IMF projections for growth for Burkina Faso

What I hate about the IMF and World Bank is that very often they report growth rates in aggregate and not per capita. Burkina Faso’s population growth rate is about 2.8%, so these projections of 4%-5.2% are really 1.2%-2.4% growth per capita, which really is miserable.  Moreover, much of the projected GDP growth is coming from gold mining, and the distribution of that income is highly skewed.  So the picture remains one of a really big bulge of poor youth seeing few opportunities for rapidly growing incomes.

Growth is projected to increase moderately from 4 percent in 2014-15 to 5.2 percent in 2016, as the broad-based recovery anticipated in the wake of the November elections has been dampened by the January terrorist attacks. Following almost two years of political crisis and transition, the central policy challenge facing the authorities is to create the necessary fiscal space to deliver tangible improvements in the quality of life of the Burkinabè people.

Source: Burkina Faso : Fourth and Fifth Reviews IMF

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Harassing the government of Puerto Rico: “I want my money.”

What the hedge funds can do that individual small investors cannot is constantly harass and nip the heels of Puerto Rico, thus possibly securing higher payment eventually.  Bloomberg summarizes the major suits against Puerto Rico that deal with debt repayment:

1. Assured Guaranty Corp. vs. Puerto Rico and its Highways and Transportation Authority: The bond insurer sued late July 21 in a federal court in San Juan, seeking an emergency removal of Promesa’s stay and to stop Puerto Rico from taking toll revenue that repays the agency’s bonds and instead using those funds for other expenses. Assured guarantees repayment on approximately $1.2 billion of Highways debt, according to the compliant.

2. Hedge funds holding general-obligation and commonwealth-guaranteed bonds vs. Garcia Padilla: Aurelius Capital Management, Autonomy Capital, Covalent Partners, FCO Advisors, Monarch Alternative Capital and Stone Lion Capital Partners filed suit July 20 in a federal court in San Juan to stop Puerto Rico from transferring funds away from bondholders. The hedge funds say it violates the Promesa law since the federal legislation prohibits the island from enacting new laws diverting revenue or assets that would violate its constitution.

3. Hedge funds holding 2014 general-obligation bonds vs. Puerto Rico: Aurelius, Autonomy, FCO Advisors and Monarch sued the commonwealth on June 21 in Manhattan federal court, claiming the island cannot use its debt-moratorium law to suspend payments on the 2014 bonds. Puerto Rico’s constitution states that if commonwealth resources are insufficient to meet all of its desired spending, then public debt will be paid first, according to the complaint. Puerto Rico on July 19 filed a notice in the case, claiming the suit falls within Promesa’s stay provision. The court will address that notice. The 2014 general-obligation sale is the only commonwealth bond issuance where creditors can sue in a court off of the island.

4. National Public Finance Guarantee Corp. vs. Garcia Padilla: The bond insurer filed suit on June 15 in a federal court in San Juan, seeking to limit the island’s debt moratorium law. National claims federal bankruptcy law preempts the moratorium legislation. It also violates the U.S. Constitution because it takes the insurer’s property without just compensation and impairs contract rights, National says. The firm insures about $3.8 billion of debt issued by Puerto Rico and its agencies, according to the complaint. Puerto Rico claims Promesa’s stay halts National’s suit.

5. Ambac Assurance Corp. vs. Puerto Rico Highways and Transportation Authority: The bond insurer filed suit on May 10 in a federal court in San Juan, requesting an immediate receiver to manage the Highways agency and claiming that a contract with a third-party operator may divert $115 million away from the Highways authority, which could affect repayment of debt. Ambac guarantees repayment about $472 million of Highways debt, according to the complaint.

6. Hedge funds vs. Puerto Rico’s Government Development Bank: Affiliates of Brigade Capital Management, Claren Road Asset Management, Solus Alternative Asset Management and Fir Tree Partners, which hold Government Development Bank debt, sued the bank on April 4 in a federal court in San Juan. The firms want to stop the bank from directing funds to local agencies as the GDB restructures its debt. The hedge funds on May 20 amended their complaint, seeking to invalidate portions of the island’s debt moratorium law.

7. Bond insurers vs. Garcia Padilla: Assured and Ambac sued the governor on Jan. 7 in a federal court in San Juan to stop Puerto Rico from taking revenue originally used to pay certain agency bonds and using that money instead to cover general-obligation bonds, called a claw back. The insurance companies claim it violates the U.S. Constitution because the action deprives them of their property rights. Financial Guaranty Insurance Co. filed a similar suit on Jan. 19.

