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441. Post-2015 Means of Implementation: What Sort of Global Partnership?

Author:
Alex Evans
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Until recently, 95% of the bandwidth for talking and thinking about the post-2015 agenda was focused on goals and targets. Now that the Open Working Group (OWG) on the post- 2015 agenda has reported, though, policymakers and opinion formers are starting to think more seriously about the ‘how’ as opposed to the ‘what’ – and what a new Global Partnership on development, as well as the overall political outcome on means of implementation (MOI) more broadly, might look like by the end of next year.
Topic:
Development, Economics, Politics, and Sustainable Development Goals
Political Geography:
Global Focus

442. The BRICS Development Bank: A New Tool for South-South Cooperation?

Author:
Jan Schablitzki
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Institute for Development and Peace
Abstract:
The Sixth BRICS Summit, held in July 2014 in Fortaleza, Brazil, resulted in agreements to establish a New Development Bank (NDB) as well as a Contingent Reserve Arrangement (CRA). This Policy Brief discusses the impact of the NDB on the existing architecture of development finance, focusing on the bank’s potential contribution to the BRICS’ South-South cooperation. The first section outlines the BRICS countries’ rational for establishing the NDB. In the following section potential development paradigms that are likely to be adopted by the NDB are addressed. Since no decision has been taken on the bank’s future governance, this section will be based on the experiences from the BRICS’ national development banks. Once the NDB’s governance is agreed upon, it will impact whether and to what extent the new bank will cooperate with the existing international system of development finance. A third section discusses the NDB’s potential appeal for the Global South. The Global South shares with the BRICS a disappointment with the existing system, and connects specific hopes and expectations with the foundation of the NDB. Examining the Banks effect on South-South cooperation, the section includes prospects on the Bank’s capital potential and by that its potential contribution to the prevalent demand for infrastructure financing in developing countries. A final section summarises the points made and aims to put the present perceptions of the NDB in rather cautious perspectives.
Topic:
Economics, International Trade and Finance, Infrastructure, and Developing World
Political Geography:
Global Focus

443. Disruptive Innovation: Risk-Shifting and Precarity in the Age of Uber

Author:
Emily Isaac
Publication Date:
12-2014
Content Type:
Working Paper
Abstract:
Over the past 30 years, economic restructuring and advancements in technological innovation have allowed for the emergence of new business models that disrupt many longstanding industries. Much of the industry disruption that we see today stems from tech companies and startups that have developed a better cost-model by utilizing smart phone-enabled apps to offer simpler and less expensive products and services than those offered by competing incumbents. Uber Technologies Inc., an on-demand ridesharing service that connects passengers to local drivers in real time using smartphone technology, is one of the most disruptive, successful tech start-ups yet. Uber’s success, which can be attributed to a low fixed-cost model that provides ride-seekers a faster and more reliable alternative to the traditional taxi and promises drivers a higher hourly earning through the avoidance of costly regulations, has severely disrupted the taxi service industry. In cities around the world, taxi companies are losing their customers and their drivers to Uber and similar “transportation network companies” (TNCs), such as Lyft, Sidecar, and Hailo.
Topic:
Economics, Markets, Science and Technology, and Infrastructure
Political Geography:
Global Focus

444. Escape from the Commodity Trap: Will the Production Transformation Sustain Productivity, Growth and Jobs?

Author:
John Zysman
Publication Date:
04-2014
Content Type:
Working Paper
Abstract:
The emerging transformation of the production of goods and services is dramatically altering what is produced, where, how, and who captures the value. It creates opportunities and challenges. Part I of this essay examines the transformation of production and its acceleration by Cloud Computing. A first argument is that the transformation of production, including both manufacturing and ICT-enabled services should be our focus. A second argument is that ICT enabled services are a source of distinct value in the economy. Third, it considers the distinct and contradictory challenges facing manufacturing. The fourth argument is that the transformation of production will be accelerated by the emergence of Cloud Computing as the next Information Technology Platform. Part II of the essay makes a few focused policy suggestions and considers several issues policy makers need to consider as they frame policy. The emphasis is on the role of next generation tools and competencies of “places”. The crucial policy question is how to nudge that transformation in the advanced countries toward higher value added, higher skilled, higher wage solutions.
Topic:
Economics, Science and Technology, Communications, and Global Markets
Political Geography:
Global Focus

445. Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications

Author:
Jonas E. Arias, Juan F. Rubio-Ramirez, and Daniel F. Waggoner
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Are optimism shocks an important source of business cycle fluctuations? Are deficit-financed tax cuts better than deficit-financed spending to increase output? These questions have been previously studied using SVARs identified with sign and zero restrictions and the answers have been positive and definite in both cases. While the identification of SVARs with sign and zero restrictions is theoretically attractive because it allows the researcher to remain agnostic with respect to the responses of the key variables of interest, we show that current implementation of these techniques does not respect the agnosticism of the theory. These algorithms impose additional sign restrictions on variables that are seemingly unrestricted that bias the results and produce misleading confidence intervals. We provide an alternative and efficient algorithm that does not introduce any additional sign restriction, hence preserving the agnosticism of the theory. Without the additional restrictions, it is hard to support the claim that either optimism shocks are an important source of business cycle fluctuations or deficit-financed tax cuts work best at improving output. Our algorithm is not only correct but also faster than current ones.
Topic:
Economics, Business, Tax Systems, Economic Theory, and Deficit
Political Geography:
Global Focus

