The Knowledge Economy in Historical Perspective
& Roger Fouquet
, World Economics, March 2018
The knowledge economy provides huge opportunities for economic growth and to become the cornerstone of future economic development by turning data into wisdom or human capital. Education, one aspect of the knowledge economy, exhibits a history divided into three stages: the apprenticeship era, the universal schooling era and the (future) life-long learning era. The spread of knowledge has accelerated owing to the different stages of knowledge production, in particular the printing press and now the internet.
Using Indian Data to Measure the Impact of the Eurozone Debt Crisis Through the Financial Channel
, World Economics, December 2017
Economic data for the period 2000 to 2013 shows that the sovereign debt crisis in the Eurozone had a macroeconomic impact on India by transmission through financial channels. Capital flows into India slowed down significantly due to the crisis: net external loans availed by banks stood at US$2.7 billion in the third quarter (Q3) of 2012–13 as against outflows of US$87 billion in Q3 of 2011–12. The number and quantity of Euro issues by Indian firms declined from INR159.6 billion (with 18 issues) in 2009–10 to only INR10.3 billion (with 5 issues) in 2012–13 and portfolio investments into India fell significantly. One significant lesson from the Euro debt crises is that the Indian financial system is relatively more open than that of the Chinese.
Now You See Them, Now You Don’t: the Case of the Shrinking Global Economic Imbalances
, World Economics, December 2016
Global economic imbalances in the mid-2000s reached a level that many commentators viewed as unsustainable. The claim was frequently made that the imbalances contributed significantly to causing the world-wide financial and economic crisis at the end of the decade. Since the mid-2000s the imbalances have shrunk considerably, and their pattern has also changed. This article uses conventional balance of payments theories to examine what may have been happening. It draws on empirical evidence to assess which theories receive the strongest support from the available data. It emerges that most of the adjustment has been brought about by reductions in expenditure in deficit countries. With some notable exceptions, expenditure switching by means of changes in real effective exchange rates has generally made only an extremely modest contribution. The article goes on to contemplate the future evolution of imbalances. The experience with global economic imbalances since the world economic crisis raises many fundamental issues about the future design of the international monetary system. These include the type of adjustment and financing mechanisms embodied in it, as well as the nature of international macroeconomic policy co-ordination.
Costing a Data Revolution
& Justin Sandefur
, World Economics, September 2015
The lack of reliable development statistics for many poor countries has led the U.N. to call for a “data revolution” (United Nations, 2013). One fairly narrow but widespread interpretation of this revolution is for international aid donors to fund a coordinated wave of household surveys across the developing world, tracking progress on a new round of post-2015 Sustainable Development Goals. We use data from the International Household Survey Network (IHSN) to show (i) the supply of household surveys has accelerated dramatically over the past 30 years and that (ii) demand for survey data appears to be higher in democracies and more aid-dependent countries. We also show that given existing international survey programs, the cost to international aid donors of filling remaining survey gaps is manageable--on the order of $300 million per year. We argue that any aid-financed expansion of household surveys should be complemented with (a) increased access to data through open data protocols, and (b) simultaneous support for the broader statistical system, including routine administrative data systems.
Understanding Commercial Property Price indexes
, World Economics, September 2013
The type of database used for the measurement of commercial property price indexes (CPPIs) dictates the potential weaknesses in the resulting indexes and limitations of the methods available for measuring the indexes. Two major types of data are appraisals of the value of properties and recorded transaction prices. The former is based on expert judgement and may have problems of smoothing and lagging transaction prices. The latter is based on actual transactions and may have sample selectivity bias and limited sample sizes for these heterogeneous properties. These issues are examined.
Poor Economic Statistics Fuel China’s Low Consumption Myth
& Tian Zhu
, World Economics, June 2013
The generally held belief that China’s consumption is too low is a myth based on inadequate theory, a misreading of official statistics and the use of market exchange rates for making international comparisons. Chinese official statistics underestimate consumption expenditure on housing, they omit consumption paid for as benefits by the corporate sector, and there are a number of problems with the household expenditure surveys employed. An adjustment for statistical issues suggests that the rate of consumption is 60–65% of GDP, not the 48% based on the widely quoted official statistics figures, and is quite similar to the level experienced by other East Asian economies.
The ‘Good Global Citizen’ Remit of the IMF: Reforming international economic and financial cooperation
& Roberta Marra
, World Economics, March 2013
In the highly globalized world economy of our times, where markets are tightly integrated, setting domestic economic policy with a view simply to keeping one’s house in order is no longer optimal. New responsibilities follow for each member of the community of countries from the recognition that the action by one may affect the others. These mutual responsibilities form the core of what we call the ‘Good Global Citizen’ remit of the IMF, a reformed framework for international economic and financial cooperation. This study identifies the new responsibilities, and defines and articulates the rules under the proposed remit.
