INVESTING in Agriculturally-Led Growth: The Philippine Case

Much of the debate on the role of agriculture in economic development centers on whether agriculture should be taxed or subsidized. The classical prescription for economic development is investment in industrial modernization financed by an agricultural surplus. Proponents of agricultural development have cautioned, however, that squeezing the agricultural sector will stifle the engine of growth and lead to economic stagnation (e.g., Johnston and Mellor, 1961; Krishna, 1967). Instead, they have advocated the opposite policy of stimulating agricultural development through investment and subsidies to the agricultural sector. The 1980s witnessed a widespread recognition that either taxing or subsidizing agriculture wastes resources and reduces the incentives for investment (see e.g. World Developme~R~et port, 1983 and 1987). This leads to the conundrum that motivates the present paper: how can agricultural development be stimulated without distorting the incentives for efficient resource allocation and investment

The Foundation Performance Dashboard: Vital Statistics for Social Impact

Boards and foundation leadership rarely have a clear, consistent, and comprehensive picture of their foundation's performance. Interestingly, this situation persists despite the fact that nearly 60% of foundation CEOs would like to have more board involvement in reviewing the foundation's philanthropic mission and effectiveness. Our experience suggests that this conundrum results from a fundamental uncertainty: Foundations are unsure how to bridge the chasm between the readily available and concise metrics for investment performance and the much more complex, expensive, and subjective data from internal operations and program evaluations

"The International Monetary (Non-)Order and the 'Global Capital Flows Paradox'"

This paper sets out to investigate the forces behind the so-called "global capital flows paradox" and related "dollar glut" observed in the era of advancing financial globalization. The supposed paradox is that the developing world has increasingly come to pursue policies that resulted in current account surpluses and thus net capital exports—destined primarily for the capital-rich United States. The hypothesis put forward here is that systemic deficiencies in the international monetary and financial order have been the root cause behind today's situation. Furthermore, it is argued that the United States' position as issuer of the world's premiere reserve currency and supremacy in global finance explain the related conundrum of a positive investment income balance despite a negative international investment position. The assessment is carried out in light of John Maynard Keynes’s views on a sound international monetary and financial order.

Do We Value Our Cars More Than Our Kids? The Conundrum of Care for Children

Formal child care workers in the United States earn about $21,110 per year. Parking lot attendants, in contrast, make$21,250. These relative wages are telling: the market values the people who look after our cars more than the people who look after our kids. This article delves below the surface of these numbers to explore the systemic disadvantages of those who care for children—and children themselves. The article first illuminates the precarious economic position of U.S. children, a disproportionate number of whom live in poverty. The article then shows both that substantial care for children is provided on an unpaid basis in households, predominantly by women, and that care for children is undervalued when provided through the market. After presenting three distinct perspectives on market payments for care for children—(1) a public goods analysis, (2) a patriarchy analysis, and (3) a gift analysis— the article proposes a set of income tax breaks for jobs involving care for children

The Conundrum of Covered Bonds

Covered bonds, which have been part of European fi nance since the time of Frederick the Great, are now being widely touted as the answer to securitization’s imperfections. There is great confusion, though, about the nature of covered bonds and their relationship to secured bond fi nancing and securitization. This article attempts to demystify covered bonds, examining how they fi t within a larger fi nancing framework, analyzing their legal rights and obligations, and comparing their costs and benefi ts. The benefi ts of covered bonds are similar to those of securitization; both can access low-cost capital market funding with low risk to their investors, and both can be used to regenerate lending markets. The costs of covered bonds may be higher, though, because the “dynamic” collateral pools and “dual” recourse to the issuer that protect covered bonds shift virtually all risk to unsecured creditors. Whether that risk should be allowed to be shifted so asymmetrically is a policy question for any nascent covered bond regime

The Macroeconomy and Long-Term Interest Rates: An Examination of Recent Treasury Yields

From 2001 to 2006, U.S. long-term interest rates have remained steady while the federal funds rate has both declined and increased, as Figure 1 shows. Historically, long term interest rates tend to respond to changes in short term rates, but recently this does not appear to be the case. Former chairman of the Federal Reserve, Alan Greenspan, recently dubbed this occurrence a “conundrum,” because no one can provide a distinct explanation concerning this phenomenon. There are several noteworthy incentives for why long-term yields should have increased from 2004 to 2006, but they have remained constant during this time period. According to current economic theory, the U.S. budget deficit, the Federal Open Market Committee’s (FOMC) recent increases in short term rates, the latest recovery from recession, and the hefty current account deficit should all be contributing to higher long-term rates. Despite these macroeconomic influences, rates have not responded. Therefore, a supplementary force(s) must be creating a substantial impact. For example, this trend may be explained by a decrease in interest rate volatility, the Federal Reserve’s ability to maintain low inflation expectations, or an increase in foreign demand for U.S Treasuries. Is the ten-year Treasury yield truly a conundrum, or have macroeconomic influences caused long-term interest rates to maintain at an appropriate level? [excerpt

The Olympic transport legacy

This article examine sustainable transport provision for the London 2012Olympics and its intended legacy role in economic and social regeneration across East London. It concludes that ultimately, legacy success will depend on the ability to adapt to, and adopt, the new processes and cultural shifts over time, quickly assimilating them in a move towards more sustainable transport systems. The Olympics can put into place the foundations for a more sustainable society, but it needs more than this alone to realise the potential

The complexities of monetary policy.

What happens when an academic researcher becomes a policymaker? Recently, President Anthony Santomero shared some thoughts on this topic with members for the Downtown Economists Club in New York City. In particular, he talked about several conundrums he's encountered since moving from the academy to the central bank. We've reprinted his speech "The Complexities of Monetary Policy" in this issue of the Business Review so that we can share President Santomero's insights with our readers as well.Monetary policy

Unemployment Conundrum in Iran

This paper examines the major causes of Iran’s unemployment conundrum using a simultaneous-equation model and annual time series data from 1968 to 2000. It is found that the rate of unemployment responds positively to output gap and increasing economic uncertainty and negatively to the higher growth rates of real investment and inflation, supporting the view that there exists a degree of trade-off between inflation and unemployment. However, since persistent and soaring inflation rates eventually lead to the chronic depreciation of the domestic currency and rising economic instability, it will be irrational to exploit this trade-off to fight against unemployment, particularly in the post-1979 revolution. Iran possesses one of the youngest populations in the world with approximately 40 per cent of its population less than 15 years. It is thus argued that if major tax and constitutional reforms are not undertaken, unemployment will continue to rise, depicting a sombre future for the next working age generation.Unemployment, Iran

Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum

Currently, evidence on the ‘resource curse’ yields a conundrum. While there is much crosssection evidence to support the curse hypothesis, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise the growth of commodity exporters. This paper adopts panel cointegration methodology to explore longer term effects than permitted using VARs. We find strong evidence of a resource curse. Commodity booms have positive short-term effects on output, but adverse long-term effects. The long-term effects are confined to “high-rent”, non-agricultural commodities. We also find that the resource curse is avoided by countries with sufficiently good institutions. We test the channels of the resource curse proposed in the literature and find that a substantial part of it is explained by high public and private consumption, low or inefficient total investment, and an overvalued exchange rate. Our results fully account for the cross-section results in the seminal paper by Sachs and Warner (1995).commodity prices; natural resource curse; growth