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The Informal Economy of the BRICS
Authors: Girish Mohan Dubey & Akanksha Singh, December 2023

This article evaluates the impact of trade liberalisation on the informal economy in the BRICS countries, which have significant unorganised sectors and trade policy changes. The article uses panel data from 1996 to 2015 to measure informality based on the method of Kaufmann and Kaliberda, which estimates the size of the informal sector as the difference between official GDP and electricity consumption. It finds that trade liberalisation has increased informality in the BRICS countries, implying that globalisation and economic growth have not benefited the unorganised sector or reduced inequality and development issues. It suggests that trade policy reforms should be accompanied by measures to improve governance, regulation, social protection and formalisation of the informal sector.

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Averting Public Debt Tsunami
Authors: Jan Janků & Jan Libich, December 2023

This study introduces an innovative policy proposal designed to improve the fiscal stance of most countries towards long-term sustainability. We suggest implementing ‘deficit taxes’ for individuals and (100-fold higher) ‘deficit fines’ for politicians in any year in which a (cyclically adjusted) budget deficit occurs. In line with the theory of ‘rational inattention’, these taxes and fines will incentivise voters and politicians to stop ignoring debt accumulation and the threat of a fiscal crisis.

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Modern Money Theory
Author: Biagio Bossone, December 2023

The article criticizes modern money theory (MMT), which is a macroeconomic policy that aims to achieve full employment by using money-financed fiscal deficits, without using any formal modelling. The article claims that MMT policy would not work in an open and internationally highly financially integrated economy, because it would either cause the money stock to grow unsustainably large or require domestic interest rates to be set at levels that would contradict the goal of full employment and create economic and financial instability. The article argues that MMT can only work, at best and if at all, in specific country circumstances, such as having high policy credibility or issuing an international reserve currency, which can prevent the negative effects of MMT policy and make expansionary demand shocks effective.

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Argentina, Crises and the International Monetary Fund
Author: Graham Bird, December 2023

Argentina has a long history of economic, financial and currency crises and has been exhibiting crisis characteristics since 2018. Crises in Argentina may be analysed using currency crisis models and in particular, experience seems to fit the first-generation model. After a break of 15 years, Argentina has had programs with the International Monetary Fund, a standby agreement in 2018 and an extended fund facility agreement in 2022. The programs have incorporated fairly conventional IMF conditionality in terms of fiscal and monetary correction and currency realignment. On the basis of almost all criteria, the programs have not been successful, and it is important to understand why this is the case. In the recent presidential elections, one candidate advocated dollarization. However, there are underlying problems with this policy approach. Political factors in Argentina play an important role in determining policy choices and outcomes.

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Is ‘Make in India’ a Saga?
Author: Sarbapriya Ray, December 2023

The ‘Make in India’ drive aims to boost domestic manufacturing and reduce import dependence, attracting global investors and producers to India’s potential and ecosystem. The manufacturing sector in India has shown weak growth in value added and employment, lagging behind the service sector, due to capital-intensive and labour-saving technologies. India ranks low in several indexing parameters, indicating a lack of strategic effort by the government to improve the manufacturing environment and competitiveness. For ‘Make in India’ to be successful, India needs to create a global workforce, use natural resources optimally, build world-class infrastructure, offer tax incentives and reduce reliance on China.

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A Mandatory Carbon Credit Purchase set by a Country’s Gross National Happiness
Author: Finnley William River Ross, December 2023

Countries should be mandated to purchase carbon credits for their shortfall in nationally determined contributions to the Paris Agreement. The carbon credit purchase quantity for each country should be scaled by a country’s gross national happiness. Governments should fund this carbon credit purchase through national carbon pricing. Mandating government carbon credit purchases will facilitate far-reaching emissions reductions, carbon removal at scale and combat global inequality.

