Mukti

Political business cycle in Bangladesh

Posted in economics, governance, political economy, politics by jrahman on October 10, 2015

While looking for something else, I recently discovered that in 2013-14 financial year, Bangladesh government’s current expenditure — that is, money spent on salaries, procurement, subsidies and loan repayments — increased by 0.8 per cent of GDP.  On top of that, government investment also increased by 0.7 per cent of GDP.

That is a lot of spending.

Now, I haven’t been following economic and policy developments in as much detail as in the past, so I may well have missed great policy initiatives that underline the apparent spending binge.  But according to the work of IMF’s Christian Ebeke and Dilan Olcer of Riksbankrise in government expenditure of that magnitude is not uncommon in election years in developing countries.  More worryingly, they show that this kind of binge usually ends badly.

(more…)

Comments Off on Political business cycle in Bangladesh

Surviving the white crow

Posted in Bangladesh, democracy, economics, governance, macro, political economy, politics by jrahman on January 20, 2015

Nassim Nicholas Taleb popularised the term ‘black swan’ in his 2007 book.  It comes from the Latin expression rara avis in terris nigroque simillima cygno, meaning “a rare bird in the lands, very much like a black swan” — they didn’t have any black swan in Europe, and thought swans must be white.  That notion changed when the Europeans came to Australia.  Taleb pithily summarises his thesis as:

What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

In Bangladesh, perhaps we could think about ‘white crow’ events — our crows are black, we think crows must be black, but of course there are white crows Down Under.

Taleb’s work gained much popular acclaim after the 2008-09 financial crisis.  The thing about black swans / white crows, however, is that they are hard to predict ex ante.  That’s Taleb’s first attribute.  As such, for analysts and policymakers, it might seem that Taleb has little of practical value to offer.

His subsequent work seeks to address this concern.  In a widely read Foreign Affairs article*, Taleb and a co-author argues:

Thus, instead of trying in vain to predict such “Black Swan” events, it’s much more fruitful to focus on how systems can handle disorder—in other words, to study how fragile they are. Although one cannot predict what events will befall a country, one can predict how events will affect a country. Some political systems can sustain an extraordinary amount of stress, while others fall apart at the onset of the slightest trouble. The good news is that it’s possible to tell which are which by relying on the theory of fragility.

…..

For countries, fragility has five principal sources: a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks.

How does Bangladesh look through the prism of Taleb’s theory?  I’d argue we should be at least concerned about the possibility of things falling apart, though there are also things to be hopeful about.

(more…)

Tagged with:

Comments Off on Surviving the white crow

Books

Some time ago, there was a facebook meme about 10 books:

List 10 books that have stayed with you in some way. Don’t take more than a few minutes and do not think too hard. They do not have to be the great works of literature, just the ones that have affected you in some way. Tag 10 friends and me so I can see your list.

Over the fold, for archival purposes, are two lists — one general, the other economics related.

(more…)

Comments Off on Books

Ideas that went nowhere…..

Posted in development, economics, labour, macro, micro, political economy by jrahman on January 12, 2015

….. because life got in the way.

Okay, that’s a bit melodramatic.  Let’s start again.  It used to be the case that to have a professional career as an economist in America, you needed a PhD.  That’s changing a lot.  There’s a general glut of PhDs.  And organisations such as the IMF are now more interested in people with practical experiences than half a decade or more of often impractical academic training.  In any case, outside America, PhDs were always for those who wanted to pursue an academic career.  So, other than the vanity of being addressed as Dr Rahman, I’ve never really seen much return from doing a PhD.

And yet, every now and then, I think about the ideas over the fold and wonder what might have been.

(more…)

The real record — inflation (continued)

Posted in economics, macro, political economy, Uncategorized by jrahman on December 24, 2013

For those coming in late, even though inflation has risen under the current government (Chart 1), real GDP per capita has grown by around 4½ per cent a year under successive governments over the past decade.

c1 (2)

Over the last couple of weeks, I have had a bit of correspondence about inflation. This post answers some of the questions.

(more…)

Tagged with:

Decoding The Bangladesh Paradox — A Research Agenda

Posted in development, economic history, economics, institutions, labour, macro, political economy, trade by jrahman on December 2, 2013

The macroeconomic fact is, in the last decade, under all three governments, per capita GDP have grown by around 4½ per cent a year. At that rate, average real (that is, inflation-adjusted) income doubles in 16 years. …. This is impressive stuff, for which every recent government deserves some credit.

That’s the conclusion from the post on real GDP per capita growth under different governments. Of course, real GDP per capita is a means to the end, not the end in itself. What we really care more about is the standard of living that higher real GDP per capita entails —that is, it’s the development record, and not just the growth, under different governments that we want to know.

