Michael Kevane

The Greek economy has shrunk by more than a quarter since 2008, and continued to plunge at the beginning of the year without adjusting for seasonal effects, although at a slower velocity. While Greece’s official statisticians do not make such adjustments, statistics agencies in most countries adjust quarterly data to reflect the fact that economic activity typically picks up at the end of a year and slows at the beginning of the next.Another euro zone trouble spot, Portugal, also performed less dismally than expected. Its economy shrank 0.1 percent in the first quarter from the previous quarter, compared with a 1 percent decline that analysts had forecast.Portugal, which is seen as having done more than Greece to improve economic performance, may have benefited from stronger exports. But Mr. Fois of Barclays said a recovery probably remains distant.“Expecting sustained growth in the short term would be a bit optimistic,” he said. “You still have a lot of fiscal austerity to come through.”Germany has benefited from the European Central Bank’s low lending rate of 1 percent, a benchmark that is set with the euro zone as a whole in mind but is probably too low for German conditions.While credit is tight in much of Europe, it is still available in Germany at inexpensive rates that have pushed up real estate prices in urban areas. German wages are also likely to rise as companies have trouble finding skilled workers, fueling inflation which is already above the official target of about 2 percent.Higher wages and inflation in Germany are likely to trouble some policy makers and segments of the German public, but may be good news for other countries in Europe. They would have an easier time competing with Germany for investment, while higher wages might increase German demand for their products.

via Euro Zone Economy Skirts Recession – NYTimes.com.

FRANKFURT, Germany — Let Greece go. It’s a possibility that’s being considered more and more publicly in Europe.There have been two and a half years of bailouts and broken promises by Greece to reform. The result: a fifth year of recession and, this week, political chaos. Voters on Sunday favored parties that either oppose the country’s international bailout or want to renegotiate it. If it cannot get more rescue loans, Greece will go bankrupt and likely have to leave the eurozone, the currency union of 17 countries.The question confronting leaders in Athens, Berlin and the other eurozone capitals could soon be:What would happen if Greece left the euro? How much damage would that do to it and other countries in the eurozone? Has Europe insulated itself to a degree that it can cut Greece loose, while keeping its currency alive?

via Greek euro exit no longer unthinkable | cleveland.com.

Established or not, economists are hot commodities. Last year, the average starting salary for new assistant economics professors was nearly $112,000 – the highest ever in inflation-adjusted terms and one of the highest across academic departments, according to the American Economic Association.“I tell our PhD students, you’re fortunate to have chosen economics instead of philosophy or English,” says John Cawley, professor of economics at Cornell University in Ithaca, New York. “Because the reality is, everyone gets a job.”

via Battle for Academic Economists Is Heating Up – Real Time Economics – WSJ.

Exports, a cornerstone of China’s torrid economic growth over the past three decades, grew only 4.9 percent last month — half as fast as economists had expected. And a slump in new orders over the past month at the Canton Fair, China’s main marketplace for exporters and foreign buyers, suggests that overseas shipments by the world’s second-biggest economy, after that of the United States, may not recover quickly.Growth in other sectors appears to be slowing, too, particularly in real estate. Soufun Holdings, a Chinese real estate data provider, released figures Monday showing that residential land sales in the country’s 20 largest cities had fallen 92 percent last week from the week before, as declining prices for apartments have left developers short of cash and reluctant to start further projects.

via Data Signals Economic Trouble in China – NYTimes.com.

Is available here.

A nice discussion of the issues…

Last year we had a by Monkey Cage standards vigorous debate about Michael Ross’ American Political Science Review article “Oil, Islam, and Women.” Ross argued that poor progress towards gender equality in the Middle East was caused not so much by the region’s Islamic traditions as by its preponderance of oil. The argument goes as follows. Oil tends to crowd out other exports, especially manufacturing. Manufacturing demands large numbers of low wage workers and has been the primary source for increased female non-farm labor participation in countries across the globe. Moreover, manual jobs in the extraction of natural resources are male-dominated. Increased female labor participation has in turn been the stepping stone for greater political representation and equal rights. Ross demonstrates that within the Middle East oil-poor countries like Morocco and Tunisia have relatively better records on gender equality than oil-rich countries. Outside the Middle East oil-poor countries also tend to do better in this regard.It has not taken long for proponents of the cultural approach to respond. SSRN has two working papers that both apply multi-level modelling to World Values surveys to show that islam, not oil, correlates with variation in opinions about gender equality across countries. Attitudes towards gender equality, in turn, shape whether women achieve equal rights and leadership positions, such as elected office. one paper is by Amy Alexander and Christian Welzel the other one comes from Harvard’s Pippa Norris .

via Oil, Islam, and Women Revisited — The Monkey Cage.

with(datasetname, tapply(analysisvariable , list(rowvariable , columnvariable ), mean))

and also after installing reshape and plyr packages:
library(reshape)
cast(bill1, female ~ competitive , value = ‘score2’, fun = mean)

Wikipedia has a nice discussion of Black Wednesday.

