Inflation volatility,economic growth and monetary policy in Bangladesh

This article provides an overview of the trends and movements of CPI-inflation in Bangladesh since the early 1950s and examines the key issues in rule-based monetary policy for price stability, implying low and stable inflation, in this country. Under a fixed exchange rate system, inflation in Bangladesh was moderately high and volatile during the 1950s and 1960s. Since the country’s independence from Pakistan in 1971, inflation in Bangladesh has remained moderately high on average and highly volatile and persistent under a fixed-pegged exchange rate system or under a managed floating system since 2003. Using data from the early 1970s or earlier depending on data availability, the article undertakes both Granger-causality and the structural vector autoregression (SVAR) analysis with two models. The first model is comprised of such variables as inflation, the real interest rate, the real exchange rate and output growth, and the second model is comprised of the volatilities of money growth, real output growth and inflation. Then, based on the empirical findings, the article concludes that a rule-based monetary policy, namely monetary targeting or inflation targeting, remains appropriate for Bangladesh provided that it adopts a more flexible, if not freely floating, exchange rate system. The article suggests that the use of monetary policy to achieve multiple objectives under a fixed-pegged exchange rate system creates a time-inconsistency problem, reduces monetary policy credibility and makes it (monetary policy) ineffective in lowering inflation and its volatility. Low credibility of monetary policy in particular raises inflation persistence. Within the present monetary-policy framework in Bangladesh, the article illustrates how the fixed-pegged exchange rate system has generated money growth volatility in the presence of large-scale inflows of overseas workers’ remittances and readymade garments export earnings. This does not seem to be a concern of the central bank of Bangladesh (Bangladesh Bank); rather, it (Bangladesh Bank) pursues monetary-base targeting to keep inflation low and stable after considering economic growth. The consequent diminishing credibility of monetary policy has kept inflation volatile and persistent, which has adversely affected economic growth.     

Price hike of staple food,nutritional impact and consumption adjustment: evidence from the 2005–2010 rice price increase in rural Bangladesh

This paper studies the nutritional impact of the rice price increase between 2005 and 2010 on households in rural Bangladesh and their resulting adjustment in consumption of rice, non-rice food and non-food items. We compare net rice buyers, who suffer from a negative income effect, with self-sufficient households that do not suffer from any such effect. Our findings indicate that rural households in Bangladesh cope well with the surge in the domestic rice price as indicated by the absence of any effect on their calorie intake and dietary diversity. In fact, both types of households similarly change their consumption of rice, non-rice grain, pulses, protein, fruits and other items. Furthermore, we do not find any evidence of buyers’ switching towards low-quality items in a food group. In a separate analysis, we compare net rice sellers with self-sufficient households and arrive at a similar conclusion. In both cases, income plays a crucial role in the consumption of non-rice food and non-food items, indicating the importance of effective income support programs at the time of price shocks in staple food items.     

Goodwill bazaar: NGO competition and giving to development

This paper builds a model of competition through fundraising between horizontally differentiated NGOs. NGOs allocate their time resource between working on the project and fundraising, which attracts private donations. If the market size is fixed, the fundraising levels increase with the number of NGOs and the free-entry equilibrium number of NGOs can be larger or smaller than the socially optimal number, depending on the efficiency of the fundraising technology. If the market size is endogenous and NGOs cooperate in attracting new donors, fundraising levels decrease with the number of NGOs and the free-entry equilibrium number of NGOs is smaller than the one that maximizes the welfare of donors and beneficiaries. If NGOs can divert funds for private use, multiple equilibria (with high diversion and no diversion of funds) appear.     

The First and Second Stage Pass‐through of Exchange Rates: A Developing Country Perspective

This paper investigates the validity of the conventional wisdom that, unlike in developed countries, exchange rate pass‐through (ERPT) should be ‘complete’ for developing economies. To test this hypothesis, we construct new variables as well as original data sets, which are not readily available in the literature, and employ an alternative error correction model technique for a typical small open developing economy—Bangladesh. The transmission of exchange rate movements to import prices is found to be ‘complete’; however, the ‘second stage pass‐through’ is ‘partial’ both in the short and long run. The response of traded goods prices to exchange rate shocks is found to be significant and larger in the long run compared with the short run. Trade liberalization is also a significant phenomenon for ERPT. The analysis has wider applicability to other small open economies.     

