News and Analysis: 19-30 Aug 2013 | EmergingFrontierMarkets.com

Based in: Manila, Philippines

Posted on Thu, 29 Aug 13:

Joseph Stiglitz: How Dr. King shaped my work in economics, NY Times (blog), 27 Aug 13 [courtesy Philly Council Biz Econ]:
I had the good fortune to be in the crowd in Wash. when the Rev. Dr. Martin Luther King Jr. gave his thrilling 'I Have a Dream' speech on 28 Aug 63. I was 20 years old, had just finished college, and only weeks before my graduate studies at MIT. Listening to Dr. King speak evoked many emotions for me. Young and sheltered though I was, I was part of a generation that saw the inequities that had been inherited from the past, and was committed to correcting these wrongs, writes Nobel Laureate '01 / fmr World Bank chief economist

Martin Feldstein: US interest rates will continue to rise, Project Syndicate, 28 Aug 13:
Six months ago, I wrote that US long-term interest rates would rise, causing bond prices to fall by so much that an investor who owned 10-year Treasury bonds would lose more from the decline in the value of the bond than he would gain from the difference between the bonds' interest rate and the interest rates on short-term money funds or bank deposits. That warning has already proved to be correct. But what of the future?, asks Pres Reagan's Council Econ Advisers chair / Harvard prof

Mohamed El-Erian: The Fed and the emerging markets peril, Bloomberg, 27 Aug 13 [courtesy Philly Council Biz Econ)
US officials have taken to the airwaves over the last few days to absolve the Fed of blame for the recent turmoil in emerging markets. The most common argument -- that the Fed's dual mandate of price stability and maximum employment is limited by law to domestic objectives -- is correct. But that line of reasoning is too narrow given the feedback loops between emerging markets, corporate earnings and the US econ, writes CEO and joint chief invest. officer of PIMCO, the largest bond investment co.

Posted on Sun, 25 Aug 13:

Jackson Hole - Fed told pay more attention to global policy impact, MNI Market News/Ger., 24 Aug 13:
The Fed Reserve has sometimes been accused of fomenting problems for other nations, and while it is probably asking too much for the Fed to reorient its policies, the Fed and other central banks can and should consider the external impact of their policies, participants in the Kansas City Fed's annual symposium were told Sat. Ever since the Fed lowered interest rate to nearly zero, Brazil and other emerging markets have complained about the impact on them (Jackson Hole: Global dimensions of uncoventional monetary policy)

Hyun Shin: A fresh start, Princeton U, June '10 [PDF] (Final ch of his Risk and Liquidity - Clarendon lectures in finance):
With the global financial crisis, we may be experiencing another shift in the collective willingness to review the foundations of regulation. However, as desirable as regulatory changes are, they are almost certainly inadequate by themselves in meeting the challenge of the next boom-bust cycle. As seen in these lectures, the main culprit for the boom-bust cycle is the underpricing of risk in the boom phase of the cycle. Risks increase in booms, and are only manifested in busts, writes Princeton prof / participant at this weekend's Jackson Hole confab

Shang-Jin Wei: What the trade numbers hide, Columbia Univ, 6 May 13:
Consider the iPhone. The bulk of its value (incl its design and key components) is produced in the US and Japan, shipped to China, and then China exports the final product around the world. When calculating the balance of trade between the US and China, though, the full value of iPhone is credited to China's side of the trade ledger, writes Columbia Chazen Intl Bus. Inst dir (Infographic: Building blocks of the digital world - The electronics global value chain)

Posted on Fri, 23 Aug 13:

Brazil's currency strengthens following $60 bil. intervention plan, Bloomberg, 23 Aug 13:
The Brazilian real gained after the central bank stepped up efforts to arrest its currency's decline, announcing a $60 bil. intervention program involving currency swaps and loans. Still the currency is the 2nd worst performer in the past month after the Indonesian rupiah. The real fell 7.7% vs the US dollar in the period. Investors are exiting emerging markets as the Fed prepares to reduce the amount of money it pumps into the economy (Indonesia tries to reduce current account deficit as currency, stock market slide, AP) [via Star Trib]