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Enriching the Human Development Index through the Inclusion of Affordable Healthy Diet
Author: Richard Blair , December 2023

This article presents research findings that support adding ‘affordable healthy diet’ as an indicator in the ‘Long and healthy life’ dimension of the Human Development Index (HDI). The article also aims to link the Sustainable Development Goal 2 (End Hunger, Achieve Food Security and Improved Nutrition and Promote Sustainable Agriculture) with the HDI, by showing the importance of food and nutrition security in human development. A quantitative analysis is used, including econometric and statistical methods, to establish the relationship and the statistical significance of affordable healthy diet in the HDI. The study aims to be the first to integrate food and nutrition security in the assessment of human development, using testable and established statistical methods to improve governance, regulation, social protection and formalisation of the informal sector.

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Measuring the 'Flat White Economy'
Author: Douglas McWilliams, September 2023

The ‘Flat White Economy’ defined in the eponymous book is the combination of tech and creative economies that developed initially in the east of London and have since evolved into becoming a significant component of the UK’s GDP and that of other economies. Research undertaken by the Centre for Economics and Business Research (Cebr) estimated that the sector had grown to 12% of the UK’s GDP in 2022, compared to around 9.2% for manufacturing. Measuring the value of services is difficult but measuring the output of creative and tech services, especially since the birth and expansion of the internet, creates additional problems which imply that current estimates of the size of the sector could be too low. There are four main measurement issues: the size, growth and lifecycle of the companies to be surveyed; the accounting treatment of investment in software; a flawed, out-of-date definition of R&D expenditure; and producing relevant price deflators while hindered by the difficulty in measuring quality.

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Monetary Facts and Inflation
Author: Steve H. Hanke, September 2023

Despite recent bouts of inflation in the United States, the United Kingdom, and Europe, central bankers have been attributing the rise in inflation to various non-monetary factors, such as supply chain problems and geopolitical events. However, this article argues that excess money supply is the real culprit behind inflation, echoing the famous quote by Milton Friedman, ‘Inflation is always and everywhere a monetary phenomenon.’ The study finds a high correlation between the rate of growth of the money supply and the rate of inflation, supporting Friedman’s assertion. The author presents updated data from 147 countries spanning the period from 1990 to 2021, reaffirming the tight linkage between changes in the money supply (M2) and inflation. This evidence contradicts claims by central bankers and supports the view that inflation is primarily a result of monetary factors rather than non-monetary ones.

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Are Purchasing Power Parity Exchange Rates Misleading in Oil-Rich Gulf Countries?
Author: Miriam Al Lily, September 2023

This article examines the accuracy of purchasing power parity (PPP) rates in Saudi Arabia. It highlights concerns about the perceived wealth of Saudi citizens based on interviews with American expatriates and wage statistics. It discusses the limitations of the Saudi International Comparison Program (ICP) data, including variations in data quality, differences in product selection, limited coverage and the assumption of uniform consumption patterns. It analyses the divergence between Saudi Arabia’s PPP rates and the fixed market exchange rate and examines the relationship between Saudi Arabia’s PPP rates and oil prices, revealing the paradoxical decline in living standards during periods of high oil prices. In conclusion, the PPP exchange rates for Saudi Arabia appear to fail to accurately assess living standards in Saudi Arabia.

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Reconciling with Two Decades of Quantitative Easing
Author: Chris G. Pope, September 2023

Credit-based growth has been the cornerstone of industrialisation efforts among most of the world’s present-day advanced economies. This was premised upon the issuance of interest-free credit and/or the regulation of the flow of credit to favour investment in tangible capital formation over speculation. The quantitative easing measures carried out today have benefited mainly the ultra-rich and are unsustainable. As nations respond to inflation, there is high risk of a financial collapse. Central banks such as the Bank of Japan have little they can do within their current policy range to stop this. Japan needs demand for Japanese credit, for productive purposes. It is likely to find this in nations embarking upon credit-based growth to achieve industrialisation in the developing world. This would be a benefit to both the people of Japan and the developing world.