Neoliberal and neostructuralist perspectives on labour flexibility,poverty and inequality: A critical appraisal

Numerous recent reports by non-governmental organisations (NGOs), academics and international organisations have focused on so-called ‘climate refugees’. This article examines the turn from a discourse of ‘climate refugees’, in which organisations perceive migration as a failure of both mitigation and adaptation to climate change, to one of ‘climate migration’, in which organisations promote migration as a strategy of adaptation. Its focus is the promotion of climate migration management, and it explores the trend of these discourses through two sections. First, it provides an empirical account of the two discourses, emphasising the differentiation between them. It then focuses on the discourse of climate migration, its origins, extent and content, and the associated practices of ‘migration management’. The second part argues that the turn to the promotion of ‘climate migration’ should be understood as a way to manage the insecurity created by climate change. However, international organisations enacts this management within the forms of neoliberal capitalism, including the framework of governance. Therefore, the promotion of ‘climate migration’ as a strategy of adaptation to climate change is located within the tendencies of neoliberalism and the reconfiguration of southern states' sovereignty through governance.     

Has the ‘franc fort’ exchange rate policy affected the inflationary dynamics? Theory and new evidence

Abstract

This paper examines the impact of the ‘franc fort’ policy implemented in France from 1983 on the inflationary dynamics by means of a square root Kalman filter approach. An interesting aspect of the analysis is the evidence that the ‘franc fort’ exchange rate policy had a significant impact on the inflationary dynamics in France through its credibility effects. These results confirm the imported credibility hypothesis according to which the French authorities accelerated the disinflation process by importing the German monetary policy credibility through the ‘hard peg’ of the franc–DM exchange rate. These findings show that inflation dynamics in France began to converge significantly to that in Germany after the implementation of the ‘franc fort’ policy, making more credible the plan for the final transition to the euro. Moreover, this analysis may also reveal much about the nature of potential success of the current initiative of the new member countries now in the process of joining the EU and looking eventually to adopt the euro.     

Disentangling the migration-trade nexus: the pro-trade effects of immigrants and emigrants in the presence of vertical and horizontal product differentiation

This paper presents an exploration of the migration-trade nexus taking the case of Italy by crossing the two dimensions of migration (immigration and emigration) and the two dimensions of intra-industry trade (vertical and horizontal). This empirical strategy proves useful in refining interpretation of econometric results. In general, we find that both immigration and emigration are positively and significantly related to intra-industry trade. However, the magnitude and the statistical significance of the impact of migration on trade vary, depending on the type of trade flows considered (vertical or horizontal), the direction of migration (immigration or emigration) and the partner countries considered (OECD or non-OECD). In particular, we find that immigrants from non-OECD countries have a positive and significant impact on both ‘variety trade’ and ‘quality trade’, while immigrants from OECD countries significantly affect ‘variety trade’ only. Emigrants to non-OECD countries have positive effect only on ‘variety trade’. These findings are largely consistent with predictions deriving from theoretical models of intra-industry trade and from the literature on migration-trade nexus.     

THE EFFECT OF OWNERSHIP IN NGOS’ COMMERCIAL VENTURES

ABSTRACT: Amidst pressure to become self‐financing, Non‐Governmental Organizations (NGOs) have become increasingly involved in profit‐generating business ventures. Because NGOs are traditionally financed by donations with the expectation that they focus on their social mission, the commercialization of NGOs has generated criticism. This paper examines the effect of ownership on investment incentives in NGOs’ commercial ventures, using an incomplete contracts framework. NGO‐ownership helps minimize the tension between primary social mission and managerial decisions. However, external ownership provides better incentives to invest in mission‐enhancing innovations. Finally, because relationships with firms are repeated, NGOs may use relational contracts to align their ventures’ incentives. However, such contracts need to be credible to work.     

Public-private partnerships in micro-finance: Should NGO involvement be restricted?

This paper examines public–private partnerships in micro-finance, whereby NGOs can help in channelizing credit to the poor, both in borrower selection, as well as in project implementation. We argue that a distortion may arise out of the fact that the private partner, i.e. the NGO, is a motivated agent. We find that whenever the project is neither too productive, nor too unproductive, reducing such distortion requires unbundling borrower selection and project implementation, with the NGO being involved in borrower selection only. Further, we compare and contrast two alternative credit delivery mechanisms, the linkage mechanism (which is the focus of this paper), with the ‘Grameen’ one.     

