GDP Upgrade: How Can One Measure the Quality of Economic Growth?
Sustainable per capita economic growth is possible if the quality of goods and services produced by the economy increases. US GDP growth may be underestimated by 0.4–0.6% per year because of unmeasured (undetected) improvement in the quality of goods and services. Calculation and publication of new statistical indicators such as IQI for separate product groups and the impact of quality on GDP for the whole economy will improve our understanding of the contribution of quality to economic growth.
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Statistical Data Collection Challenges amid COVID-19 PandemicThe importance of reliable statistical data is even more urgent in the context of the coronavirus crisis, in terms of managing the risks for public health, restarting the world economy and addressing the long-term economic and social impact of the pandemic. Government lockdowns, social distancing and work from home restrictions, imposed to contain the spread of COVID-19, pose important challenges to statistical data collection and analysis. The unavailability of data sources and the pausing of face-to-face interviews and surveys has had an adverse impact on data quality and processing. Innovation and coordination between all parties involved in the process is required in order to develop new ways of conducting less complex surveys and questionnaires, while keeping a direct and interactive communication with respondents.
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Tackling the Undeclared EconomyAre participants in the undeclared economy rational economic actors who can be swayed by increasing the expected penalties and likelihood of detection? Or are they social actors who participate in reaction to a lack of vertical trust (in government) and horizontal trust (in others)? Evaluating a 2019 Eurobarometer survey, participation in undeclared work is weakly associated with the level of penalties, but there is a stronger, significantly greater likelihood of participation when there is a lower risk of detection and lower vertical and horizontal trust. The outcome is a call for the conventional repressive approach to be complemented with trust-building strategies.
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Analysing Data Issues in Measuring Inequality in UK RegionsConverting official nominal regional GDP data for 2017 to real values, using an approximate deflator for regional price levels, reduced the size of the London economy by 12% or £51 billion. Using real GDP per head as an indicator of prosperity revealed London to be the most prosperous region and Wales the poorest. Real data reduced the inequality between regions by 26% compared to the nominal data. Using real household income per head as an alternative indicator showed London to be the most prosperous region and the North East of England to be the poorest. Real data reduced the inequality between regions by 16% compared to the nominal data. Using the regional unemployment rate as a proxy inverse measure of prosperity produced markedly different results to the financial data. London had high prosperity in financial terms co-existing with a comparatively high unemployment rate. A composite index of prosperity, combining all three indicators with selected weights, revealed London to be the most prosperous region at 33% above the national average and the North East of England to be the poorest at 23% below the national average.
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Bringing Global Finance into Macro-Policy AnalysisThe Portfolio Theory of Inflation (PTI) brings global finance into macroeconomic policy analysis, and addresses Obstfeld and Taylor’s (2017) remark that standard models of macroeconomic stabilization do not pay sufficient attention to finance. In particular, the PTI approach shows that: (1) in an open and globally financially integrated national economy the effectiveness of macroeconomic policies depends on the level of credibility that financial markets attribute to the economy, in particular its policy authorities and policy stance (2) whereas the monetary policy trilemma constrains countries to enjoy at most only two of the three possible states (i.e. exchange-rate stability, freedom of cross-border payments, and economic policy autonomy), the trilemma does not constrain all countries equally if they operate in a context of high international financial integration: credible countries enjoy greater space for effective policies than less credible countries (3) not all countries benefit equally from a floating exchange rate regime, either; the latter offers credible countries greater space for policy effectiveness and protection against external shocks, while such space gets progressively thinner as country credibility weakens (4) an open economy that is fully financially integrated, internationally, with large public debt and poor policy credibility does not stand to gain much in terms of shock insulation and policy autonomy from either issuing liabilities in its own (rather than a foreign) currency or adopting a flexible (rather than a fixed) exchange rate regime (5) however, all else being equal, the benefits from a floating exchange rate regime increase with the degree of the economy’s policy credibility.
