News and Analysis: 6-17 June 11 | EmergingFrontierMarkets.com

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Posted on Fri, 17 June 11:

Higher food prices here to stay, says OECD-UN FAO report, 17 June 11:
Higher food prices and volatility in commodity markets are here to stay, acc to the OECD-FAO Agricultural Outlook 2011-2020 released today. It says that a good harvest in the coming months should push commodity prices down from the extreme levels seen earlier this year. However, over the coming decade, real prices for cereals could average as much as 20% higher and those for meats as much as 30% higher, compared to 2001-10. The report reinforces the core messages for mitigating and managing price volatility in a recent inter-agency report to the G20 coordinated by FAO and OECD on behalf of 10 int'l orgs

Jean Pisani-Ferry: Must one repay one's debts?, Le Monde/ France, 6 June 11 [courtesy Bruegel]:
The 1st question is whether Greece is still solvent. This is harder to judge than for a firm because a sovereign state possesses the power to tax. In theory, all that is needed in order to get out of debt is to increase taxes and cut spending. But the power to tax is not limitless. A gov't determined at any cost to honor its debts ends up imposing a much higher level of tax revenue than the level of services it supplies, and at a certain point this discrepancy becomes socially and politically unsustainable, says Bruegel dir/ Univ Paris-Dauphine prof

The human face of economics - An interview with George Akerlof, Finance & Development, June '11:
This Nobel Laureate '01 says the topic that has motivated him the most over his 40-year career is unemployment. While that is true, it is, however, his '70 article showing how markets might break down in the presence of asymmetric (or unequal) information that won him the award. Indeed, if you play a game of word association with an economist and say "Akerlof", chances are the response will be 'lemons'. This is because the example he gave was of used car markets, where sellers have better knowledge of whether their car is a good one or a 'lemon'

Posted on Wed, 15 June 11:

Can small loans reduce poverty?, AAAS EurekaAlert, 10 June 11:
Small loans, somewhere in the neighborhood of $100 to $500, are an increasingly popular weapon in the fight to reduce poverty. Called microcredit, institutions dole out these monetary advances to help extremely poor people engage in successful entrepreneurship and improve their quality of life. While proponents extol its virtues, researchers look for evidence; they want to know if it works. Does it really increase financial development and help individuals make solid monetary decisions as its supporters claim? (Karlan/ Appel: Microfinance works, even without a Hollywood ending, CSMonitor, 17 May)

Kenneth Rogoff: The global fallout of a Eurozone collapse, Financial Times, 6 June 11 [courtesy Harvard]:
The euro experiment is at a crossroads. And it has also brought us to a crossroads in the whole int'l monetary system. Will our grandchildren inherit a world with a huge number of national currencies, or a very small number of multi-country currencies? Having a smaller number of currencies is a phenomenon that makes a lot of sense economically, economizing on transactions' costs and leveraging economies of scale. The real question is whether a common currency is sustainable politically. My guess is that if the current slow patch in global growth does not quickly subside, we will not have to wait long for an answer, says Harvard prof/ co-author with C Reinhart of This Time is Different (2009)

Capital flows to emerging markets rise, Inst International Finance, 1 June 11:
The IIF is projecting further increases in private capital flows to emerging markets this year to more than $1 trillion, following a 54% rise to $990 bln in '10. The IIF is the leading global association of financial services firms with over 430 members from over 70 nations. While high inflows contribute to econ growth in emerging markets, they also present policy challenges to those nations already facing inflation pressures, strong credit growth and asset price gains. It stressed that nations should be cautious about introducing capital controls in response to high inflows

Posted on Mon, 13 June 11:

Martin Feldstein: The US economy is worse than you think, Wall St Journal, 8 June 11 [courtesy Nat'l Bureau Econ Res]:
The policies of the Obama admin have led to the weak condition of the US economy. Growth during the coming year will be subpar at best, leaving high or rising levels of unemployment and underemployment. And the economy will continue to suffer until there is a coherent and favorable econ policy. That means bringing long-term deficits under control without raising marginal tax rates - by cutting gov't outlays and by limiting the tax expenditures that substitute for direct gov't spending, says fmr US pres Council Econ Advisers chair/ Harvard prof (Simpson, Bowles, Domenici and Rivlin: Death, taxes ... and deficit, Politico, 16 May) [courtesy Brookings]

Michael Spence: Asia's new growth model, Project Syndicate, 5 June 11 [courtesy Daily News Egypt]:
There is a growing awareness among policymakers, businesses, and citizens in China and India (and in Asia more broadly) that the historical growth paths that all of their predecessors followed simply will not work, because they do not 'scale' to a world economy that is triple its current size. Perceptions are rapidly coming into line with the reality that sustainability must become a critical ingredient of growth. The old model won't work, says Nobel Laureate '01/ NYU and Stanford prof

William Easterly: The happiness wars, Lancet/ UK, 30 Apr 11 [PDF]:
Happiness research and measurement is the newest fad in social policy. The UK coalition gov't now monitors national happiness along with the traditional gross national product. A high-level commission organized by French Pres Sarkozy recommended something similar for every nation. In the US, the debate on taxes cites the results of happiness research. So International Differences in Well-Being, a compendium of this research featuring the leading academics in the field, is fitting, says NYU prof