The United States Boom, 'Clintonomics' and the New Economy Doctrine: A Neo-Gramscian Contribution

The financial crisis that struck South Korea with such ferocity in mid 1997 appeared to take many by surprise. Throughout the 1990s and up until the onset of the crisis, foreign lenders demonstrated their confidence in the Korean economy by literally pouring capital into the country, swelling foreign debt to unprecedented levels. Such confidence was bolstered by the affirmations of international credit rating agencies that attached positive ratings to the Korean economy right up until mid 1997. No one, it seemed, at home or abroad, believed that the Korean star that had risen so quickly and shone so brilliantly could fall as far and as fast as it did. However, barely had the dust settled behind the ‘electronic herd's’ mass exodus when tales of the ‘inherent instabilities’ of the Korean economy began to emerge. The Korean government bore the brunt of heaviest international criticism, its ‘interventionist’ financial policies widely blamed for distorting the market mechanism, leading to the misallocation of economic resources and ultimately precipitating the crisis. Such interpretations of Korea's crisis have, however, since been called into question on numerous grounds.     

Verifying India’S Exchange Rate Regime in the Pre-Reforms Period (1975–91)

Verifiability of an announced exchange rate regime becomes important in the context of credibility and transparency of a regime. These latter ideas become especially significant in the context of the currently reigning hypothesis of the missing middle, which postulates that exchange rate regimes intermediate to the corner regimes of ‘free floating’ and ‘firm fixing’ are increasingly becoming nonviable in a world of greater international capital mobility as these intermediate regimes are more difficult to verify. This paper attempts to verify India’s exchange rate regime in the so-called basket arrangement period. Using auxiliary information about the regime, it estimates the confidential Indian basket and shows that the behaviour of India’s exchange rate was not exactly as per the announced regime.

     

China’s Contingencies: Critical Geopolitics,Chinese Exceptionalism and the Uses of History

This paper examines the intimate relationship between narratives emanating from China and their uses of Chinese history, and how such perspectives inform China’s geopolitical positioning and practices in lieu of its purported ‘rise’. Taking inspiration from the deconstructive impetus of critical geopolitics, this article contends that these historical claims to China’s rise constitute deterministic accounts, hinging on the notion of Chinese exceptionalism to provide discursive backing for a Sinocentric geopolitical order in the coming decades. This in turn downplays ‘alternative’ historiographies that can shed light on how the nature of China’s emergence may be more dependent on and shaped by the external environment than previously acknowledged. Building on the historical-geographical expositions related to the idea of contingency, this article demonstrates how China (whether it be in the past or present) cannot be seen as operating in a vacuum but has to constantly negotiate and adjust its strategy of engagements/interactions based on the specific demands imposed by world politics. Specifically, by elucidating these dimensions through cross-strait relations between China and Taiwan, it is argued that understanding China’s contingencies can raise important questions for us to critically appreciate the contextual actors, processes and relationships that differentially impact on China’s engagements in the world.     

Corruption,product complexity and African exporters

Several studies have shown that African manufacturers perform poorly, especially in comparison to their counterparts from other developing countries. We build on these studies by (a) examining the decision to stop exporting among African manufacturers and (b) investigating whether these decisions can be linked to institutional dimensions (such as corruption). Consistent with previous studies, we observe that a significant fraction of African firms stop exporting every year. Using product complexity as a measure of an industry’s ‘sensitivity’ to corruption, we find that firms in more ‘corruption-sensitive’ industries are more likely to stop exporting if there is an increase in overall corruption in the exporting country. Firm characteristics (such as size and productivity) also seem to influence the decision to stop exporting. Our finding about the relationship between corruption and the decision to stop exporting supports the conventional wisdom that corruption is detrimental to economic performance.     

The specificity of manufacturing in Marx's economic thought

Abstract

This article examines Marx's approach to manufacturing and the extent to which manufacturing could be considered to have a special place in Marx's economic thought, especially in relation to accumulation and growth. The important ‘progressive’ features of manufacturing that can be found in Marx's writings and which are discussed here include: division of labour; socialisation of labour; mechanisation; increasing returns to scale; learning-by-doing; technological advancement; and overall, superior potential for cumulative productivity increases. These insights anticipate some of the thinking around the specificity of manufacturing found in twentieth-century structuralist development economics and some heterodox schools of thought such as Kaldorian approaches. This article suggests an interpretation of Marx as having a two-dimensional conceptualisation of activity specificity, with not only sectoral but also ‘technological–organisational’ dimensions, where these two dimensions are not fully independent of each other.     