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Measuring the Efficacy of Financial IntermediationThis study focuses on the transaction costs of borrowing by the poor and provides an empirical assessment. In doing so, this study addresses two salient questions: (a) what are the transaction costs for borrowing poor? and (b) how significant are these transaction costs for the poor in deciding whether to borrow from an institutional or an informal source? The study area includes southern, western, northern, eastern, and central regions of India. Using a stratified random sampling approach this study captures comprehensively all the forms and variants of microfinance intermediation in India. The sample also covers three broad social categories—scheduled castes and scheduled tribes, other backward classes, and other social groups—and studies three major approaches to financial intermediation: the direct lending model, self-help groups (SHG) and microfinance institutions (MFI). The results indicate that borrower transaction costs in the direct lending model are 9.06% in rural areas, 9.57% in semi-urban areas and 10.93% in urban areas, with an overall average of 9.85%. Under the SHG lending model borrower transaction costs range between 3.62% in rural areas, 3.70% in semi-urban areas and 3.93% in urban areas, with an overall average of 3.75%. Similarly, the MFI lending model has borrower transaction costs of 7.70% in rural areas, 7.91% in semi-urban areas, 8.43% in urban areas, and the average is 8.02%. The findings provide the required insights for policy support needed to lessen the burden on the beneficiaries of microfinance. Accordingly, the SHG lending model, with the lowest borrower transaction costs, is suitable for microfinance intermediation in rural areas.
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Relationship of Economic Freedom to Economic Performance, Gender Equality, and Social ProgressThis study examines the relationship of economic freedom, as measured by the Economic Freedom Index, to economic performance (GDP), gender equality, and social progress. Prior research suggests that business activity is more robust in societies that are more economically free with lower government involvement. Modern business firms must do more than just make a financial profit; firms must also be good corporate citizens and demonstrate corporate social responsibility, such as by advancing gender equality and general social progress. Business managers play key roles in their firms’ advancing corporate social responsibility. Findings of this study indicate that higher levels of economic freedom are significantly positively related to the social factors of gender equality and social progress, important issues to socially responsible business firms.
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Measuring Prosperity in Regions of the UKThis article provides updated estimates of prosperity in regions of the United Kingdom using two measures - GDP per head and Gross Disposable Household Income per head in 2017. Official nominal data on these two measures is deflated by two approximate regional price indices to yield "real" estimates, allowing for differences in price levels between the regions. In "real" terms, on both measures, London is the most prosperous region by a considerable margin, while Wales and the North East of England are the poorest regions. These "real" estimates give a clear picture of the challenge facing the Government in "levelling up" the performance of the UK regions and the locations where government assistance is most needed.
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Enterprise Size Classification in AfricaComparing enterprise size across countries is a key challenge in international development—SME definitions used in international development are often criticised as ineffective and a source of mistargeting of international development resources in the private sector. This study applies the International Finance Corporation definition of small and medium-sized enterprises (SME), commonly used in international development, and that proposed by Gibson and Van der Vaart (GV) (2008) to a set of enterprises in Africa to determine whether the two definitions capture similar underlying firms and enterprise attributes that practitioners would like to think of as worthy of international development support. The article finds a significant overlap: enterprises classified as SMEs simultaneously by both definitions. Indeed, 57% of firms in the sample qualify as SMEs under the two definitions. SMEs under the GV definition (but not the other) appear to face significant constraints in obtaining access to finance compared to those under the IFC definition (but not the other), and perform poorly in creating jobs relative to those under the IFC definition.
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What Shipping Can Tell Us About Europe’s Efforts to Face the Risk of COVID-19-Induced ‘Japanification’ Shipping leads the ‘dance’ on the way up and if this is indeed true, the post-COVID-19 economic recovery should not be long, if one is to judge from the relative prosperity of containerised shipping as of Q2, 2020. Most EU member states may face a new risk ahead: ‘Japanification’, an unwillingness to increase household spending and often business expenditure/demand, along with the inability of monetary policy to balance savings and investments. When things get better, and the COVID-19 infection curve flattens close to zero, European leaders will have to come up with new ideas on the rebirth of the European dream, if they want to prevent a new round of authoritarianism and populism throughout Europe.