Posted on Fri, 10 June 11:

France's Lagarde leads Mexico's Carstens in IMF race as nominations close, Bloomberg, 10 June 11 [courtesy San Francisco Chronicle]:
With hours before the deadline to submit nominees, the French finance minister has the backing of European Union nations, and Russian PM Putin has voiced his support. Carstens, Mexico's central bank governor, says he's backed by 12 Latin American nations while he hasn't garnered endorsements from Argentina and Brazil. Lagarde has benefited from the failure of emerging markets to coalesce around a candidate from their own ranks after vowing to end a six-decade European lock on the position

Rethinking economics in a changed world, Finance & Development, June-Aug '11:
The global financial crisis was a wake-up call for econ thinkers and policymakers. Econ models and policy tools - and how they are used - need to adapt to changes in the world econ and financial system. In a recent conference on the topic, we interviewed 3 Nobel Laureates who participated: Stanford's Michael Spence, Columbia's Joseph Stiglitz, and MIT's Robert Solow. Here is what they have to say on some of the most hotly debated topics in economics today

L Chandy and G Gertz: Global poverty's new reality - There's a lot less of it, Washington Post, Jan '11 [courtesy Brookings Inst]:
Our sense of the extent of global poverty remains firmly rooted in the year '05 - the last year for which the World Bank has produced data on the number of people living on less than $1.25 a day. In a new study, we updated the Bank's figures to reveal how poverty has changed with the emergence of developing nations. We estimate that between '05 and '10, nearly half a billion people escaped extreme hardship. Never before in history have so many people been lifted out of poverty in such a short period, say Inst fellow and res analyst (Ravallion: New Brookings study is overly optimistic on progress vs poverty, Weblog at World Bank)

Posted on Wed, 8 June 11:

World food prices set to remain high, UN Food Agric Org, 7 June 11:
High and volatile agric commodity prices are likely to prevail for the rest of this year and into next year, acc to the latest analysis published on Tue in the UN agency's twice-yearly Food Outlook. The report cites a sharp rundown on inventories and only modest overall production increases for the majority of crops as reasons for continuing strong prices. Although prospects are encouraging in some nations such as Russia and Ukraine, weather conditions, featuring too little and in some cases too much rain, could hamper maize and wheat yields in Europe and N America (The speculators playing with our daily bread, Guardian/ UK, 2 June)

Economics of the Arab awakening - From revolution to transformation and food security, Int'l Food Policy Res Inst, May '11 [PDF]:
Experts have long identified slow progress in econ diversification and job creation, social inequalities, and persistent food insecurity as major dev't challenges for Arab nations. Did these factors and, more broadly, people's dissatisfaction with their living standards contribute to the recent uprisings? At first glance, the sudden turn of events and the generally low coverage, quality, and accessibility of data in the Arab world make it difficult to find answers to this question. By looking beyond conventional data, however, this brief provides some insights into the potential role of economics in the ongoing uprisings (Arab world in transition - Assessing the economic impact, Inst Int'l Finance)

Christian Helmers: What makes science parks successful?, University World News/ UK, 8 May 11:
Clusters of innovative firms are an old phenomenon. In the UK during the 1st Industrial Revolution, eg, the cotton industry was heavily concentrated in Lancashire. In more recent times, clusters of high-tech firms, prime among which is Silicon Valley in Calif., have gained fame and are referred to as role models for promoting innovation, successful commercialization of research and econ growth. What is it that makes clusters so attractive?, asks London School Econ res economist (Skolkovo - Lessons learned from Silicon Valley, Modern Russia, Nov '10 | Wadhwa: Can the Russians build a Silicon Valley?, Berkeley Blog, Sep '10 | How Silicon Valley left Boston in the dust)

Posted on Mon, 6 June 11:

Eswar Prasad: BRICs must put up a fight for IMF top job,  Financial Times, 25 May 11 [courtesy Brookings Inst]:
Emerging markets need a game plan. Europe has shown tremendous alacrity in circling the wagons around its preferred candidate, and may swiftly create a fait accompli by bringing on board other advanced economies. Japan and the US are the swing votes. They have restated support for a transparent and merit-based process, and have not taken sides yet. But neither wants the outcome to threaten its own privilege of appointing a deputy managing director. Therein lies an opportunity, says Inst senior fellow/ Cornell U prof

Capital flows debate offers an opportunity to shape financial globalization,  OECD, 19 May 11:
The risks posed by increasing capital flows require a coordinated package of macro, prudential and structural policies, with capital controls only to be considered as a last resort, acc to a new report. It examines the long-term drivers of int'l capital flows and assesses how these flows may make economies more vulnerable to external shocks, increased risks of overheating and credit and asset price boom-and-bust cycles (Global capital flows in spotlight at Brazil conference, IMF Survey Mag, 26 May)

Bryan Caplan: A quick case for 'charter cities' - Memo to the Gates Foundation,  Weblog at Econ and Liberty Lib, Mar '11:
The Bill and Melinda Gates Foundation has an interesting accountability mechanism. After they make a major funding decision, they solicit pro and con memos on 'roads not taken' - other ways they could have spent their money. Since the foundation recently decided not to back charter cities to help reduce global poverty, they asked me to write a memo to explain why they made a mistake, says George Mason U prof

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