Measures of economic well-being in UK

Research Summaries in PowerPoint

From Robert Allen;

-Economics, Science, and the British Industrial Revolution
-Farm to Factory: the Soviet Industrial Revolution


See also his, Dictionary of Historical Weights and Measures

Assorted on Capital Flows, etc

International Financial Integration through the Law of One Price: The Role of Liquidity and Capital Controls

Managing Capital Flows: The Case of Indonesia

Managing Capital Flows: The Case of Malaysia

Managing Capital Flows: The Case of the Philippines

Nonsensical arguments against capital controls

On global cash flows issue you can jump in without drowning

Reaping the Benefits of Financial Globalization

Cost of India’s Burgeoning Foreign Exchange Reserves: What to Do With So Many Reserves?

Looking at some of the domestic and external economic indicators, India seems to have come a long way since the 1991 balance of payment crisis. The liberalization process started in the 1980s giving an impetus to exports and oil imports. This lead to trade and current account deficits which were mainly financed by high-cost short-term external commercial loans. Medium and long-term external commercial loans also rose. By 1990, the debt-service ratio rose to 35.3% while the ratios of short-term debt to forex reserves and debt to current receipts reached highs of 382.1% and 328.9%. In 1991, political instability at home and a global oil price spike led to further deterioration in the trade and current account deficits, falling to -3% and -3.1% of GDP, even as export growth and remittances declined. Downgraded credit ratings harmed investor sentiment as short-term investors and Non-Resident Indians (NRI) withdrew money from the country and foreign banks were reluctant to roll-over debt. Trying to defend the currency, the Reserve Bank of India’s (RBI) foreign currency assets fell from $3.1 bn in August 1990 to $975 mn in July 1991, inadequate to fund even three weeks of imports. Economic growth and industrial output slowed and inflation surged. India pledged gold to the Bank of England to finance its imports and also sought bilateral and IMF assistance to repay its debt to avoid rescheduling.

However, the crisis paved way for further liberalization of the economy and since then trade, foreign investment and exchange rate reforms have been undertaken. Post-2002, booming economic growth, domestic investment activity, eased restrictions on capital flows and interest rate differentials have led to a rise in FDI, portfolio investment, NRI deposits and external commercial borrowings (ECBs) by domestic firms, leading to a surplus on capital account. However, the country runs trade and current account deficits due to oil and non-oil imports, not withstanding the growth in exports (esp. in services) and remittances. Apart from the surge in these capital inflows, RBI has been resistant to exchange rate appreciation to protect exports, though India is a domestic demand driven economy, and structural factors more than currency value constrain export growth. This has resulted in the rapid growth in forex reserves from a mere $5.8 bn in 1991 (Fiscal Year in India is from April-March) to $76 bn in 2002, $141 bn in 2004, $199 bn in 2006 to close to $290 bn by Feb 2008. Foreign investment followed by External Commercial Borrowings by domestic firms have accounted for this rise in forex reserves.

Are Capital Controls in the Foreign Exchange Market Effective?

Thaksin, Capital Controls, and the Reserve Bank

Has the strategy of bringing back capital controls worked?

China Poverty Fact of the Day

From World Bank;

The new PPPs reveal that prices are about 40 percent higher than had been assumed under the old PPP, which was an academic guestimate. Some researchers immediately applied the new PPP conversion factor for GDP to household data and came up with hugely higher estimates of the $1 per day poverty rate for China. However, the World Bank does not use the GDP conversion factor in measuring poverty. The research department of the bank will produce a conversion factor for poverty analysis that takes account of two important things:

(1) the basket actually consumed by the poor is different from the GDP basket; and

(2) the poor almost exclusively live in rural areas where prices are lower.

This work is still underway but the research department has given us a range for their new estimates. Their old estimate of $1 per day poverty rate was 10% in 2004; the new estimate will be in the range of 13-17%. Does this mean that there has been less poverty reduction than had been trumpeted? Actually, just the opposite: there has been more.

The reason for this is that the better price data will also be applied to earlier estimates of poverty (all of which are based on constant Chinese yuan data). The World Bank estimate of $1 per day poverty in China at the beginning of reform will be raised to somewhere in the range of 71-77%. The old estimate was 64%. So, we used to think that 54% of China’s huge population had been lifted out of poverty during economic reform. The improved estimate will be around 59%.

Author Podcast-The Confiscation of American Prosperity

Michael Perelman, author

The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression.

, interviewed on Bloomberg

Global Growth goes down as World Bank recalculates China GDP

Global Growth Estimates Trimmed After PPP Revisions

Related;
PPP Versus the Market: Which Weight Matters?

PPPs-FAQs
Recalculating China's GDP

New Zealand Healthcare

When New Zealand outshone the club of Western nations in a graph of deaths following heart-attack treatment, Health Minister David Cunliffe basked in the reflected glory.