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The Impact of the Bonus Culture on the UK EconomyThe decline in UK tangible investment since 2000 has led to a sharp decline in labour productivity and the trend growth rate of the UK economy. A similar decline in the USA was caused by the perverse incentives of the bonus culture, but due to poorer statistics the connection between the bonus culture and investment is less easy to demonstrate for the UK than for the USA. More than 100% of the fall in UK investment is attributable to private non-financial companies (PNFCs). The factors that could possibly explain this weakness are: (i) low return on equity (RoE), (ii) weak labour supply, (iii) a perceived need to reduce leverage, (iv) a rise in monopoly power, (v) low expectations and (vi) a rise in the hurdle rate due to the bonus culture. I show that while other explanations are not necessarily impossible they are highly unlikely; a rise in the hurdle rate, i.e. the required return on equity, is thus the only credible one. Even before the COVID-19 crisis raising the trend growth rate of the UK was by far its most important economic issue. The policy challenge is therefore to reverse the damage done by the bonus culture. I suggest that the most likely way to achieve this is through introducing a tax credit for tangible investment.
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Modern Political Economy and Colonialism: The Case of BoliviaThe November 2019 coup d’état in Bolivia, orchestrated by the armed forces, brought an abrupt end to President Evo Morales’s modern approach to governance and development. The coup also brought a return to colonialism or neo-colonialism. However, the elections slated for October 18, 2020, may very well restore democracy in Bolivia. In political economy, only under conditions of convergence are politics and economics fundamentally inseparable, mutually interdependent and not dichotomous. Divergence means that the opposite of convergence holds true. Colonialism had been both the dominant ideology and the governing development paradigm in Bolivia for most of the last two centuries. The long-standing status quo changed in 2005 when Morales came to power and introduced a modern (plurinational) perspective to political economy and development. His governing development paradigm included, inter alia, indigenous rights, which were thrust to prominence, to make up for years of neglect of indigenous populations. And along with this, initiatives that advanced progress, development (economic, social and political) and equality, became the new norm. While the past year saw a deterioration of democracy in Bolivia, the upcoming elections hold promise of returning Morales’s party into power and the restoration of his true legacy, which is otherwise disparaged and misrepresented by the interim government. In this article, economic and political data and analysis – especially in tabular or narrative form – provide a powerful medium to make my case.
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Evaluating Demographic Paths in the Long RunThis article is motivated by potential changes to fertility and migration patterns that may result from major global economic and/or health crises such as the COVID-19 global pandemic. The focus is on the long-term effects of changes to fertility and migration on both discounted national output per capita and intergenerational income distribution. Simulations are based on United Nations population projections, applied to 15 countries. Lower fertility and lower immigration are generally positive for discounted output per capita and raise the lifetime incomes of smaller cohorts. While lower immigration also raises the lifetime incomes of smaller cohorts, it has a lower impact on discounted output per capita.
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Mitigating Economic Losses of FraudEconomic loss caused by fraud has become a subject of concern for countries globally. Digital world also provides data and these can be leveraged to detect and prevent fraud while also applying forensic analytics to recover the loss. Although gathering and collating data from various sources poses a challenge, the benefits outweigh the costs. Data analytics, if implemented correctly, may detect fraud and prevent a potential economic loss. The article discusses challenges, solutions and technologies for implementing a data-driven approach.
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Funding Economic Development and the Role of National Development BanksPrior to its privatisation in 2008, the Cyprus Development Bank played an important role in the economic development of Cyprus, intermediating international finance from multilateral development banks. This function was subsequently undertaken by commercial banks, which are currently limited by balance-sheet fatigue, however, and lack necessary elements for successfully executing this role. Our analysis shows a current void of institutional capacity in funding growth-bearing projects. Proceeding in a normative way, we recommend reinstalling a development finance agency that will tackle the issues by swapping equity for debt relief.
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Structural Reform, IMF Conditionality and the ‘Goldilocks Problem’Recent empirical research suggests that structural reform has a significant positive effect on future economic growth. Following the proliferation of structural conditionality in IMF programmes in the 1980s and 1990s, the ‘streamlining’ initiative begun in the early 2000s envisaged a more parsimonious approach designed to increase ‘ownership’ and improve programme implementation. However, there is a potential ‘Goldilocks problem’. While structural conditionality can be too ‘hard’, it can also be too ‘soft’. When is it just right? Empirical evidence on the political economy of structural reform may provide clues to how IMF conditionality could be designed to strengthen its impact on economic growth.