Microfinance institutions’ transparency in Sub-Saharan Africa

This study analyses the impact of the ownership structure and macro-level factors on Microfinance institutions’ (MFIs) transparency in Sub-Saharan Africa (SSA). Using cross-sectional data from 223 MFIs in 11 countries, we find that MFI transparency in SSA is low and highly variable. Our results indicate that larger MFIs and non-governmental organizations (NGOs) are associated with greater transparency. Greater transparency of NGOs is consistent with the need to sustain and attract donor funding. Country-level resources, such as the level of financial sector development, also impact MFI transparency.     

Beyond Myths,Lies and Stereotypes: The Political Economy of a ‘New Scramble for Africa’

Commentators across the political spectrum have increasingly drawn attention to a ‘new scramble for Africa’. This ‘new scramble’ marks the latest chapter of imperialist engagement, with not only Western states and corporations but also those of ‘emerging economies’ seeking to consolidate their access to African resources and markets. The ‘new scramble for Africa’ involves therefore significant transformations related to shifts in global politico-economic power. However, as this article elaborates, much of the burgeoning literature on the ‘new scramble for Africa’ is premised upon problematic substantive, theoretical and ontological claims and debates. In particular, the article seeks to challenge two commonplace and related narratives. Firstly, the highly questionable representations of the scale and perceived threat of emerging powers' (particularly China's) involvement in Africa, in contrast to the silences, hypocrisy and paternalistic representation of the historical role of the West. Second, and relatedly, debate and analysis are framed predominantly within an ahistoric statist framework of analysis, particularly that of inter-state rivalry between China and other ‘emerging’ states vs. Western powers. Absent or neglected in such accounts are profound changes in the global political economy within which the ‘new scramble for Africa’ is to be more adequately located.     

UNEMPLOYMENT PERSISTENCE AND THE SUSTAINABILITY OF EXCHANGE RATE PEGS

It is commonly thought that an open economy can accommodate output shocks through either exchange rate or real sector adjustments. We formalize this notion by incorporating unemployment persistence into a two‐sided escape clause model of currency crises. We show that unemployment persistence makes a currency peg more fragile and undermines the credibility of the monetary authority in a dynamic setting. The fragility is captured by a devaluation premium in expectations that increases the average inflation rate when the currency peg is more vulnerable to ‘busts’ than ‘booms’. This interaction between macroeconomic and microeconomic rigidities suggests that a policy reform can only be consistent if it renders either exchange rates or the economy more flexible.     

Factor Intensity Reversal in a Three-Factor,Three-Commodity Model*

The extension of the notion of factor intensity reversal is extended to three dimensions and it becomes clear that a single phenomenon in two dimensions becomes two distinct phenomena in three. It is shown that one interpretation, the degeneration of A, the coefficient matrix, is the phenomenon which causes problems in trade theory, and this case is easily extended to higher dimensions. Another interpretation uses the Minkowski and Metzler definitions of intensities, and here it is shown that while ‘reversals’ are possible they cause no difficulties unless they are also associated with a degeneration of A. Thus the heart of ‘factor intensity reversal’, i.e. degeneration of A, is easily generalized.     

International Donors,NGOs, and the Geopolitics of Youth Citizenship in Contemporary Lebanon

In the aftermath of 9/11, Western states have increasingly used the promotion of democracy and civil society as a means of effecting geopolitical aims in the Middle East. Democracy promotion has involved extensive financial support of local non-governmental organisations (NGOs) who work to instill (neo)liberal-democratic values and norms among populations that are seen to be lacking in these. This article, in examining the production of citizenship as a geopolitical practice, brings critical-geography scholarship into conversation with the critical literature on Western-funded civil society in ‘transitional’ societies. We focus on the case of Lebanon, which has been targeted by Western donors due to its strategic importance in deepening regional geopolitical rivalries. We highlight the pervasiveness of Western democracy discourses in the work of local NGOs, and especially the tendency to view sectarian politics as a source of instability that must be sublimated by new forms of societal consensus. But our account also highlights the scepticism that NGO directors feel toward their own efficacy and toward the influence of Western donors in Lebanese society. Their critical assessments of Western-funded civil society call into question the extent to which democracy promotion can secure Western geopolitical interests, much less enforce Western political supremacy.