BBC News – Malawi devalues kwacha by 33%, leading to panic-buying

The kwacha was devalued as part of moves by the new government to restore donor funding.The former government had rejected IMF calls to devalue the currency.Our reporter says that other goods such as rice, maize flour and orange squash were running short in Blantyre’s Chichiri shopping centre – the main retail area in Malawi’s biggest city.He has been told that the same panic-buying is also happening in Malawi’s main towns.The scramble comes despite economists saying they did not expect the devaluation to immediately lead to higher prices, as many businesses were expecting the move and were already using the new exchange rate.The central bank announced that one dollar would now be worth 250 kwacha, up from 168, while the peg to the US currency would be scrapped.”The devaluation of the kwacha and the liberalisation of the foreign exchange market are expected to continue the government’s efforts to reach agreement with the IMF,” said Reserve Bank of Malawi Governor Charles Chuka, adding that this would hopefully lead to more donor funding in the next few months.

via BBC News – Malawi devalues kwacha by 33%, leading to panic-buying.

Is this still the main “danger” facing the renmimbi?

Measures to suppress volatility may encourage speculators to all line up on one side of the market, at present the side anticipating further appreciation, subjecting the economy to worrisome capital inflows and aggravating the risk of overheating.

Barry Eichengreen “Long and Short of It” p. 6.

The first courses in our training were identical, and so of course I have to agree with Menzie (since that was it for me!) writing about what explains lackluster U.K. performance:

I believe the data are not puzzling from an open economy perspective but that might reflect my training; deficient aggregate demand and relatively high inflation can occur when there is a large imported share in GDP.

via Econbrowser: Thinking about the Double Dip Recession in the UK.

I have a special place for the village/town of Tanghin-Dassouri just outside of Ouaga because it is home to the lovely (but closed) Louis Lacaille library.  The town seems like it has a lot of political problems, in evidence in this short article published in Le Reporter (and a previous article I blogged about).  The whole issue of how important writing, transparency and communication are for functioning in a modern economy is seen clearly.

Devant le refus de ses interlocuteurs, le maire hausse le ton et se montre même menaçant dans un premier temps. « Vous devez accepter cette main tendue. C’est par pure indulgence, sinon nous aurions pu retirer le terrain sans contrepartie, puisque vous n’avez pas de titre foncier… », leur aurait-il fait savoir à un moment donné. Mais ils ne se laissent pas intimider. Ils décident de mettre en valeur leur terrain. Ils fixent une date pour le début des travaux. Ils ne manquent pas de tenir le maire informé au travers d’une correspondance en date du 6 mars 2012. « Nous avons l’honneur de vous faire part que tout l’ensemble de la famille a refusé votre proposition de changer le terrain ou de le déplacer. Raison pour laquelle nous vous envoyons cette note à titre d’information que nous allons mettre notre terrain en valeur… », peut-on lire dans cette correspondance. La veille du début des travaux, la tension monte d’un cran dans la ville. Pendant que les frères du défunt s’affairaient à déposer des agrégats sur le terrain, des jeunes identifiés comme des partisans du maire font irruption et menacent de les affronter le lendemain s’ils s’entêtent à mettre le terrain en valeur. La gendarmerie est saisie de l’affaire. Des représentants des deux camps sont entendus par cette dernière. Pour éviter toute situation déplorable, il est demandé que toute action sur le terrain soit suspendue. Nous avons contacté le maire.

via TANGHIN-DASSOURI : Grosse bagarre autour d’un terrain de 3 hectares.

Africa received its largest ever share of global foreign direct investment FDI last year, an Ernst and Young survey has said.FDI projects grew by 27% in 2011, pushing Africa’s share of the world’s investment to almost a quarter.FDI inflows, now about $80bn £50bn, should reach $150bn by 2015, according to the global consultants.But potential investors still see Africa as “the least attractive” destination, the report finds.

via BBC News – Africa’s share of foreign direct investment largest ever.