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Exchange Rate Fluctuations and Stock Market Returns in Emerging Asian Economies
Authors: Mearaj Ud Din Dar & Khursheed Ahmad Butt, September 2023

Exchange rates are a prominent macroeconomic variable that exposes emerging stock markets to international economic risks. This study attempts to understand and explain stock market returns and exchange rate dynamics in the progressive emerging market group of Asia. The study applies the ARDL modelling technique and Granger causality test to monthly time-series data. It finds that import-dominated countries (India, Indonesia and Turkey) have positive exchange rate coefficients while for export-dominated countries (China), an increase in real effective exchange rate affects stock returns negatively. Causality analysis reveals informational inefficiency among the sample countries except for Indonesia, because exchange rate movements lead stock prices. The study concludes that the exchange rate is highly significant for investors (global and domestic) and policymakers in the Asian economies reviewed, who focus on it to better diversify their portfolios.

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The Impact of Macroprudential Transparency on Price Stability in Advanced and Emerging Economies
Authors: Salma Gallas & Houssam Bouzgarrou, September 2023

Transparent macroprudential policy promotes economic and financial stability by maintaining price stability and enhancing the resilience of financial systems. This study evaluates the impact of macroprudential transparency on inflation levels and expectations using data from 65 economies during the period 2000–2015. It employs panel data methodology and the generalised method of moments approach. The research findings reveal that macroprudential transparency is associated with lower inflation rates and inflation expectations in developing economies and emerging markets. Additionally, the efficiency of prudential transparency is confirmed for countries that do not adopt inflation targeting.

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The Impact of Foreign Direct Investment and Exports on Vietnam’s Economic Growth: 1991-2022

The article examines the impact of foreign direct investment (FDI) and exports on Vietnam's economic growth from 1991 to 2022. Data on FDI, exports and real gross domestic product (GDP) were collected and analysed using EViews 8 software. The results show that both FDI and exports have a positive relationship with economic growth in Vietnam. Specifically, a 1% increase in FDI leads to a 0.2352% increase in economic growth, and a 1% increase in exports results in a 0.5425% rise in economic growth. The study suggests policy implications to promote FDI attraction and export activities to foster Vietnam’s economic growth and development.

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Climate Change Convention: COP27 Activities and Study of GCF Pledged Finance
Authors: Tawfiqullah Muradi & Vikram Sandhu, September 2023

COP27 focused on adaptation efforts in small island developing states (SIDS) and Africa, aiming to strengthen the resilience of vulnerable local populations and restore land to address biodiversity loss and climate change. This article examines the methodological aspects of the research design and highlights the significance of COP27 in achieving global goals and the objectives of the Paris Agreement. It evaluates Global Climate Fund (GCF) access modalities, such as request for proposals (RFP), the Simplified Approval Process (SAP) and direct access, to engage multiple stakeholders in addressing greenhouse gas mitigation, adaptation, food security, biodiversity conservation and desertification. The GCF’s Readiness Private Sector Programming (PSP) played a crucial role in implementing Nationally Determined Contributions (NDCs) and National Adaptation Plans (NAPs) during COP27, supporting investment in climate action. The article also emphasises the importance of transparency frameworks, domestic policy implementation and national-level decision-making in line with the ambitions of the Rio Conventions. Additionally, the comprehensive approach to channelling funds into sustainable sectors within countries is analysed as a means to achieve the stated goals.

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Hyperinflation in Suriname
Authors: Steve H. Hanke & Nicole Saade, June 2023

Primary data reveal two new instances of hyperinflation, both occurring in Suriname in the 1990s. In June 1993 and October 1994, Suriname experienced monthly inflation rates of 208% and 58.6%, respectively. With these additions, the Hanke-Krus World Hyperinflation Table now records 66 hyperinflation episodes. These are the first recorded instances of hyperinflation in Suriname.

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Are Sovereign Defaults (Partly) Bad Luck?
Author: Colin Ellis, June 2023

When sovereigns default, the consequences can be disastrous. Domestic banks and companies often suffer alongside their governments, and the sovereigns themselves face high risks of re-defaulting. One contributor to default is often disappointing growth – examining a sample of defaults since 2000, growth has typically fallen short relative to independent forecasts made both one year and two years prior to default. Textual analysis of those errors finds regular attribution of this weak growth to exogenous shocks, beyond the control of the governments that default. This supports the hypothesis that, in part, sovereign defaults reflect bad luck. Finally, there are signs of a relationship between the extent of growth falling short of forecasts and the losses investors suffer in the event of default. Unsurprisingly, larger growth shortfalls are typically associated with higher losses.