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Monetary and Fiscal Policy Coordination During Fiscal Dominance RegimesThis study empirically examines the interaction between monetary and fiscal policy by using vector auto regressions (VAR) and a vector error-correction model (VECM) and explores the need for coordination. • We also analyse a Stackelberg interaction model with government leadership to know the strategic interaction between monetary and fiscal policy. The findings show that an unexpected increase in the monetary policy effect: (i) has a contractionary impact on economic growth; (ii) leads to a gradual decline in inflation; (iii) tightens liquidity conditions; and (iv) leads to a rise in bond yields. On the other hand, an unexpected increase in the fiscal policy effect: (i) has a positive effect on GDP growth; (ii) prompts an initial decline, then a gradual rise in inflation levels; (iii) leads to falling bond yields. Monetary policy is found to be more responsive to fiscal policy effects. The results imply that there is a greater need for effective coordination between monetary and fiscal policy as a sufficient condition to achieve economic stability.
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Will the Current Money Growth Acceleration Increase Inflation?The coronavirus pandemic has not only come as a profound shock to the major economies, but also exposed tensions between leading schools of thought. Uncertainty has arisen about the medium- and long-term consequences of the policy responses to COVID-19. Will the pandemic, and the consequent major upheaval in economic policy, lead to deflation or more inflation? This article—which is intended above all as a contribution to the emerging deflation vs. inflation debate—begins by discussing official policy in recent months. It then states a position in the tradition of the quantity theory of money and develops the argument that inflation will rise significantly in the aftermath of the pandemic.
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Shedding Light on the Shadow EconomyThe shadow or informal economy covers all economic activities which are hidden from official authorities for monetary, regulatory and institutional reasons. Although widely used, multiple indicator-multiple cause (MIMIC) models have been criticised, and we develop a modified model and database covering 157 countries over the years 1991 to 2017. We tested our model using satellite data on nocturnal light intensity as a proxy for the size of countries’ economies, and compared our results with the figures of 23 countries’ national statistical offices, finding stable and similar results. The average over all countries and over the whole period is 30.9% of GDP. The shadow economy is large in some regions (Latin America and sub-Saharan Africa) and there is sizeable heterogeneity within regions. On average, from 1991 to 2017 the shadow economy declined by 6.8%. In the short term the shadow economy has a negative impact on the official one and in the long term it has a positive effect.
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Measuring EU-Wide InequalityEU-wide inequality is higher than official figures by Eurostat suggest. With a Gini coefficient of 0.35 and a quintile ratio of 8.4 in 2018 (5.8 at purchasing power parity), it reaches the level of US inequality. This is a major driver of migration and relocation of production within the European Union (EU), both of which have led to a rise of nativist votes and Brexit. Relative inequality has been declining owing to catch-up growth of the poorer economies in central and eastern Europe, while within-country inequality has remained stable or increased. However, absolute inequality is likely not to decline for many years.
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Is the European Union Failing the Viability Tests?A union of states is there for various reasons but a fundamental one is to provide public goods that cannot be provided optimally by actions at the level of individual states. Such union-level public goods would be, for example, defence of the union against aggression by other states from outside it, protection against infectious diseases spreading in the union, regulation of massive population flows into the union, and safeguarding of financial and macroeconomic stability of the union. These kinds of goods are characterised by two important qualities so that they can be classified as public goods at the level of a union of states: ‘nonrivalness’ and ‘nonexcludability’. These concepts have been elementary concepts of economics since the work of the renowned economist Paul Samuelson in the 1950s.
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CPI in the Time of CoronavirusThe spread of the COVID-19 around the world started in January 2020. Many countries implemented an activity lockdown after the World Health Organization announced pandemic status. Businesses have been ordered by governments to impose severe restrictions on their activities and transactions. Office workers shift their work home, schools are closed, and many factories are shut down. Just before economic lockdown and social distancing policies were announced, total consumer expenditures ?rst spiked, owing to panic buying, and then collapsed after about two weeks. These large ?uctuations in shares of relative expenditure have a profound impact on data collection and calculation of official statistics. This short article focuses on the consumer price index (CPI).
