Psychology will play a greater economic role in the aftermath of Covid-19 than in 2008

As supply shock turns into demand shock, we could see a dramatic decline in how fast money changes hands, writes Karlygash Kuralbayev

How to deal with higher debt levels and falling prices post-lockdown

Injecting liquidity may not work and may actually hurt the economy’s ability to withstand future crises, writes Karlygash Kuralbayev

Environmental taxation, employment and public spending in developing countries

This paper investigates the consequences of environmental tax reforms for unemployment and welfare, in the case of developing countries with a large informal sector, rural-urban migration, and three different assumptions about public spending: (1) as part of a revenue-neutral policy, (2) fixed, and (3) varying endogenously. Under the indexation of unemployment benefits and informal-sector income that give rise to a double dividend, a lower level of public spending is associated with a smaller negative impact on the after-tax income of households and a higher increase in employment. These policies, however, still lead to a reduction in social welfare; even more so in the case of endogenous public spending, although it is associated with a higher increase in employment and a smaller reduction in private-sector incomes. The model implies that complementary policy, in terms of lower public spending, is unlikely to be socially acceptable, and does not support the case for a green tax reforms in developing countries

Is Kazakhstan vulnerable to the Dutch disease?

Kazakhstan possesses extensive natural resources reserves that are expected to yield significant export revenues. Since Kazakhstan’s attaining independence in 1991, the composition of exports has changed in favor of energy-related sectors. In the context of such evidence and considerable expected future revenues, many researchers have pointed to the Dutch Disease question. This paper examines whether Kazakhstan is vulnerable to this condition. Using an extended version of the Balassa-Samuelson model including a terms-of-trade effect, we find evidence that changes in the terms of trade had a significant effect on the real exchange rate after 1996, providing evidence of the Dutch Disease. --Dutch Disease,transition,oil,terms of trade,Kazakhstan

Characterising green employment: the impacts of 'greening' on workforce composition

This paper estimates the share of jobs in the US that would benefit from a transition to the green economy, and presents different measures for the ease with which workers are likely to be able to move from non-green to green jobs. Using the US O*NET database and its definition of green jobs, 19.4% of US workers are part of the green economy in a broad sense, although most green employment is 'indirectly' rather than 'directly' green, comprising existing jobs that are expected to be in high demand due to greening, but do not require significant changes in tasks, skills, or knowledge. Analysis of task content also shows that green jobs vary in 'greenness', with very few jobs only consisting of green tasks, suggesting that the term 'green' should be considered a continuum rather than a binary characteristic. While it is easier to transition to indirectly green rather than directly green jobs, greening is likely to involve transitions on a similar scale and scope of existing job transitions. Non-green jobs generally appear to differ from their green counterparts in only a few skill-specific aspects, suggesting that most re-training can happen on-the-job. Network analysis shows that the green economy offers a large potential for short-run growth if job transitions are strategically managed

Macroeconomic Adjustment to Resource Shock in a Growing Two-sector Economy

This thesis focuses on the issues that face small open economies well endowed with natural resources and subject to external shocks such as changes in their terms of trade or in the world interest rate. Chapter 2 examines the Dutch disease problem in a model with capital accumu: lation and an open international capital account. Given that an improvement in the terms of trade is associated with a decrease in the risk-premium on lending to this economy, as it is shown in the chapter, this can lead to a Dutch party (rather than Dutch disease) in which real exchange rate appreciation is associated with an expansion of the capital-intensive traded sector. The economy also accumulates more debt in the long-run in response to the lower borrowing costs. By adding nominal rigidities to the inter-temporal model of the Dutch dise~e, chapter 3 examines how inflation inertia shapes the dynamic adjustment of the economy to the shocks under different exchange rate regimes. The country's adjustment paths are slow and cyclical if there is significant backward-looking element in the inflation dynamics and the exchange rate is fixed. In contrast, with an independent monetary policy, flexible exchange rate carries out the burden of adjustment and allows escaping severe cycles. The fourth chapter of the thesis evaluates quantitatively whether fiscal policy can moderate the short-run swings owing to 'terms of trade shock in the price of non-traded goods relative to the price of the traded goods. The chapter studies tax reduction and debt retirement policies, which are implemented by means of fiscal feedback rules, given that government is a receipt of oil revenues. The chapter shows that fiscal policy can play its role in offsetting disruptive exchange rate appreciation, which, however, depends on underlying fiscal policy regime.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

Inflation Persistence and Exchange Rate Regime: Implications for dynamic adjustment to shocks in a small open economy

The paper examines implications of inflation persistence for business cycle dynamics following terms of trade shock in a small oil producing economy, under inflation targeting and exchange rate targeting regimes. It is shown that due to the 'Walters critique' effect, the country's adjustment paths are slow and cyclical if there is a significant backward-looking element in the inflation dynamics and the exchange rate is fixed. It is also shown that such cyclical adjustment paths are moderated if there is a high proportion of forward-looking price setters in theh economy, so that when the Phillips curve becomes completely forward-looking cyclicality in adjustment paths disappears and the response of the real exchange rate becomes hump-shaped. In contrast, with an independent monetary policy, irrespective of the degree of inflation persistence, flexible exchange rate allows to escape severe cycles, which results in a smooth response of the real exchange rate.inflation inertia, inflation targeting, exchange rate targeting, Phillips curve, oil shocks, small open economy

Inflation persistence: Implications for a design of monetary policy in a small open economy subject to external shocks

We analyze implications of in.ation persistence for business cycle dynamics following terms of trade and risk-premium shocks in a small open economy, under fixed and flexible exchange rate regimes. We show that the country's adjustment paths are slow and cyclical if there is a signi.cant backward-looking element in the in.ation dynamics and the exchange rate is fixed. We also show that such cyclical adjustment paths are moderated if there is a high proportion of forward-looking price setters. In contrast, with an independent monetary policy, flexible exchange rate allows to escape severe cycles, supporting the conventional wisdom about the insulation role of flexible exchange rates.inflation inertia, monetary policy, exchange rates, persistence, Phillips curve, small open economy