This, however, raises two questions. First, how do we attribute to any particular government the growth and development record when policies under any particular government are likely to have long term consequences? And second, how do we explain the Bangladesh Paradox:

The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

That quote is from a November 2012 Economist article. That article, and accompanying editorial, had a go at explaining the paradox. Joseph Allchin had a crack more recently at the NY Times. The suspects are usual: garments, remittance, NGOs. But we economists are a parsimonious lot, or so we like to think. We would like to know exactly what contribution each of these factors made, what was the channel through which the factors affected growth and development, what role, if any, did government policy play, and what all that means for future.

I haven’t seen a comprehensive analysis of the Bangladesh Paradox. And no, I am not going to provide the answer in this post. Rather, over the fold is a research agenda on how to analyse the Paradox.

(more…)

Tagged with:

Rajan and Zingales (2006) — reasons to be optimistic about Bangladesh

Posted in development, economics, political economy by jrahman on December 1, 2013

Raghuram Rajan is as close to a Bollywood star an economist is ever likely to be.  He may have saved the Indian rupee from a collapse by simply showing up to work — okay, that’s a slight embellishment, but only just (see here for a more nuanced take).  Before that, way back in 2006, he said that the global financial system was at risk of being in considerable trouble — that’s the closest to predicting the global financial crisis anyone has ever been.  Months before that celebrated paper, he wrote a paper with his Chicago colleague Luigi Zingales that may give us some reasons to be optimistic about Bangladesh.

To be sure, Bangladesh is never mentioned in The persistence of underdevelopment: institutions, human capital, or constituencies? — not even once.  But their neat little model doesn have some strong relevance for the present day Bangladesh (and no — this post has nothing to do with the current political crisis).

(more…)

Time for Atiur Rahman to deliver

Posted in economics, elections, macro, political economy, politics by jrahman on February 7, 2013

As far as I know, this blog is the only place that publicly criticised the appointment of Dr Atiur Rahman as the Governor of Bangladesh.  How has he performed in the last few years as the central banker?  Given the share market bubble and crash and several controversial developments — scams, ‘political’ banks, l’affaire Yunus — in the banking sector, it’s reasonably straighforward that he has failed in his task of maintaining financial stability.  On the other hand, Bangladeshi economy has shown remarkable resilience — growth has been steady around the 6% mark despite shocks such as the share market crash or the fiscal strains related to the rental power plants.  Inflation has been much higher than the Bank’s target picked up during most of the governor’s term, but has subsided recently to be within the Bank’s target (see the chart of inflation through the year, actual vs Bangladesh Bank target — source: CEIC Asia and BB). 

Untitled

So, on balance, a mixed record for the Governor so far.  And over the next few months, his record can swing either way.  Unfortunately, the latest monetary policy statement suggests that there is a high risk that my fears about him will yet come true. 

(more…)

Comments Off on Time for Atiur Rahman to deliver

সাতকাহন

Seven trashes collected by the senses.

(more…)

Comments Off on সাতকাহন

All about Citizen Mati

Posted in democracy, economics, Islamists, media, micro, people, political economy, politics by jrahman on January 7, 2013

All About Eve Poster

All About Eve, the Oscar-winner in 1950, is a drama set in the black-and-white era Broadway.  It shows how the seemingly innocent Eve Harrington (Anne Baxter) connives, deceives and manipulates people and event to eclipse the ageing star Margo Channing (Bette Davis).  In her quest, Eve is initially assisted by the theatre critic Addison DeWitt (George Sanders).  But before long, DeWitt makes it clear who calls the shot.  Let me outsource to wiki to describe how the movie ends:

After the awards ceremony, Eve hands her award to Addison, skips a party in her honor, and returns home alone, where she encounters a young fan—a high-school girl—who has slipped into her apartment and fallen asleep. The young girl professes her adoration and begins at once to insinuate herself into Eve’s life, offering to pack Eve’s trunk for Hollywood and being accepted. “Phoebe” (Barbara Bates), as she calls herself, answers the door to find Addison returning with Eve’s award. In a revealing moment, the young girl flirts daringly with the older man. Addison hands over the award to Phoebe and leaves without entering. Phoebe then lies to Eve, telling her it was only a cab driver who dropped off the award. While Eve rests in the other room, Phoebe dons Eve’s elegant costume robe and poses in front of a multi-paned mirror, holding the award as if it were a crown. The mirrors transform Phoebe into multiple images of herself, and she bows regally, as if accepting the award to thunderous applause, while triumphant music plays.

You see, whether it is Margo or Eve or Phoebe — it’s Addison who makes or breaks the star.  The question is, what makes Addison tick? 

And more generally, what motivates the media?

(more…)

Comments Off on All about Citizen Mati