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Hyperinflation in the General Government: German-Occupied Poland During World War IINewly discovered primary data reveals two previously undiscovered episodes of hyperinflation. They occurred in German-occupied Poland from late 1939 to early 1945. Nazi-occupied Poland, a territory then referred to as the General Government, experienced monthly inflation rates of 71.4% in January 1940 and 54.4% in August 1944. Inclusion of the 1940 and 1944 Polish cases of hyperinflation brings the total number of episodes of hyperinflation documented in the Hanke-Krus World Hyperinflation Table to 60. With these newly discovered cases, Poland has experienced more episodes of hyperinflation—four—than any other country in the world.
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Global Finance and Effectiveness of Macro-PoliciesThe Portfolio Theory of Inflation (PTI) incorporates a global perspective on the analysis of macro policy effectiveness. According to the PTI, in open and internationally highly financially integrated economies: The intertemporal budget constraint (IBC) of governments is endogenous to global investment choices: it is more flexible for credible countries and tighter for less credible ones, and the IBC of highly credible countries becomes even more flexible at times of global crisis. Macro-policies are effective in credible economies and less effective (and potentially inflationary) in non-credible economies (with flatter Phillips curves being observed in credible countries and becoming even flatter in times of global crisis). Governments can reap no advantage from redenominating their debt or increasing the share of their debt held by residents and monetary financing of public deficits is effective as an anti-recessionary, short-term stopgap, but it is not sustainable as a policy to sustain full employment in the longer run.
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Can Money Turn Bad News into Good News?Over the past two decades, monetary policy has been used in unprecedented ways for macroeconomic and financial sector stabilization. This article argues that monetary policy, especially the unconventional measures (quantitative easing) implemented in the post-2008 period, has likely contributed to major financial imbalances (asset bubbles). Markets started responding to bad news about the economy’s fundamentals by stock price increases as if it was good news: in anticipation that loose monetary measures (injections of liquidity) would continue. This has important policy implications for the debate whether/how monetary and macroprudential policies should address asset price developments, very relevant during the current COVID-19 pandemic.
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Quant Bust 2020We explain in a nontechnical fashion why dollar-neutral quant trading strategies (e.g. statistical arbitrage) suffered substantial losses (drawdowns) during the COVID-19 market sell-off. We discuss: (i) why such strategies work during “normal” times; (ii) the market regimes when they work best; and (iii) their limitations and why they “break” during extreme market events. An accompanying appendix (with a link to freely accessible source code) includes back-tests for various strategies, which put flesh on and illustrate the discussion in the main text.
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Brazil at a CrossroadsThe comprehensive impact of the coronavirus has prompted Brazil’s political economy to take shape in a manner which is exposing actions that are not founded on good governance but rather on shenanigans, political manoeuvring and the promotion of personal agendas. This is placing its presidency under stress and Brazil’s young democracy is in peril. At the local and regional levels, democracy, governance and political economy are mired in corruption and crime. Using World Bank data, it is illustrated that perhaps only under Lula’s Presidency (2003–10) was multifaceted progress in development achieved.
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The Epidemiology of Economic and Financial Crises The COVID-19 crisis dramatically illustrates how viruses can rapidly spread across the globe with devastating effects. Increasing trade integration during the ‘first wave’ of globalisation provided a conduit through which economic disturbances could be transmitted between countries. The ‘second wave’ of globalisation involving closer international financial integration has created the potential for much more virulent transmission. This article analyses how the evolution of globalisation has affected the epidemiology of economic and financial crises, and takes the Eurozone crisis as a case study of cross-country contagion. The policy problems associated with the changing nature of transmission are also investigated.
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Mimicking a Buffer Fund for the Eurozone Eurozone fiscal buffer fund could be set up to finance transfers to countries triggered by the cyclical movements in their unemployment rate. Countries would contribute a fixed share of their GDP to the fund in good times. The receipts from the fund are found to significantly mitigate the fiscal contractions during downturns and thus help bolster the stability of the Eurozone economy by counteracting the pro-cyclicality of fiscal policies. To quantify the extent of macroeconomic stabilisation thus achieved, estimates for the ‘fiscal multipliers’ are superimposed on the assumed change in fiscal policies. It suggests that a Eurozone buffer fund would have significant stabilisation properties. The computations are carried out using two databases – the European Commission's AMECO database and the OECD Economic Outlook database -- by way of a robustness check.