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Improving Economic Policy
Author: Andrew Smithers, June 2023

The consensus model (CM) holds that there is only one equilibrium that needs to be maintained for economic stability. This follows, as a matter of logical necessity, from the model’s fundamental assumptions. The evidence is, however, clear that, independently of each other, asset prices, money supply and demand all need to be kept in balance. The widespread scepticism among economists and central bankers over the single equilibrium assumption is thus abundantly justified. Two important conclusions follow: CM must therefore be discarded if economic policy is to achieve growth with low and stable levels of unemployment and inflation. The existence of three possible disequilibria requires at least three independent policy instruments to allow the economy to be managed successfully. In addition to monetary and fiscal policy, another instrument is thus needed, which tax policy can and should provide. If used appropriately, these three tools can preserve stability. Importantly, the correct use of tax policy should not only prevent the policy errors which have led to rapid inflation and financial crises but restore the trend growth of developed economies to the rates achieved before 2000.

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Graduation From The Prolonged Use of IMF Resources
Authors: Harvey Baldovino & Graham Bird, June 2023

The International Monetary Fund (IMF) was designed to offer temporary financial assistance to member countries experiencing balance of payments difficulties. However, for a relatively large number of countries the use of IMF resources became prolonged; the Philippines was an extreme example of this. In sharp contrast, since 2000 the Philippines has made no further use of IMF resources and has graduated from the Fund. This article investigates the reasons underpinning graduation in the case of the Philippines and discovers that not only did changed economic circumstances moderate the need to borrow from the IMF, but also political factors made incumbent governments more reluctant to turn to the Fund. Drawing on the Philippines as a case study, the article extracts more general lessons relating to graduation and raises the issue of whether graduation is always desirable. Although a number of studies have examined the prolonged use of IMF resources in considerable depth, up to now the phenomenon of graduation has been largely ignored. This article aims to fill a gap in the academic literature.

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Pakistan’s Poor Governance and Capital Flight
Author: Dev Kar, June 2023

Pakistan’s chronic economic mismanagement, as reflected in persistently large current account deficits, compelled it to enter into 22 financing arrangements with the International Monetary Fund, the latest one being in 2019. The key factors behind capital flight from Pakistan are its poor scores on governance, such as on political stability and absence of violence and control of corruption, the stranglehold of its elites, and the rising income inequality. We estimate that about 50% of all borrowing since 2001 has been squirreled away abroad by the country’s elites. Governance and economic policies need to be improved in order for Pakistan to avoid a debt crisis in the future.

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A Matter of Wealth, Intangible Wealth and Sustainable Development
Author: Megi Marku, June 2023

Wealth disparities among countries with varying levels of natural resources have been a long-standing topic of debate. Despite numerous hypotheses proposed over the years, a new concept has recently emerged that is gaining traction among scholars. This concept, known as intangible wealth, is derived from a World Bank study and comprises non-material factors such as human capital, institutional efficiency and effective governance. The intangible wealth hypothesis posits that these intangible factors play a crucial role in explaining the differences between poor and rich countries. By emphasising the importance of intangible wealth, this concept challenges conventional notions of wealth that focus solely on natural resources and material assets. Intangible wealth has emerged as a new concept that explains the differences in economic prosperity among countries. The concept emphasises the importance of factors such as human capital, institutional quality and efficient governance in promoting economic growth. Policymakers can use this concept as a framework for developing policies that promote sustainable economic growth. By focusing on intangible assets, countries can create an environment that is conducive to economic prosperity.

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Measuring the Informal Economy in Morocco
Authors: Othmane Bourhaba & Mama Hamimida, March 2023

This paper, relying on the electricity consumption method, attempts to both measure the size of the informal economy in Morocco and construct a larger time series dataset for the Moroccan informal economy. We use the Kaufmann and Kaliberda (1996) model to calculate the size of the informal economy over the period 1971 to 2014. The results show that this hidden part of the economy constitutes 41.4% of official GDP in 2014, and also that the informal economy in Morocco shows growth and a positive trend with an average annual growth rate of 2.11% between 1971 and 2014.