Building on Angus Maddison’s Work
, World Economics, September 2010
Angus Maddison died last April. As can be seen on his website, he left an impressive legacy of books, articles and tables of key figures. For many, his single most notable and distinctive contribution is the set of tables entitled Statistics on World Population, GDP and Per Capita GDP, 1–2008 AD. This comprehensive and widely used database is uniquely rich, accessible and convenient to use: no other source in the world compares with it. This article argues the case for continuing and building on Maddison’s work through a wide-ranging cooperative scholarly programme. Ideally, such a programme would embody two related features. First, it would cover both the historical dimension and continuing developments in the world economy: the Maddison series would remain topical, as well as an ongoing contribution to quantitative economic history. Second, the programme would involve not only non-official experts, in universities and research institutes, but also national and international statistical agencies. Two immediate tasks are (1) extending the Maddison series to 2009 and (in due course) later years, and (2) inquiring into the differences that have emerged between some of Maddison’s estimates, in particular for China, and the counterpart figures put out by the leading international agencies.
The Work of Angus Maddison: Angus Maddison (1927–2010)
Sir Alan Peacock
, World Economics, September 2010
The late Angus Maddison (1927-2010) made an outstanding contribution to economics and economic history. Following a career as a senior economist in the Organisation for Economic Co-operation and Development (OECD) he worked on a monumental statistical analysis of the historical growth in the world economy over 2000 years including China. His statistical methods create an implicit criticism of the projections on economic growth and its influence on climate change. He has forced a rethink of theories of economic growth.
Maddison and Wu: ‘Measuring China’s Economic Performance’
& Eric V. Swanson
, World Economics, March 2010
Angus Maddison and Harry Wu (2008) claim that, in 2003, China’s GDP was 73% of that of the United States on a purchasing power parity (PPP) basis. Rejecting the results of the 2005 International Comparison Program (ICP), they construct their own PPP using a 1986 GDP estimate for China (Ren & Chen 1995) which they adjust upwards, and then extrapolate to 2003 using their revised growth rates for China, which they adjust downwards. This note examines the validity of their adjustments and assumptions, and finds them to be inconsistent with recommendations both from the perspective of index number theory and recommended national accounting practices. The 2005 PPP estimates from the ICP, which Maddison and Wu reject, produce a more plausible estimate of the size of China’s economy relative to that of the US (43% in 2005).
Keywords: China, China, Consistency, Exchange rates, Inflation, National accounts, PPP, Price level, Prices, Prices, Real GDP
International Comparisons of GDP: Is there an alternative to PPPs to obtain real GDP estimates?
, World Economics, September 2008
The recent publication by the World Bank of PPP-GDP estimates for 2005, referred to 146 countries, seems a good occasion to reopen the long-standing debate on the use of Purchasing Power Parities. While theoretical speculations on the subject have continued, no estimates were supplied for more than a decade. The author’s alternative method for GDP estimation is based on inflationadjusted long-term exchange rates, where real GDP estimates are obtained through simultaneous equations. He describes the method in the light of his experience and compares its results for 100 countries with both ICP estimates and GDPs at exchange rates.
Measuring China’s Economic Performance
Andreas (Andy) Jobst
& Harry X. Wu
, World Economics, June 2008
China is the world’s fastest growing economy and is also the second largest. However, the official estimates of the Chinese National Bureau of Statistics exaggerate GDP growth and need adjustment to conform to international norms as set out in the 1993 System of National Accounts (SNA). This paper presents and discusses the necessary adjustments. The two major contributions are new volume indices for the industrial sector and for "non-material" services. Finally, in order to measure the level of Chinese GDP in internationally comparable terms, the authors use a measure of purchasing power parity (PPP) instead of the exchange rate.
Keywords: China, China, Consistency, Exchange rates, GDP, Inflation, PPP, Price level, Prices, Prices, Real GDP
International Comparisons of GDP: Issues of theory and practice
& David Henderson
, World Economics, March 2005
When it comes to making international comparisons of real GDP, different views,
conventions and practices are still in evidence. The authors set out the case for
using purchasing power parity (PPP) converters for this purpose, rather than
conversions based on exchange rates, and give reasons for rejecting various
arguments that are still widely made to the contrary. In doing so, they provide
instances of the differing current practices of international agencies, and argue
the case for greater uniformity and consistency on their part. They make a
number of suggestions, general and specific, for improving the quality and
presentation of cross-country comparative data.
From Big Macs to iMacs: What do international price comparisons tell us?
& Holger Wolf
, World Economics, June 2000
The authors review recent international price comparisons to examine the veracity of claims about “rip-off Britain”. They reach three conclusions. First, methodologically, the data requirements for a meaningful price comparison are very demanding and most of the evidence does not meet these standards. Second, price differences within countries seem, in many cases, to be just as high
if not higher than price differences between countries. Third, for most goods, the difference between the UK and the rest of the EU seems to be minor relative to the difference between the EU and the United States. The real puzzle is the comparatively high prices in the EU.