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Can Pandemic Bonds Deliver on Their Promise?Epidemics are an unpredictable, though, recurrent feature of human history. With seven major outbreaks over the past twenty years, epidemics and pandemics are on the rise, and happening more frequently and closer to one another than before. Lack of funding makes developing countries especially vulnerable to epidemics. In 2017, the World Bank launched pandemic bonds to raise funding that can be deployed rapidly in the case of a pandemic. Coming 106 days after the World Health Organization declared COVID-19 a pandemic, the bonds’ payout may be only minimally helpful to some of the poorest countries’ efforts to fight the outbreak, and leave the impression that the bonds delivered too little too late. Pandemic bonds remain an important financial tool and, with some restructuring, could fill a crucial gap in global health security, while at the same time continuing to engage with capital markets for the benefit of the poor.
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Measuring Happiness Among Egypt’s YouthThis article aims to assess happiness among young people aged 18–29 years in 2009 and 2014, using a multidimensional Happiness Index among Youth (HIY), based on the Survey of Young People in Egypt (SYPE). Uncertainty and sensitivity analysis are applied to examine the robustness and efficiency of the index. A multinomial model is used to study the main determinants of happiness among young people. The main results of the study are that young men are happier than young women. The educational level of the head of household has a positive, significant effect on happiness.
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Macroeconomic Impact of Eurozone Debt Crisis on IndiaThe eurozone represents a significant market for emerging markets like India; hence, any stagnation or a downturn in the eurozone leaves a dent in their export growth. Sensitivity analysis using measures of direct and indirect export dependency through international production networks and other economies suggests that the eurozone crisis impacted through the trade channel. As the impact of the eurozone debt crisis was significantly negative, the levels of dependence on the USA and China continued to be stable without experiencing any sharp deviations. It is desirable for India to diversify its export markets and to further strengthen domestic institutions and policies to reduce the impact of such crises and shocks.
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Indian Rupee on the Back-Foot Against the British PoundIn foreign exchange (forex) markets the Indian rupee has fallen against the British pound over a long period, for various reasons. India is the fastest-growing large economy in the world, with a rising middle class that makes it increasingly attractive to British exporters. So, the UK–India trade relationship influences currency movements. This study focuses on the impact of the UK–India trade relationship, other macroeconomic variables such as foreign direct investment (outflow and inflow), real interest rates, gross domestic product, foreign exchange reserves and how the external debts of India affect the rupee. Investors, arbitrageurs, traders, exporters and importers in the forex market like to know the impact of the most significant macroeconomic variables on currency.
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Migrant WorkersThis article covers immigrants to the Valley of Kashmir who coma from almost all Indian states despite conflict in the Valley. The Valley is entirely rural in character, having high unemployment but offering jobs and business opportunities to huge number of immigrants. Immigrants are working in a number of industries and have started their own businesses, providing competition with local businesses. This study is the first of its kind to use census data for reference and covering all the districts of the Valley.
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Self-Help Groups and Women’s EmpowermentThis article considers the working and growth of Self-Help Groups and their impact in empowering women in India. We study the activities of Self-Help Groups and identify the employment and livelihood skills of women in these groups. The study covers the operating system and capital structure of the Self-Help Groups and evaluates their financial positions. Taking into consideration the socioeconomic backgrounds of the members of these groups we identify the reasons women join them. Finally, the article identifies problems related to Self-Help Groups at different levels and analyses and evaluates the challenges they face.
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Major Problems Persist with UK Price Inflation Data Author: , March 2020
The Economics Affairs Committee of the House of Lords has published a damning report on the measurement of inflation statistics in the UK. The House of Lords Report number 246 Measuring Inflation accuses the UK Statistics Authority of being at risk of a “breach of its statutory duties on the publication of statistics, by refusing to correct an error that it openly admits exists in the Retail Prices Index (RPI).” The UK Statistics Authority has a duty to "promote and safeguard the quality of official statistics".