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Measuring Britain’s Green Economy
Author: Brian Sturgess, March 2023

Official data show that the performance of Britain’s green economy, up to 2019 at least, has been decidedly anaemic. UKEF’s 2030 export target is unimpressive, but even so Britain’s green economy and international trade remain small. Measuring this sector is vital but statistical estimates of the evolving green economy represent work in progress, while Britain’s two official data sources are significantly inconsistent. These differences urgently need resolution. The EGSS database, which is more closely aligned with international standards, shows paltry responses to yawning skills gaps and concentration in low-growth/low-productivity activities. Britain post-Brexit, with an underperforming green economy, faces a long road ahead since the only sector effectively contributing to exports and jobs is electric vehicle production.

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Climate Change and the Global Economy
Author: Julian Gough, March 2023

Over the period 1998-2022 global temperatures remained generally unchanged despite a 14% rise in the concentration of carbon dioxide in the atmosphere, thus contradicting the IPCC's scientific theory of climate change. The IPPC's flawed theory, accepted by most governments, will inevitably lead to mistaken economic policies which will prove both costly and pointless. The UK has taken the most drastic actions to reduce carbon dioxide emissions from the burning of fossil fuels; a series of misguided laws, taxes and subsidies have distorted the free operation of market forces in allocating resources. State intervention in the UK in the pursuit of the Net Zero emission target has resulted in an energy supply industry which is inefficient, expensive, unreliable and unsustainable in the long term - it has inflicted considerable costs on industries and consumers. The IPPC's exhortations for de-carbonisation have had a mixed response across the world - many Western nations have committed to Net Zero targets but most Eastern and developing countries have declined to do so.

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The Devils
Author: Biagio Bossone, March 2023

In a world of highly financially integrated economies, economic theory should differentiate between the role of local agents and that of global financial investors and place the latter at the centre of macroeconomic modelling. The portfolio choices of global financial investors influence the effectiveness of macroeconomic policies: the greater the credibility of a national economy (as perceived by global financial investors), the larger its space available for running effective expansionary policies. Conversely, when investors consider an economy not to be credible, they act in ways that narrow its policy space, and the effects of expansionary policies dissipate into currency depreciation and higher inflation, with little or no impact on real output. Economies should keep their public debt low, limit it to financing investments that repay themselves and/or to bringing the economy out of recessions. In this second case, they should commit to reducing the debt during recoveries.

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Taxation Effects on Economic Growth

We examine the impact of total taxation and individual taxes on growth in 21 European Union countries from 2000 to 2017 using OECD data. The method used is ordinary least squares. Secondly, owing to the endogeneity which is observed in our estimation, we used a two-step system—generalised method of moments—for the analysis. Tax on corporates appeared statistically important, which shows a strong relationship between tax on corporates and the logarithm of Gross Domestic Product. A policy of high taxation can impact negatively on investment, entrepreneurship and activities which improve research and development. The negative effect of taxes on corporates during an economic crisis could be responsible for the increase in tax evasion, discouragement of small business activity and increase in corruption and inequalities.

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Greece’s Economy’s Outstanding Recovery
Authors: Theodore Pelagidis & Eleftheria Kostika, March 2023

Growth in Greece’s GDP ran faster than the Eurozone average in 2022. Foreign direct investment reached record highs and tourism rebounded at 2019 levels. The country proved resilient to the energy crisis despite the worsening macroeconomic outlook in the euro area. Regaining investment grade status in 2023 is a feasible target as the distance from this milestone is just one step and Greece’s credit profile has substantially improved. Over the coming years, will Greek economy continue to achieve considerable and sustainable growth rates? The pandemic and energy crises have further increased the urgent need to tackle both long-standing and looming challenges.

