECD. The OECD has a target for  rich countries to give around 0.7% in foreign aid, but most fall short, and the average is about half of this target. However, Timothy Taylor disagrees with the argument that more direct foreign aid should be given. He explains: “Take $134.9 billion in aid and divide it by 2.4 billion people consuming less than $2 per day, and it works out to about $56 per person. Even if effectively administered and invested, that amount of aid isn’t going to budge the needle on global poverty by very much.” Taylor believes that high income countries should instead focus on reducing trade barriers, facilitating private investment in areas such as infrastructure, protecting global environmental public goods, and encouraging research and development as well as technology transfer. – Carl Kelly

  2. China Financial Markets – Michael Pettis: ‘How much longer can the global trading system last?’

    According to a Brazilian economist, the United States has increased its isolationism because the costs of interventionism are moving higher, while, at the same time, the benefits are declining. In this regard, Michael Pettis argues that the U.S. has become a less relevant economy due to the incorporation, in the last few decades, of a meaningful number of countries in the global economy, which has reduced the share of global trade benefits gathered by the U.S. On the other hand, the costs of maintaining a U.S.-dominated world has increased as it did the number of players. Against this backdrop, Pettis warns that the U.S. should address the issue of the dollar as the global reserve currency and the way the country absorbs “volatility and shortfalls in demand that originate abroad.”  Ricard Torné

  3. The Growth Economics Blog – Dietz Vollrath: ‘Re-basing GDP and Estimating Growth Rates’

    Re-basing of real GDP means to replace the present price structure (base year) with a new base year. The base year constitutes the reference point to which future values of GDP are compared to. GDP is rebased to make sure that national accounts series reflect the state of the economy as accurate as possible. However, an important issue is that rebasing tends to obscure evidence of high economic growth rates when generating past growth rates retroactively. The key to this idea is that rebasing generally leads to a higher real GDP in the first year of a series, thus leading to relatively lower growth rates in subsequent years. Dietz Vollrath illustrates this idea with a simple example of Nigeria’s 2013 rebasing exercise. – Teresa Kersting

  4. Mises Economics Blog – Carmen Elena Dorobăț: The Road to Poverty Is Paved with Small Inflations’

    In this blog post, Carmen Elena Dorobat argues that large or small inflation hurts the masses and ultimately is bad for total welfare. Using Venezuela as an example, Dorobat discusses the problems that persistent, high inflation can have on an economy. Last week, the value of Venezuela’s unofficial currency fell to record lows and is now ten times lower than the official rate. The Venezuelan economy is currently experiencing a host of problems, including: power outages, shortage of basic goods and rapid depletion of dollar reserves. Dorobat suggests that this catastrophe has been in the making since the late 1990s and is leading Venezuelans into poverty.   Angela Bouzanis

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