Hyperinflation in Suriname

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?

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

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

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

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

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

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

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

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

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

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

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

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?

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?

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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Monetary Policy Tightening and Economic Landing

This article presents a new approach for estimating the optimal nominal interest rate and labels it the appropriate-FFR. The analysis suggests that the US Federal Reserve is behind the curve in the present cycle and also predicts a hard landing using both the FOMC and Blue Chip consensus forecasts. Given the historical accuracy of our method, we caution decision makers to consider the possibility of a hard landing in the near future.

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The Long and Winding Road from the International Macroeconomic Policy Trilemma to the Integrated Policy Framework

For many years the international macroeconomic policy trilemma, which argues that it is impossible to simultaneously have a pegged exchange rate, monetary independence and an open capital account, has provided a theoretical foundation for open economy macroeconomics and international monetary economics. The original form of the trilemma has been criticised and modified to suggest that its corners can be rounded and that the constraints imposed by it may be circumvented in the short run. The trilemma has also been criticised for ignoring the importance of financial stability. The most extreme allegation has been that the trilemma does not exist at all because flexible exchange rates do not provide effective insulation from a global financial cycle and that therefore countries only have a choice between monetary autonomy and capital controls. Much of the research in international monetary economics since the inception of the trilemma has tended to focus on its key elements, particularly in terms of exchange rate policy and capital controls, in a world that exhibits increasing financial globalisation. The research agenda recently embarked upon by the International Monetary Fund under the umbrella of the Integrated Policy Framework (IPF) concentrates on how countries should respond to the volatility of international capital flows. This article provides a summary of the evolution of international monetary economics in the context of the trilemma, as well as a measured and constructive critique of the IPF. In so doing, it assesses the current state and future direction of open economy macroeconomics and international monetary economics.

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From Recession with Love

This article examines why some conventional finance theory no longer seems to apply in the post-2008 period. It discusses the reasons for financial markets responding to good news about economic fundamentals as if it was bad news. My controversial conjecture is that (as long as inflation is no longer an imminent threat) recession news would be welcomed by the financial markets – boosting equity prices rather than lowering them. I further document the increasingly-important “flight to focal points” phenomenon, offering examples from the meme stocks and cryptocurrency asset classes as well as some predictions going forward.

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Risk through the Looking Glass

This article argues that the general acceptance of volatility constituting a good measure of risk is not appropriate in the context of capital investment appraisal. It is argued that expected loss should be employed as a measure of risk. It is further illustrated how the risk aversion attitudes of potential investors can be taken into consideration in the capital investment decision. The pursuit of return without risk inevitably leads to the transfer of wealth through an underperforming banking system which collaborates with an unregulated financial market seeking low risk and relatively safe returns for the benefit of their wealthy clients. The promise of a ‘return without the risk’ leads financial intermediaries in an elusive direction: the only way to attain this is through directing funding to capture existing assets rather than investing in the real economy to create new wealth.

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Relationship Between Macroeconomic Variables and Stock Market Returns

The present study is an attempt to understand the interactions between prominent macroeconomic variables and stock market returns among seven emerging economies by using a novel econometric technique, the ARDL model. The study found macroeconomic variables do have significant impact on stock market returns although varying in magnitude and direction across sample countries. Significant external impact of oil prices and exchange rates is visible on stock market returns of emerging economies. Stock returns of the emerging economies are informationally inefficient because understanding the trends in macroeconomic variables can be used to beat the market.

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Stock Prices and the Macro Economy in India

This article studies the relationship between stock prices and the Indian macroeconomy assessed by the level of GDP. There are many different channels of influence between these two variables, channels which may function in either direction. There are also many hypotheses pertinent to these interrelationships. We concentrate on the empirical character of this link, which we analyse within the framework of a VAR/VEC model that allows for two-way interactions but is agnostic regarding the specific theoretical underpinnings, rather than overtly evaluating hypotheses. Using tests for stationarity and cointegration it is discovered that the relationship between stock prices and GDP is cointegrating over the long term. We estimate a VAR model and use variance decomposition. We find that there is strong evidence of long-run causality from the stock market to the economy but not vice versa. We also find modest evidence of a similar short-run effect. We rationalise our results in terms of the relatively small size of India’s stock market. It is found that Nifty 50 has strong influence on GDP but GDP does not have any influential effect on Nifty 50 in its forecast error variance. The DCC analysis indicates that there is no integration between GDP and Nifty 50 return in the short run or over long periods.

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Zombie Companies, Low Investment and Low Interest Rates

The number of zombies has risen this century and growth has slowed. Both have a common cause in the bonus culture but, unlike Japan after 1990, there is no direct causal link. Ultra-low interest rates have not slowed growth. While monetary policy is largely responsible for the surge in inflation and the current high risk of another financial crisis, higher interest rates, not offset by other measures to stimulate the economy, would have slowed rather than boosted growth. The popularity of these misconceptions arises from (i) otherwise fully justified concerns about monetary policy, (ii) misunderstanding the concept of creative destruction, and (iii) confusing companies with the businesses they own. Overleveraged companies are refinanced or liquidated; the distinction depends on the difference between their scrap and potential stock market value, the relevance of which is denied by the consensus economic model. Analysing the issue thus requires the use of other economic models.

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Gender Inequality in the Indian Informal Economy

This article seeks to understand the different dimensions of informal employment in India from a gender perspective. It also seeks to understand the social and economic impact of COVID-19 lockdowns on the lives of female informal workers in Ludhiana (Punjab). Gender pay gaps are larger in the informal sectors examined than in the formal sector. The COVID-19 pandemic has deepened existing social and economic inequalities, resulting in loss of jobs, low income, increasing the burden of household work, concerns about payment of rent and limited access to health services for female informal workers.

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Understanding the Determinants of the Gender Gap in the Economy

The gender gap has been central to discussing development policies in recent decades. It is considered one of the primary benchmarks for policymakers worldwide. This study aims to combine and highlight the primary determinants of the gender gap in four regions: North America, Latin America, Africa and the Middle East, including 21 countries over the period 1990–2020. The model used is backed by economic theory and previous empirical studies to examine the interaction between the gender gap represented by the wage, labour and education gaps (on one hand) and six determinants (trade openness, economic growth, the Human Development Index, population, remittances and foreign direct investment) on the other hand. The study’s empirical findings indicate that governments should seek to remove the wage gap by being transparent, to ensure women do not receive less than men. They should also support the role of women through mentorships in business, especially in jobs classified as male-dominated, and apply skills-based assessments fairly, regardless of the gender of the employee, especially in developing countries.

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