446. Financial Business Cycles

Author:
Matteo Iacoviello
Publication Date:
08-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using Bayesian methods, I estimate a DSGE model where a recession is initiated by losses suffered by banks and exacerbated by their inability to extend credit to the real sector. The event triggering the recession has the workings of a redistribution shock: a small sector of the economy--borrowers who use their home as collateral--defaults on their loans. When banks hold little equity in excess of regulatory requirements, the losses require them to react immediately, either by recapitalizing or by deleveraging. By deleveraging, banks transform the initial shock into a credit crunch, and, to the extent that some firms depend on bank credit, amplify and propagate the shock to the real economy. I find that redistribution and other financial shocks that affect leveraged sectors accounts for two-thirds of output collapse during the Great Recession.
Topic:
Economics, Global Recession, GDP, Economic Theory, Fiscal Policy, and Banking
Political Geography:
Global Focus

447. Financial Frictions and Macroeconomic Fluctuations in Emerging Economies

Author:
Ozge Akinci
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Estimated dynamic models of business cycles in emerging markets deliver counterfactual predictions for the country risk premium. In particular, the country interest rate predicted by these models is acyclical or procyclical, whereas it is countercyclical in the data. This paper proposes and estimates a small open economy model of the emerging-market business cycle in which a time-varying country risk premium emerges endogenously. In the proposed model, a firm's borrowing rate adjusts countercyclically as the default threshold of the firm depends on the state of the macroeconomy. I econometrically estimate the proposed model and find that it can account for the volatility and the countercyclicality of country risk premium as well as for other key emerging market business cycle moments. Time varying uncertainty in firm specific productivity contributes to delivering a countercyclical default rate and explains 70 percent of the variances in the trade balance and in the country risk premium. Finally, I find the predicted contribution of nonstationary productivity shocks in explaining output variations falls between the extremely high and extremely low values reported in the literature.
Topic:
Economics, Business, Economic Theory, Risk, and Trade
Political Geography:
Global Focus

448. Cyclically Adjusted Current Account Balances

Author:
Jane Haltmaier
Publication Date:
12-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Great Financial Crisis coincided with a sizable reduction in global external imbalances, defined as the absolute value of the sum of individual country current account surpluses and deficits relative to global GDP. Although current account balances should not respond to a downturn that is uniform across countries, one that hits countries with current account deficits harder than those with surpluses might result in a decline in the global balance. This paper quantifies the cyclical portion of the current account balance for 35 countries using estimates of the severity of the cycle in each country relative to that of its trading partners in conjunction with three estimates of the sensitivity of the current account balance to changes in the output gap. Two of the estimates are derived from equations linking trade to income and the third is derived from the relationship between changes in current account balances and changes in output gap differentials. The main result is that the bulk of the reduction in the global current account imbalance since 2006 appears to have been structural. Cyclical forces are estimated to account for between 10 and 30 percent of the decline. In the aggregate, the cyclical effect is estimated to be currently holding down the global current account balance by about 1/2 percentage point. However, the size of the cyclical effect is more substantial for some countries. Both surplus and deficit countries have contributed to the decline in the absolute value of the global current account imbalance, but the contribution of the deficit countries is about twice as large as that of the surplus countries. Changes in oil prices have had largely offsetting effects on the global current account balance, but changes in real exchange rates in recent years have contributed to the reduction.
Topic:
Economics, Energy Policy, Oil, Natural Resources, Financial Crisis, GDP, Exchange Rate Policy, and Trade
Political Geography:
Global Focus

449. Two Principles of Debt and national Income Dynamics in a Pure Credit Economy

Author:
Jan Toporowski
Publication Date:
04-2014
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The paper puts forward two principles of national income dynamics in a pure credit economy. The first is the commonly known principle of Keynesian/Kaleckian economics according to which total output and employment in a capitalist economy is determined by the level of business investment. In turn that investment has to be financed, so that debt is inherent in such and economy. The second principle is a principle of the conservation of debt , which argues that, while new debt creates deposits in the economy, attempts to reduce debt generate deflationary processes that off-set debt reductions by creating ‘enforced’ debt in other parts of the economy. The analysis reinforces Minsky’s view that debt structures require corresponding investment to manage them, and that debt problems arise when such investment is insufficient.
Topic:
Debt, Economics, Investment, Economic Theory, Keynes, and Credit
Political Geography:
Global Focus

450. Inextricability of Autonomy and Confluence in Econometrics

Author:
Duo Qin
Publication Date:
06-2014
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper examines how ‘confluence’ and ‘autonomy’, two key concepts introduced by Frisch around 1930, have disappeared in econometrics textbooks and why only some fragments of the two have survived mainstream econometrics. It relates the disappearance to the defect in the textbook position of equating a priori theoretical models as correct structural models unequivocally. It shows how the confluence-autonomy pair in unity reflects the complexity of econometricians’ goal to find and verify robust and economically meaningful models out of numerous interdependent variables observable from the real and open world. The complexity deems it essential for applied research to have a set of model design rules combining both a priori substantive reasoning and a posteriori statistical testing. Such a need also puts the task of ensuring an adequately minimum model closure to top priority for applied modellers, a task much more important than the textbook task of parameter estimation.
Topic:
Economics, Intellectual History, Economic Theory, and Models
Political Geography:
Global Focus