 

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Awesome complement-correction to Alan Blinder’s rather saccharine assessment in When the Music Stops

But after what seems an exhaustive review of a now voluminous record of transcripts, exhibits and other evidence from multiple official inquiries, Professor Ball concludes there is “no evidence” that the decision-makers “examined the adequacy of Lehman’s collateral, or that legal barriers deterred them from assisting the firm.” Rather, the decision to let Lehman fail reflected a mixture of politics — Mr. Paulson famously said he didn’t want to go down in history as “Mr. Bailout,” and the Bush administration had come under fierce criticism for rescuing Bear Stearns and the mortgage giants Fannie Mae and Freddie Mac — economic policy driven by managing “moral hazard,” and a misguided sense that investors had anticipated a Lehman failure and the consequences would be manageable.

Source: Pointing a Finger at the Fed in the Lehman Disaster – The New York Times

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Helicopter money, by Willem Buiter

But James Hamilton last week provided a nicer, more intelligible, layman’s summary.

A helicopter drop of money is a permanent /irreversible increase in the nominal stock of fiat base money with a zero nominal interest rate, which respects the intertemporal budget constraint of the consolidated Central Bank and fiscal aut hority/Treasury – henceforth the State. An example would be a temporary fiscal stimulus (say a one – off transfer payment to households, as in Friedman’s example), funded permanently through an increase in the stock of base money. It could also be a permanen t increase in the stock of base money through an irreversible open market purchase by the Central Bank of non -monetary sovereign debt held by the public – that is, QE . The reason is that QE, viewed as an irreversible or permanent purchase of non- monetary f inancial assets by the Central Bank funded through an irreversible or permanent increase in the stock of base money, relaxes the intertemporal budget constraint of the State.

Source: E-Journal Article – helifinal.pdf

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Short-run determinants of the euro-dollar exchange rate over period 2011-14

A nice empirical application exercise of augmenting the interest parity approach to try to determine what is driving changes in expected exchange rates that then affect the current spot rate.  Here, the authors emphasize sovereign risk, that is, risk that some euro governments might default and that the euro as a currency might not survive.

We identify the drivers of the movements in the euro-dollar exchange rate during the sovereign debt crisis. In particular, we show that the announcement of outright monetary transactions (OMT) by the Governing Council of the ECB during the summer of 2012 played a major role in the euro’s subsequent appreciation. OMT and the reform efforts undertaken by governments at national and European level saw off the risk of a euro-area break up and prompted net capital inflows. We estimate two models. The first is a reduced form high-frequency model, in which the exchange rate is explained by the differentials between interest rates in euros and dollars at both short- and long-term horizons, the sovereign spread in euro-area countries and an index of volatility. The second is a vector autoregressive (VAR) model including GDP growth differentials, short-term nominal interest rate differentials and inflation differentials between the euro area and the U.S., an average of the sovereign spreads of selected euro-area countries, the bilateral trade balance and the euro-dollar nominal exchange rate. Both approaches suggest that the evolution of the sovereign spread supported the value of the euro following the announcement of OMT in the summer of 2012.

Source: Determinants of the Movements in the Euro-Dollar Exchange Rate During the Sovereign Debt Crisis by Alessio Anzuini, Martina Cecioni, Stefano Neri :: SSRN

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IGEL 2016: Candice Burkett on how readers interpret fiction

At the recent IGEL meetings in Chicago I liked a paper by Candice Burkett about the correlates of more sophisticated interpretations of literary texts.  She and coauthor Susan Goldman measured how often students mentioned three kinds of indicators: basic gestures in writing (repetition, semantic) that indicate when to pay attention; rules of rupture (breaks in story continuity); and prominent placement (“When the King died, a gold ring fell out of his hand onto the floor.  Vasgo picked it up before anyone noticed.”).  They coded answers to a free form thinking aloud session (after first going through a set of questions that evolve to encourage or invite more sophisticated interpretation).  Interpretation progresses, in their schema, from understanding that some elements are symbols (the apple signifies knowledge), to discerning that the text may have a theme that is different from the plot and that involves those symbolic interpretation (knowledge of self implies moral self evaluation), to a more abstract thematic interpretation (we have free will and will make choices among immoral options).  The study had very low power though with just a sample of 40 so is really was just suggestive.  I liked the very straightforward message and the correlational goal. Honestly though I cannot remember any of the correlations!  But I liked the clear presentation and methodology and goal to try to measure something that is quite difficult to measure.

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Illegal immigration in the U.S.

Fact Tank – November 19, 2015 The number of unauthorized immigrants in the U.S. has stabilized in recent years after decades of rapid growth. But there have been shifts in the states where unauthorized immigrants live and the countries where they were born.

Source: 5 facts about illegal immigration in the U.S. | Pew Research Center

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