"It shows that cardiac health services in this country are among the best in the world," he told Parliament...

The November OECD report says New Zealand had the lowest rate of death in the days following heart-attack treatment in hospital in 2005. It is a measure of the quality of health systems, but it seems at odds with other figures in the report:* New Zealand's below-average placing for a related statistic on the death rate following hospital admission after a stroke, and* The country's high overall death rate from constricted heart arteries.

Dr Feek said New Zealand's stroke placement, at around 19 out of 23 countries, was more in line with expectations, being close to its placing at 22nd out of 30 for economic output per head, a determinant of national health status.

Professor Harvey White, the director of coronary care and cardiovascular research at Auckland City Hospital, said New Zealand's low in-hospital death rate after heart attacks would reflect some elements of better care, but hospital stays here were shorter, skewing the figures because a greater share of deaths would be after hospital.

Also, the way heart attacks were measured in New Zealand meant much smaller heart attacks would be picked up.

Dr Feek said that despite the report's wording, the New Zealand data included deaths at home.

The report shows New Zealand remains among the worst countries for death rate from constricted heart arteries, which reflects its wealth level and lifestyle factors such as smoking, obesity and high saturated-fat consumption.

Among men, New Zealand was 23rd out of 27 on this statistic in 2004. For men and women together, the rate was 133 deaths per 100,000 population in 2001, far worse than Australia on 91 in 2003. Australia's 52 per cent improvement in the preceding 20 years was greater than New Zealand's 49 per cent.

Professor White maintained this related to New Zealand's lower spending on newer heart drugs, such as some statins - the report confirms the country's comparatively low drug spending - and lower intervention rate to treat diseased heart arteries.

Counted together, New Zealand did 187 heart artery bypass operations and angioplasties (balloon expansion of heart arteries) per 100,000 population, compared with the OECD average of 249.

Professor White said these revascularisation procedures reduced mortality in some groups, but the ministry's Dr Feek said: "A lot of the evidence suggests these operations aren't life-saving; they're about quality of life."

-Statistics on recovery from heart attacks tell only half the story

Related;
Department of hmm....

Quote of the Day

To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth—a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus.

- Keynes

via Krugman

PPP in Cointegrated Panels

A recent paper from the Fund;

Testing for Purchasing Power Parity in Cointegrated Panels

Summary: This paper applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis using data for the G7 countries. This method is robust in several important dimensions relative to previous methods, including the well-known issue of cross-sectional dependence of error terms. The findings using this new method are contrasted to those from the Pedroni (1995) cointegration tests and fully modified OLS and dynamic OLS esimators of the cointegrating vectors. Our overall results are the same across all approaches: The strong PPP hypothesis is rejected in favour of weak PPP with heterogenenous cointegrating vectors.

Related;
Testing for PPP: Should we use panel methods?

Abstract. A common finding in the empirical literature on the validity of purchasing power parity (PPP) is that it holds when tested for in panel data, but not in univariate (i.e. country-specific) analysis. The usual explanation for this mismatch is that panel tests for unit roots are more powerful than their univariate counterparts. In this paper we suggest an alternative explanation. Existing panel methods assume that cross-unit cointegrating relationships, that would tie the units of the panel together, are not present. Using simulations, we show that if this important underlying assumption of panel unit root tests is violated, the empirical size of the tests is substantially higher than the nominal level, and the null hypothesis of a unit root is rejected too often even when it is true. More generally, this finding warns against the ‘‘automatic’’ use of panel methods for testing for unit roots in macroeconomic time series.

A Panic Attack on Unit Roots and Cointegration

The Purchasing Power Parity Puzzle, Kenneth Rogoff

An iTunes Index for Exchange Rates

New York vs London

Money Goes Far in New York, if You’re European

Related;
An Exercise in Sheer Conjecture

The Small China

In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China’s economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China’s size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 per cent smaller than previously stated.

This more accurate picture of China clarifies why Beijing concentrates so heavily on domestic priorities such as growth, public investment, pollution control and poverty reduction. The number of people in China living below the World Bank’s dollar-a-day poverty line is 300m – three times larger than currently estimated.

Why such a large revision in the estimates of China’s economic condition? Until recently, China had never participated in the careful price surveys needed to convert accurately its gross domestic product into PPP dollars.

The World Bank’s estimates based on summary data from the late 1980s probably overstated China’s PPP gross domestic product even then. Up to now, the bank has revised its estimate very little. In the meantime, China has repeatedly raised the prices of food, housing, healthcare and a range of other non-traded goods and services. These reforms should have lowered the PPP adjustment, but the bank left it basically unchanged.

-The limits of a smaller, poorer China

Via Trade Diversion

Related;
A Small Macroeconometric Model of the People's Republic of China
International comparisons
PRC, India Lagging in Economic Well Being, Living Standards - Study
PPP Data from World Bank and ADB

The Hamburger Standard