Macroeconomics – 麻豆直播

G20 Summit, Global Policy, and Internal Issues: The Economic Situation in Brazil During Lula’s Third Term

November 19, 2024November 19, 2024 sergiomartinpaezLeave a comment

In January 2023, Luiz In谩cio “Lula” da Silva, leader of the Partido dos Trabalhadores (PT), began his third term as the president of Brazil, the largest economy in Latin America. The economic outlook is promising, with steady growth, controlled inflation, and declining unemployment rate. Despite challenges from a difficult Congress, Lula aimed to revive social and economic policies from his earlier terms (2002-2010). Simultaneously, he is pursuing an active international agenda focused on peace in the Middle East and Ukraine, environmental protection, and reforms in global governance. Brazil’s G20 presidency will conclude in November with a meeting in Rio de Janeiro that is expected to introduce new tax measures on billionaires and initiatives to boost environmental conservation. A Global Alliance Against Hunger will also be launched to tackle global issues.

This article explores the potential for necessary changes to meet Brazilian demands, concerns about the macroeconomic trajectory’s sustainability, and political tensions leading to the 2026 elections. The central argument is that Lula’s external strategy is closely tied to strengthening the internal disputes affected by neoliberal institutions. Success in this approach is vital not only for achieving structural improvements, but also for safeguarding the democratic regime, which faced threats just eight days after Lula took office.

Agricultural production, sectoral imbalances and inflation in Albania: A Kaleckian view

December 12, 2022November 25, 2022 mimozashabaniLeave a comment

The current remarkable surge in inflation is considered to be a nearly global phenomena (Reinhart and Lucker 2022), affecting both developed and developing nations. While there may be common drivers of inflation, such as factors associated with the Covid-19 pandemic followed by Russia鈥檚 invasion of Ukraine, there are considerable variations in the causes of it, especially with reference to developing countries, including Albania. Drawing on Kalecki鈥檚 (1976) Essays on Developing Economies, I argue that there are also domestic factors attributed to the increase in inflation that resides in the structural sectoral imbalances of the Albanian economy.

Rising prices in Albania sparked protests across the country in March 2022. The protests highlighted the rise in food prices which increased by more than 9% compared to March in the previous year; with the price of bread being the main contributor to such increase. With Albanians spending more than 42% of their total budget on food, rising prices of 鈥榥ecessities鈥� adds more pressure to the poor households to make ends meet. Nearly a quarter of Albanians, 640,000 people, already live in poverty (Kote 2022) and soaring prices in the economy could push people further into poverty. But what is pushing food prices to soar in a country where agricultural land accounts for 24% of overall land, a good Mediterranean climate, and water resources, all of which are crucial for agricultural development? Despite these favourable conditions, the productive capacity of Albania鈥檚 agriculture sector to meet domestic demand for food and feed meets is only one third (World Bank, 2022a). 聽

Ignorance is Bliss: Why should we study Leontief?

September 22, 2022September 19, 2022 Thair AhmadLeave a comment

What is at stake?

Let鈥檚 start with a story. A friend asked me what my favourite genre of fiction is. I replied: microeconomics. If you get the joke, you would be laughing. Otherwise, you would be wondering why I said that. Well, that鈥檚 the truth. Take any standard economics textbook, we find ourselves in the fictional worlds of 鈥榣et鈥檚 assume there are two goods鈥� and 鈥榠f we move from point A to B鈥�. It is true and well understood that these assumptions and imaginations are meant to break down complex phenomena. However, this entry point of supply and demand curves with the endless possibilities of hypothetical scenarios is not the only way to study/introduce economics. In this regard, I put forth the relevance of studying Wassily Leontief鈥檚 work and argue that it adds pluralism to economics education at least in three aspects: 1) methodology (philosophical and mathematical approach), 2) the unit of analysis (micro to macro and in between), and 3) ideas at the margins (reading thinkers like Piero Sraffa and other classical political economists). Now we shall deal with these three themes individually.

Capital accumulation and the trend towards normal capacity utilisation in the United States

October 11, 2021September 28, 2021 sjgahnLeave a comment

In this post we show that an increase in aggregate demand first generates an increase in the use of productive equipment and then an increase in productive capacity. This suggests we do not need to worry about inflation after a fiscal or monetary stimulus to boost aggregate demand, but can rather expect higher investment in the long term along with utilisation returning to its pre-shock levels.

A stylised fact that characterises modern economies is that part of the installed productive capacity is persistently idle. By productive capacity I mean the productive equipment (mostly fixed capital goods) in existence, together with that part of the workforce which is required to operate it. As we can see in Figure 1, in countries as diverse as Belgium, Finland or Lithuania, the effective utilisation of installed capacity often gravitates below 100%, and around 80% on average worldwide.

Figure 1. Installed capacity utilisation by country (1998Q1-2017Q4).

Source: see Appendix I.

The academic consensus is that there are large margins of idle capacity planned by entrepreneurs. The reasons why entrepreneurs plan to operate with idle capacity vary according to the school of thought considered. At the risk of making a drastic simplification, we can say that while some authors think that entrepreneurs do so in order not to lose market share in the face of changes in demand, others tend to think that there is a rate of utilisation of installed capacity that does not accelerate inflation (Non-accelerating inflation rate of capacity utilisation, NAICU).