When I am on sabbatical starting this summer I’ll have time to verify that practically all of the investment is in oil and mining.  Still, clear that for many GDP is growing rapidly.  Less clear whether highly unequal growth is sustainable: across the continent stark inequality promotes movements for redistribution.  Think 1848?

I hope the panelists take a critical perspective not just an inspirational one.  I have not read the book… is that wrong? (Kristof is regularly excoriated, often for good reason, by many, including Wronging Rights).

Half the Sky:  Turning Oppression Into Opportunity for Women Worldwide

By Kristof and WuDunn
Join use for a panel discussion with Linda Alepin, Sharmila Lodhia, Patricia Nevers
and Craig Stephens
Tuesday, May 1,  4 p.m.  – 5:30 p.m. Saint Clare Room in the Learning Commons
Spring Book of the Quarter
Co-sponsored by the University Library, Office of Student Life, Wellness Center, and Center for Multicultural Learning

I shared this with my colleagues… the quote going around is that it is “easier to move a cemetery than to change a university curriculum”… LOL.

There are a lot of topics that the analytics theme embraces (think about all the analytics that goes into sports analytics… regression, simulation, optimizing!).  Among them, one that many  think is important is applied regression analysis.  I believe that we serve our students well if they know how to, when they graduate:

1) Run an MBA-relevant regression (using a software package… not by hand ;-).
2) Interpret MBA-relevant estimated coefficients (as partial effects, as dummy variables).  So many companies now do experiments, etc. where they are measuring the effect size, controlling for demographics.  Our students should be able to reasonably understand these things, regularly asking “have we controlled for…?”.
3) Leverage the evaluation of “statistical significance” to a process of asking questions.  They should be able to run regressions and notice, “hmm… not significant… does that make sense? Isn’t that interesting? I wonder why?”
4) Present regression analysis and interpretation with words and graphics, focusing on relevant information for the decision-maker.

I would like to see our analytics offerings shift in this direction.  It might not show up in a course count, but it would be a real change in direction, and it would be great if we agreed as a faculty on this direction, and could pool our talent to come up with a really great module/course on this.  Moreover, it would be fantastic if downstream courses could all integrate/reinforce this concept, since we are pretty sure that knowledge like this sticks poorly if not reinforced/repeated.

This is not to argue that decision-making software tools, simulation tools, linear-programming, etc are not also important analytical tools that our MBA students should have knowledge of.  My sense is that for the typical MBA graduate, a better understanding of regression analysis is now more useful than it was before, and our capabilities to teach it well are better than they were before (we have a raft of faculty across disciplines doing applied empirical analysis), and employers of our students are more likely to notice an improvement in quality if we focus more attention to this area.

My colleague Alex Field spoke a couple weeks ago at the Legatum Institute in London.  Here’s what they had to say about his work:

His book, A Great Leap Forward, is a re-examination of the history of US economic growth is built around a novel claim, that potential output grew dramatically in the Depression years between 1929 and 1941 and that this advance provided the foundation for the economic and military success of the United States during the Second World War as well as for the Golden Age of 1948 to 1973 that followed.

Alexander J. Field takes a fresh look at growth data and concludes that, behind a backdrop of double-digit unemployment, the 1930s actually experienced very high rates of technological and organizational innovation, fueled by the maturing of a privately funded research and development system and the government building of the highway network.

Their promo photo was nice too.  But I forced Alex to let me share with you the photo of the dining room where they had the talk.  Eye candy.  Yup, once you give a talk in a room like this, you’re done!

My kids and I have been watching Heroes over the past two months.  It is so much better than the television I watched in Puerto Rico growing up (Kojak, Petrocelli, Mannix, Hawaii 5-0, Luis Vigoreaux Presenta, etc.).  We are enjoying the complex characterization (Sylar, especially) and the ambiguous morality of everyone, as they constantly struggle with  sacrificing the short term or narrow good for the greater good.  And we like Mr. Muggles.

But now it is almost over, and the ambiguously villain-like Samuel has a tattooed Lydia as his sidekick, and of course an earlier generation like me knows immediately why she is called Lydia….

Brad DeLong posted this image today, perhaps copies from paper by Christina Romer, and since we were talking about NAIRU in class on Thursday….