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Global Population Data Quality Ratings Author: , March 2020
The accuracy of population data varies widely across countries. The most comprehensive data on the number of people living in a territory and their demographic profile, a vital component for public sector economic and social planning and also for private sector needs, is usually available from the result of a census.
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The Alarming Problems Caused By Misleading Trade Data Author: , March 2020
The fact that world exports do not match world imports indicates that there are serious problems with official trade statistics. Far too few economists and politicians will try to understand the murky reality behind these increasingly unreliable data.
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The Debate Over the Depreciation of Intangible CapitalSpending on intellectual property (IP) is classed in national income accounts (NIA) as investment and represents a proportion of total investment as measured. It is, however, rapidly depreciated so that it has only a minor impact on gross domestic product (GDP). Some economists argue that the amount of such spending is being understated and the depreciation rate overstated. If these claims were correct, they would result in large increases in the measured levels of gross and net output and reduce the share taken by labour incomes. If correct the resulting changes would also be important for economic theories. Current data show that the labour share of output is mean-reverting, thus supporting the Cobb-Douglas production function, and that q’s mean reversion results from changes in share prices. The suggested revisions to the data would undermine both. These claims require an increase in profits after depreciation in the NIA. However, they cannot be correct because independently generated data on equity returns to shareholders show that profits are already overstated. Profits need to be reduced rather than increased. The change made to NIA in 2013, by the inclusion of IP expenditure as investment, has led to widespread misunderstanding about the economy and should be reconsidered.
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Measuring Modern Business Investment: A Case Study for GermanyAn extended concept for intangible investment does not lead to additional investment momentum in the case of Germany. This corresponds to experiences with former extension of investments in national accounts. Also, growth in real GDP and the related labour productivity dynamics are not higher when a broader definition of investment in the form of intangibles is applied. Even if the investment processes are defined beyond the measurement concept for intangibles established by Corrado, Hulten and Sichel, there are no fundamentally different findings for German investment dynamics based on a special company survey. However, these findings should not be misunderstood as suggesting there is no need for action in terms of statistical measurement. Extended concepts and estimates signal for Germany considerable level effects of a more broadly defined investment concept.
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Climate Change and Economic PolicyAnalysis of data for the last two decades showed global temperatures on a plateau and little correlation of global temperatures with the concentration of carbon dioxide in the atmosphere. The so-called ‘consensus’ theory of climate change is currently failing to predict correctly and is oversimplistic. Based on a flawed theory, economic policies pursued by the EU and UK to achieve zero net carbon emissions by 2050 will have little impact on global temperatures. These policies will do considerable damage to national economies resulting in lower economic growth, distorting the allocation of resources, raising energy prices, reducing consumer choice and posing a major threat to stability of electricity supplies.
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Tackling the Double Injustice: How Citizens Evaluate Climate and Welfare PoliciesAmbitious climate policies have distributional consequences. These require countervailing social policies to keep climate targets acceptable for the electorate. This article analyses data from the European Social Survey as to whether attitudes in relation to climate and welfare policies converge or diverge. It distinguishes four types of social-ecological attitudes: ‘Synergy’ or support for both kinds of policies; ‘Green crowding-out’ where support for climate policies is not accompanied by approval of welfare; ‘Red crowding-out’ where support for welfare coincides with a rejection of climate policies; Rejection of both types of policies. There are clear differences at country level. While synergy between both kinds of attitudes is most widespread in countries with an already established welfare state, the pattern of red crowding-out predominates in countries having an economy with high fossil-dependence. At individual level, persons expressing synergy for climate and welfare policies are well educated, young, with left-wing political beliefs and live in households with above-average incomes. Individuals who reject both kinds of policies are older, less educated, live in households with below-average incomes and politically orient to the right.
