Measuring real exchange rate instability in developing countries : empirical evidence and implications

Exchange rate policy has received renewed attention because of its prominent role in adjustment programs. Several analysts have examined the impact of real exchange rate uncertainty on the performance of such economic variables as GDP growth, exports, and investment. The author uses data on the real exchange rate for 56 developing countries with managed exchange rates to make three points. First, the distribution of annual changes in real exchange rates is highly non-normal - both skewness and excess kurtosis. Secondly, this asymmetric non-normality implies that the common practice of using the standard deviation (or coefficient of variation) to compare real exchange rate uncertainty across countries is not justified. Finally, empirically, the higher order moments (skewness and kurtosis) are at least as important as the standard deviation in explaining cross-country performance.Macroeconomic Management,Achieving Shared Growth,Economic Stabilization,Statistical&Mathematical Sciences,Economic Theory&Research

Birth Satisfaction Units (BSU): Measuring Cross-National Differences in Human Well-Being

While everyone agrees that GDP per capita is an inadequate measure of a country’s overall “development” it is difficult to specify what, if anything, should take its place as a useful single summary number (or even just ranking). The Human Development Index is a prominent alternative which moves towards the notion of a more comprehensive measure of human wellbeing, but suffers many limitations in the limits of the domains it covers (only adding mortality and education) and in how those domains are assessed (only averages). I propose that a useful conceptual device is to imagine that individuals were ranking the countries they were to be born into, not knowing what position in that country they would occupy (e.g. male or female, rich or poor). The result could be a cardinal ranking of country of birth satisfaction units, how strongly someone would prefer to be born into country X versus country Y. While this thought experiment obviously does not of itself resolve any of the key issues, it can provide a framework for reasoning about how people would produce such a ranking: the domains of well being they would assess as important and how they would assess the distribution of well-being in those domains (e.g. would they care about the average, levels of absolute deprivation, inequalities).Human Development, Poverty, Vulnerability

Divergence, big time

Recently, much attention has been paid in the literature on economic growth to the phenomenon of"conditional convergence,"the tendencies of economies with lower-level incomes to grow faster, conditional on their rate of factor accumulation. The author documents that, regardless of conditional convergence, perhaps the basic fact of modern economic history is massive absolute divergence in the distribution of incomes across countries. Discussions of long-run convergence or divergence has been hindered by the lack of reliable historical estimates of per capita income for poor countries. The author shows that to draw reasonable inferences about whether incomes have converged or diverged does not require historical estimates of per capita income as a plausible lower limit for historical per capita incomes combined with estimates of current income in poor countries places a binding constraint on their historical growth rates. Finally, the author estimates that between 1870 and 1985 the ratio of incomes in the richest and poorest countries increased sixfold, the standard deviation of (natural log) per capita incomes increased by between 60 and 100 percent, and the average income gap between the richest and the poorest countries grew almost ninefold (from $1,500 to over$12,000).Economic Theory&Research,Economic Conditions and Volatility,Poverty Impact Evaluation,Public Sector Economics&Finance,Public Institution Analysis&Assessment,Economic Theory&Research,Inequality,Achieving Shared Growth,Governance Indicators,Economic Conditions and Volatility

The tyranny of concepts - CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital

The cost of public investment is not the value of public capital. Unlike for private investors, there is no remotely plausible behavioral model of the government as investor that suggests that every dollar the public sector spends as"investment"creates capital in an economic sense. This seemingly obvious point has so far been uniformly ignored in the voluminous empirical literature on economic growth, which uses, at best,"cumulated, depreciated investment effort"(CUDIE), to estimate capital stocks. But in developing countries especially, the difference between investment cumulated at cost and capital value is of primary empirical importance: government investment is half or more of total investment. And perhaps as much as half, or more of government investment spending has not created equivalent"capital."This suggests that nearly everything empirical written in three broad areas is misguided. First, none of the estimates of the impact of public spending identify the productivity of public capital. Even where public capital could be very productive, regressions and evaluations, may suggest that public investment spending has little impact. Second, everything currently said about"total factor productivity"in developing countries is deeply suspect, as there is no way empirically to distinguish between low output (or growth) attributable to investments that created no"factors"and low output (or growth) attributable to low (or slow growth in) productivity in using accumulated"factors."Third, multivariate growth regressions to date have not, in fact,"controlled"for the growth of capital stock, so spurious interpretations have emerged.Economic Theory&Research,Fiscal&Monetary Policy,International Terrorism&Counterterrorism,Decentralization,Capital Markets and Capital Flows,Environmental Economics&Policies,Capital Flows,Economic Theory&Research,International Terrorism&Counterterrorism,Banks&Banking Reform