Asia cannot bypass manufacturing on path to prosperity - report, Asian Dev't Bank, 21 Aug 13:
Industrialization must be an essential part of the growth formula if Asian nations want to prosper and avoid the 'middle income trap', says a new ADB report. "Historically, no economy has reached high income status without reaching at least 18% share of manufacturing in output and employment for a sustained period," the bank's chief economist said. "Right now, as services boom in the region, it's tempting to shun industrialization, but it will be a serious mistake if a nation wants to be prosperous," he added

Ghani, Goswami and Kharas: Service with a smile - A new growth engine for poor nations, Vox EU, Nov '12:
Services have long been the main source of growth in rich nations. We argue that services are now the main source of growth in poor nations as well. For more than 200 years, it was argued that econ dev't and growth were associated with growth of the labor-intensive manufacturing sector. We present evidence that services may provide the easiest and fastest route out of poverty for many poor nations, write World Bank econ advisor for SAsia, WB consultant, and Brookings Inst senior fellow

Posted on Wed, 21 Aug 13:

US weighs pros, cons of cutting some aid to Egypt, AP, 20 Aug 13:
The Obama admin, undertaking a major review of US relations with Egypt, edged closer to a decision Tue about curtailing some of America's $1.5 bil. in annual aid after the Egyptian military's crackdown on supporters of ousted Pres Morsi. The US is in a bind. While it wants to continue aiding Egypt to maintain ties with the military-run govt and assert its influence in the region, the admin and lawmakers do not want to appear to be condoning the bloody crackdown

Investors, wary of Fed, sell off emerging market assets again, Reuters, 21 Aug 13:
The rout in emerging markets gathered pace on Wed, extending to the Turkish lira which, with India's rupee, hit new record lows in a sell off prompted by the expected tailing off of extraordinary US money printing. The Fed's largesse has been a major factor in the recent success of emerging market assets. Since the start of Aug, however, currencies from countries such as India, Indonesia and Brazil have fallen more than 5% vs the dollar

Ricardo Hausmann: The conglomerate way to growth, Project Syndicate, 25 July 13:
Countries do not become rich by making more of the same thing. They do so by changing what they produce and how they produce it. They grow by doing things that are new to them; in short, they innovate. Many countries have been altering their growth strategies to reflect this insight. But they are being distracted by some of the greatest - but atypical - examples of success, writes Harvard Ctr Int'l Dev't dir / fmr Inter-Amer Dev't Bank chief economist

Posted on Mon, 19 Aug 13:

Prioritizing privacy -- Privacy and the biometric revolution, Ctr Glob Dev't, by Alan Gelb, 5 Aug 13:
How can societies decide on reasonable tradeoffs on the use of personal data, incl limiting its use for purposes not endorsed by the subject and discriminatory applications? That's a difficult question to answer even in nations accustomed to official IDs and privacy concerns. But what about in developing nations? Many are working to provide 1st-ever official IDs to their citizens, in some cases employing biometric tech far in advance of anything used before, writes Ctr senior fellow / fmr World Bank chief economist for Africa

Robert Shiller: Why owning a home isn't always a virtue, NY Times, July '13 [courtesy Yale U]:
In the aftermath of the subprime mortgage crisis, our national commitment to home ownership is sure to be questioned as we consider what to do about the enterprises that are meant to increase the supply of money available for mortgages and are now under govt conservatorship (Fannie Mae, Freddie Mac), and the Fed Housing Admin, which directly subsidizes home ownership. Which is why this is a good time to ask a basic question: In today's world, is it wise for the govt to subsidize home ownership?, writes Yale prof

Bringing health to world's poor goes beyond drug price--Letter to the ed., FT, 24 May 13 (courtesy Ctr Glob Dev't):
Your recent report on a discounted vaccine price for the Global Alliance on Vaccines and Immunization (Gavi) illustrates a continuing focus on the price, rather than on the value and affordability of a product in a given health system. On one side, advocates and global health funders focus on price-cutting, arguing that products will be more cost-effective and accessible if they are cheaper. Yet neither the advocates for lower prices nor the industry recognize that price-cutting that ignores need and value is as arbitrary a policy as price-setting that ignores access and overall revenue

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