Globalization, aggregate productivity, and inflation

This paper investigates the effects of globalization on aggregate productivity, output growth, and inflation. I present a simple two-country, two-good, flexible exchange rate model using Fisher Ideal aggregators to examine changes in the mapping from microeconomic to macroeconomic productivity growth as nations globalize. Advances in industry-specific labor productivity are shown to have potentially a much greater pass-through to aggregate productivity, output, and prices the more open nations are to trade. Globalization raises both the level and growth rate of aggregate productivity by allowing more economywide reorganization in response to ongoing technological advances than would be optimal otherwise. ; I develop a globalized version of the quantity equation of money, where inflation in the home country depends on domestic money growth and a weighted average of home and foreign GDP growth. Relative country size, consumer preferences, production technologies, and the openness of trade are the chief determinants of these weights. Calibrating the model to match certain stylized facts about the U.S. and global economies, U.S. consumer price inflation falls from roughly 3.8 percent when economies are closed to under 2 percent in the transition period, eventually settling at around 2.3 percent in free trade. Producer and consumer prices trek a common path under autarky but diverge as the world globalizes. Both home and foreign aggregate productivity growth rates increase—by 0.4 and 0.7 percentage points, respectively. Roughly 30 percent of the output weight in the determination of home inflation shifts from the home to the foreign economy—greater than might be expected from strong home bias.Globalization ; Inflation (Finance) ; Microeconomics ; Macroeconomics ; Gross domestic product

Two types of paper: the case for Federal Reserve independence

This essay argues that central bank independence is more important today than at any time in history. Because fiscal incentives for inflation grow as government debt grows, and in view of the huge run-up in government debt in the 1980s, with prospects for continued growth in the 1990s, we believe that the principal mission of our nation's central bank is at risk. Our aim is to provide a convincing case for the view that the power to spend money and the power to print money must be separate and independent powers within the government.Federal Reserve System - Independence ; Inflation (Finance) ; Deficit financing ; Fiscal policy ; Monetary policy

The Emergent Middle Classes in Timor-Leste and Melanesia: Conceptual Issues and Developmental Significance

The emergence of a middle class has been identified as an important factor driving economic and political transitions in Asia and Africa. Class has been 'happening' in the broader Pacific region1 for some time, as Gewertz and Errington (1999:2) observed of Papua New Guinea (PNG). Nevertheless, to date, little systematic policy attention has been given to questions of class. We believe that the concept of an emerging middle class provides a useful entry point for understanding significant developmental and political transformations in Timor-Leste and Melanesia and is important for informing development policies. However, in order to explore the potential consequences that an emergent middle class may have, it is necessary to first consider how such a class can be identified in the region. We have chosen to focus on Timor-Leste, PNG and Solomon Islands because these countries are undergoing comparable social and economic transitions, many of which correlate strongly with the emergence of a middle class. Such changes include rapid economic growth driven by resource booms in Timor-Leste and PNG, associated formalisation of regional economies, deepening urbanisation, increasing social integration with metropolitan powers through growing diaspora communities, changing consumption patterns, and the transformative impacts of social media following recent internet and mobile telephone penetration. This paper has three substantive sections. First, it considers contemporary discussions of class and development in Asia and other developing regions. Second, the paper develops a multidimensional framework for identifying an emergent middle class, drawing on a range of economic, political and social criteria. Finally, the paper uses these criteria to examine recent developments in each of three case study countries and then draws some conclusions on the developmental and political significance of an emergent middle class in the broader Pacific region with a view to establishing a longer term research agenda.AusAI

The churn among firms

Capitalism ; Competition ; Consumers ; Consumption (Economics) ; Corporations ; Cost and standard of living ; Business enterprises ; Productivity

China and India: two paths to economic power

The two Asian giants have achieved rapid and sustained growth -- China by focusing on goods, India by tilting toward services.Economic conditions - China ; Economic conditions - India ; Service industries ; Manufacturing industries ; International trade

Have a nice day! The American journey to better working conditions

Employment (Economic theory) ; Unemployment