Review of Macroeconomics by Alex M. Thomas

August 22, 2021July 18, 2021 mohitarora18Leave a comment

by Alex M. Thomas, Cambridge University Press, 2021.

This recently published introductory Macroeconomics textbook written by Alex M. Thomas provides a refreshingly novel approach to teaching Macroeconomics to undergraduate students. As the author points out in the Preface, this textbook offers a 鈥�problem-setting approach rather than a problem-solving one, as is the case with most economics textbooks鈥� (Page xvi, emphasis mine). The textbook has nine chapters, and the chapters have enough material to whet the appetite of a broad audience 鈥� Chapters 1,2,6 and 9 deal with the history and philosophy of Macroeconomics, Chapters 3-5 deal with the core economic theory of money and interest rates, output and employment levels and economic growth and Chapters 7 and 8 talk about the macroeconomic policy of achieving full employment and tackling inflation. In this review, I would focus on four issues 鈥� the commitment of the book towards enhancing pluralism in Macroeconomics, the importance given to studying macroeconomic theory, the idea of relating macroeconomic concepts to the context which is being studied and an explicit concern to make Macroeconomics accessible to an undergraduate audience residing in underdeveloped parts of the world.

Internal and external constraints: economic development without currency crisis

July 8, 2021June 12, 2021 basiloberholzerLeave a comment

Simply speaking, development macroeconomics can be summarized as the challenge of improving productivity and production capacity in poor countries. This involves the conditions that need to be fulfilled for a development process to start as well as the policy framework and instruments that support it. Heterodox approaches consider the state鈥檚 role in steering productivity growth as essential (Cardim de Carvalho, 1997). Markets may be able to exploit price signals and adjust resource allocation correspondingly. However, they guarantee neither sufficient profitability of key sectors nor the demand for the goods produced. Both the profit rate and effective demand are conditions for investment to take place (Oberholzer, 2020). It is thus up to the government to make public investment in priority sectors and to apply instruments such as taxes and subsidies in ways that simultaneously allow for economies of scale, higher productivity large-scale employment and demand. This is what is generally referred to as industrial policy (see for example Chang, 2006; Oqubay, 2018).

But this is not everything. Policymakers have to pursue such a development strategy in face of an (often permanent) shortage of foreign currency. While domestic currency can be generated via the domestic banking system including public development banks, the availability of foreign currency is limited unless a country is able to increase exports or restrict imports. Since larger export capacity and a higher degree of import substitution are long-term goals, the current account is determined by domestic and foreign economic growth. This insight has come to be known as the balance-of-payments-constrained model or Thirlwall鈥檚 law, respectively (Thirlwall, 1979, 2013): it is reasonable to assume that demand for a country鈥檚 exports grows in income in the rest of the world while imports increase with domestic economic growth because a part of increasing incomes is reliably spent on imported goods. Therefore, stability in the balance of payments requires that imports do not grow faster than foreign exchange earnings via exports allow. A limit to the growth of imports implies a limit to the country鈥檚 economic growth, hence the balance-of-payments-constrained growth rate.

For a new macroeconomic policy in Colombia

May 21, 2021 麻豆直播Leave a comment

In April 2021, Ivan Duque鈥檚 administration presented a tax reform bill labeled 鈥淟aw of Sustainable Solidarity鈥� to Congress. The bill contemplated an increment of the VAT on basic goods in conjunction with an increase in the marginal tax rates on the income of the so-called Colombian middle class. The vast majority of whom earns monthly less than 4,000,000 Colombian pesos (around 1,065 U.S. dollars). Although the bill put on the table contained some crucial elements for discussion, such as implementing a 鈥渂asic monthly income鈥� of 21 U.S. dollars (by far less than the current minimum wage). It contained little or nothing to effectively tackle Colombia鈥檚 high social and income inequality (with an official GINI of 0.526 for 2019).

The tax reform bill was presented in the mid of a severe economic and social crisis that had worsened due to the pandemic and against which the Colombian government has done hitherto little beyond the orthodox recipes. This triggered a general strike and nationwide social mobilizations that have already lasted over more than two weeks without any clarity as to their resolution as yet. The current social protest can be considered a continuation of a general strike that erupted at the end of 2019 and got into a rest due to the pandemic.

Yet, many elements behind the social movement go beyond dissatisfaction with the tax reform bill. Since 2016 after the peace deal between the Colombian government and the FARC, which used to be the oldest and biggest guerrilla in Colombia, the government hasn鈥檛 implemented most of the elements contemplated in the peace agreement. Also, although Colombia has had macroeconomic stability for more than 20 years, an indicator such as the official unemployment rate has consistently been above 10%. The level of poverty before the COVID-19 shock was near 32%.

Thus, the following question arises, what does it mean to have macroeconomic stability to the population? A call to think outside the box on what the government can or can鈥檛 do must be considered under other lenses. In view of the worsening of the social, political, and economic crisis in Colombia and the need to develop economic policy alternatives to the government鈥檚 orthodox position, a group of citizens and academicians wrote the open letter below to respond to those who argue the TINA mantra and believe that there鈥檚 a consensus in economics to support tax reforms amidst the COVID-19 epidemic.

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