Population growth, factor accumulation, and productivity

In research on how population growth affects economic performance, some researchers stress that population growth reduces the natural resources and capital (physical and human) per worker while other researchers stress how greater population size and density affect productivity. Despite these differing theoretical predictions, the empirical literature hs focused mainly on the relationship between population growth and output per person (or crude proxies for factor accumulation). It has not decomposed the effect of population through factor accumulation and the effect through productivity. The author uses newly created cross-country, time-series data on physical capital stocks and the educational stock of the labor force to establish six findings: There is no correlation between the growth of capital per worker and population growth. The common practice of using investment rates as a proxy for capital stock growth rates is completely unjustified, as the two are uncorrelated across countries. There is either no correlation, or a weak positive correlation, between the growth of years of schooling per worker and the population growth rate. Enrollment rates are even worse as a crude proxy for the expansion of the educational capital stock, as the two are negatively correlated. There is no correlation, or a weak negative correlation, between measures of total factory productivity growth and population growth. Nearly all of the weak correlation between the growth of output per person and population growth is the result of shifts in participation in the labor force, not of changes in output per worker.Health Monitoring&Evaluation,Public Health Promotion,Economic Theory&Research,Environmental Economics&Policies,Economic Conditions and Volatility,Agricultural Research,Health Monitoring&Evaluation,Economic Growth,Achieving Shared Growth,Environmental Economics&Policies

Involvement of Social Media Profiles in the Hiring Process

In recent years, social media has become a popular tool in the recruitment and selection process for employers. Many companies see it as a more cost efficient screening process than traditional background checks and interviews. However, its’ use comes with a greater risk for the company and potential applicants in terms of privacy violation and discrimination. This article will examine the rising popularity of the use of social media in the recruitment and selection process. In addition, it will explore the role social media plays in the hiring process from the viewpoint of employees in their respective companies versus undergraduate students who are among the applicant pool

Laser-based strain measurements for high temperature applications

The Instrumentation and Control Technology Division at NASA Lewis Research Center has developed a high performance optical strain measurement system for high temperature applications using wires and fibers. The system is based on Yamaguchi's two-beam speckle-shift strain measurement technique. The system automatically calculates surface strains at a rate of 5 Hz using a digital signal processor in a high speed micro-computer. The system is fully automated, and can be operated remotely. This report describes the speckle-shift technique and the latest NASA system design. It also shows low temperature strain test results obtained from small diameter tungsten, silicon carbide, and sapphire specimens. These specimens are of interest due to their roles in composite materials research at NASA Lewis

Feasibility study for the advanced one-dimensional high temperature optical strain measurement system, phase 3

The Instrumentation and Control Technology Division is developing optical strain measurement systems for applications using high temperature wire and fiber specimens. This feasibility study has determined that stable optical signals can be obtained from specimens at temperatures beyond 2,400 C. A system using an area array sensor is proposed to alleviate off-axis decorrelation arising from rigid body motions. A digital signal processor (DSP) is recommended to perform speckle correlations at a rate near the data acquisition rate. Design parameters are discussed, and fundamental limits on the speckle shift strain measurement technique are defined

Advanced one-dimensional optical strain measurement system, phase 4

An improved version of the speckle-shift strain measurement system was developed. The system uses a two-dimensional sensor array to maintain speckle correlation in the presence of large off-axis rigid body motions. A digital signal processor (DSP) is used to calculate strains at a rate near the RS-170 camera frame rate. Strain measurements were demonstrated on small diameter wires and fibers used in composite materials research. Accurate values of Young's modulus were measured on tungsten wires, and silicon carbide and sapphire fibers. This optical technique has measured surface strains at specimen temperatures above 750 C and has shown the potential for measurements at much higher temperatures

Two-dimensional high temperature optical strain measurement system, phase 2

A laser speckle strain measurement system with two-dimensional measurement capabilities has been built and tested for high temperature applications. The 1st and 2nd principle strains at a point on a specimen are calculated from three components of one-dimensional strain. Strain components are detected by cross-correlating reference and shifted speckle patterns recorded before and after straining the specimen. Speckle patterns are recorded by a linear photodiode array camera. Accurate strains have been measured at temperatures up to 650 C. Stable speckle correlations and linear stress-strain relations have been demonstrated up to 750 C. The resolution of the system is 15 microstrains, with a gauge length less than 1 mm