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Impact of Unemployment and Inflation on Corruption

Two problems that developing countries often face are high inflation and high unemployment. These provide a strong positive push to the level of corruption present in the country. The higher corruption level has a huge impact on the economic growth of the country. This article examines the impact of inflation and unemployment in developing countries on the level of corruption in an economy. The factors used to examine this impact are foreign portfolio investments, foreign direct investment, the Ease of Doing Business Index and the level of democracy. For data analysis panel data was collected for 162 countries, covering the period from 2005 to 2018. To examine the impact on corruption comprehensively, corruption was distributed among three variables. Dynamism was also studied through the generalised method of movements among inflation, unemployment and corruption. The outcome indicates inflation and unemployment positively impact corruption in an economy. Where a country has higher inflation rates than required, then this will automatically give an upward push to activities related to corruption. Similarly, if unemployment rates are higher than required, this will also contribute to rising activities associated with corruption.

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Improving Economic Society
Author: Mitsuhiko Iyoda, March 2023

This article identifies ways to improve economic welfare by dealing with observed market failures in the capitalist system. Rather than taking the more familiar theoretical approach, we make the case for broad targeting policies, which would bring welfare improvement in terms of both GDP and the genuine progress indicator (GPI). Several recent developments are expected to make further contributions to improving both measures. Efforts to address sustainability and stability in the international context, NPOs and ESG investing are expected to grow, an encouraging sign of social progress and the advancement of science. Through the COVID-19 pandemic and the Russia–Ukraine War, we have learned that international peace and the generosity of developed countries are necessary to create and sustain a fair and just society. We envision a complementary relationship between GDP and GPI in which the GDP framework is used for policy purposes and the GPI concept is used for monitoring performance from a welfare perspective.

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The Relevancy of GDP
Author: Shashank Vikram Pratap Singh, March 2023

In recent years, the place of GDP and how to measure happiness are two pressing and contentious issues in development studies. Despite many flaws in the index of economic growth (GDP), it is used as a reliable indicator for measuring happiness without considering the costs and benefits of doing so. There have been efforts across the world to develop alternatives or to replace GDP with a more accurate and acceptable metric so that assessment of happiness could be made in a more comprehensive manner. The indicators developed so far have not been able to address issues concerning the contribution of well-being to the happiness of citizens. This paper attempts to highlight the issues pertaining to GDP vis-à-vis happiness and suggest alternative measures.

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Can African Countries Skip Manufacturing to Achieve Economic Development?
Author: Hippolyte Fofack, March 2023

The ‘informal economy’ has played a large and growing role in the distribution of imported manufactured goods across Africa sustaining the growth of the services sector but at tremendous costs in economic development, poverty, and macroeconomic instability. A long decline in manufacturing’s share of regional GDP in Africa has bottomed out and now stands at more than 12% of GDP, up from 10% a decade ago. The African Continental Free Trade Area (AfCFTA), which is set to fast-track the diversification of sources of growth and trade, will accelerate this trend and the expected boom in intra-African trade will lead to more sophisticated exports. Africa has been a net importer of food, but agriculture and agribusiness are major growth industries with tremendous potential for job creation and structural transformation. Global fertilizer use averaged 137 kilograms per hectare in 2018, the average across Africa was less than 20 kilograms per hectare. Raising the yields of African farmers and boosting agricultural productivity is central to the continent’s strategy for achieving self-sufficiency in food production and strengthening national security. The Pan-African Payment and Settlement System (PAPPS) has been set up to facilitate trade and tackle the constraint of access to international liquidity causing a large trade financing gap. The PAPSS, is jointly supported by the Afreximbank, the AfCFTA Secretariat, the African Union Commission, and African central banks.

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Is India a Low Risk of Stagflation?
Author: Sheetal Khandre, March 2023

In 2021/22 the world inflation rate increased by 2.7%, potentially due to the Russia–Ukraine war and the pandemic. According to the International Energy Agency, Russia’s oil exports might reduce by 2.5 million barrels per day under the existing sanctions, representing around 30% of its current exports and nearly 3% of the world supply (IEA, 2022). This situation has helped drive up the inflation rate and may be pushing the economy towards stagflation. In this article, I examine whether the Indian economy faces the problem of stagflation or high inflation. Time series data are used to evaluate stationarity and ARIMA models to forecast future values. This study proves that crude oil prices, exchange rates, unemployment, inflation and GDP are not stationary. The ARIMA model helps forecast future values to scrutinise the risk of stagflation.

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