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Cryptocurrency Challenges Sovereign CurrencyAll national and international monetary structures have evolved to assist in the creation and management of sovereign fiat currencies. This sovereign currency status quo was suddenly upended with the arrival of the first cryptocurrency, Bitcoin, in 2008 which introduced a peer-to-peer digital fiat currency without the need of a central banking system, through a trustless, fungible and tamper-resistant distributed accounting system known as blockchain. The response to the threat posed by cryptocurrency has ranged from declaring it illegal, attempting to regulate it, ignoring it, treating it as a commodity and/or like any other financial asset and regulating it as such; or more recently seriously considering state-backed digital currency. Presently the assessment appears to be that of ‘co-existence’ with central banks providing national/sovereign currency, primarily digital currency, and cryptocurrency vying with gold as a back-up or ‘insurance’ against the perils of a sovereign fiat currency.
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New Theory of the Business EnvironmentPolitical economy is a core factor in the business environment, where either convergence or divergence are essential characteristics. This paper outlines, with a formula, illustrations and five country ratings, a new theory of the business environment that is comprehensive, and also offers a modicum of a quantitative dimension, expressed in terms of metrics and data.
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Fiscal Federalism: Data Analytics PerspectiveGoods and service tax (GST) is a value-added tax which is levied on goods and services sold and consumed domestically within a country. Although GST is paid by customers it is remitted to the government by the businesses selling the goods and services. The implementation of GST in India is a relatively new development that has impacted on fiscal transfers. The Fifteenth Finance Commission of India is currently deliberating on its terms of reference to determine fiscal transfers from the centre to state governments for the period 2020/1 to 2024/5. The GST Network (GSTN) has been established to provide information technology infrastructure to taxpayers, central and state governments, dealers and all stakeholders. Evidently, there are substantial opportunities to leverage data emanating from GSTN. In such a context, the role of data analytics becomes prominent in monitoring tax administration, mitigating tax evasion, leveraging digitisation and designing fiscal federal policy. The implications presented in this article are relevant to any country having a federal structure that has implemented GST in some form or another.
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Greek Economy: Between Optimism and Substandard GrowthIs Greece’s economy back to normal after the victory of liberal-conservatives in last summer’s elections? The Greek economy is certainly out of the doldrums but structural problems are still in place. The economy desperately needs foreign capital inflows, the most challenging bet for the new Prime Minister K. Mitsotakis. What do statistical data tell us about 2020 economic prospects? What will be the effect of covid-19 on the economy?
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Coronavirus: The Case for Digital Money?We discuss the advantages of adopting government-issued digital currencies and a supranational digital iCurrency. This will get rid of paper money, a ubiquitous medium for spreading germs, as highlighted by the recent coronavirus outbreak. We set forth three policy recommendations for adapting mobile devices as new digital wallets, regulatory oversight of sovereign digital currencies, and a supranational digital iCurrency. We also argue that the USA should reevaluate its “exorbitant privilege and exorbitant duty” in light of the financial meltdown from the coronavirus outbreak.
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The Impact of Income and Unemployment on Suicide in Scandinavian CountriesThis article experimentally investigates how economic factors in Scandinavian countries affected the suicide rates between 1991 and 2010. Notwithstanding factors affecting suicide in Scandinavian countries have been studied, there are no studies on the relationship between suicide, income and unemployment. Although Scandinavian countries have among the highest welfare levels in the world, suicide rates are quite high. Empirical results indicate that suicide is related to a number of economic factors like GDP per capita and unemployment. This study finds a negative relationship between GDP and suicide and a linear relationship between unemployment and suicide. Unemployment’s encouragement of negativity increases suicidal tendencies, at the same time as declining income has similar psychological effects.
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The Socioeconomic Plight of Carpet Weavers of KashmirWeaving is a method of textile production in which two distinct sets of yarns or threads are interlaced at right angles to form a fabric or cloth. Kashmir handicraft products have earned worldwide fame for their attractive designs, functional utility and high-quality craftsmanship. In the absence of other manufacturing industries in the state, handicrafts have remained a key economic activity from time immemorial and engage approximately 374,000 artisans. Crafts like shawls, crewel work, namdha, chain stitch, wood carving, papier maché, costume jewellery, kani shawls and the carpets hold a significant share in the overall production and exports of the state. Carpet weaving is an essential craft, both at national and state levels, in its overall contribution to employment and revenue.
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