Tourism Spending

Real spending on travel and tourism increased at an annual rate of 2.6 percent in the second quarter of 2011 after increasing 2.8 percent (revised) in the first quarter. Growth in travel and tourism outpaced growth in real gross domestic product (GDP), which increased 1.0 percent in the second quarter after increasing 0.4 percent in the first quarter. The growth in real spending on tourism primarily reflected increases in total transportation and in recreation and entertainment.

Overall growth in prices for travel and tourism goods and services remained high, increasing 7.3 percent in the second quarter of 2011 following an 8.5 percent (revised) increase in the first quarter. The growth in prices for travel and tourism goods and services reflected increases in prices for traveler accommodations and for gasoline.

Definitions: 
Tourism spending. Tourism spending comprises all goods and services purchased by tourists (defined as people who travel for any reason). In the following tables, tourism spending is referred to as direct tourism output.

Indirect tourism-related spending. Indirect tourism-related spending comprises all output used as inputs in the process of producing direct tourism output (e.g., toiletries for hotel guests and the plastic used to produce souvenir key chains).

Total tourism-related spending. Total tourism-related spending is the sum of direct tourism spending and indirect tourism-related spending.

Direct tourism employment. Direct tourism employment comprises all jobs where the workers are engaged in the production of direct tourism output (such as hotel staff, airline pilots, and souvenir sellers).

Indirect tourism-related employment. Indirect tourism-related employment comprises all jobs where the workers are engaged in the production of indirect tourism-related output (e.g., employees of companies that produce toiletries for hotel guests and the plastic used to produce souvenir key chains).

Total tourism-related employment. Total tourism-related employment is the sum of direct tourism employment and indirect tourism-related employment.

Data Watch

Since the recession ended, businesses had increased their real spending on equipment and software by a strong 26%, while they have added almost nothing to their payrolls....

You can’t fault companies for investing in new machinery rather than hiring new workers. As two news reports detail, labor costs are rising, a function of both private and public pressures.

First, employers face a jump in health insurance costs. The Kaiser Family Foundation reported a 9% average increase in the premiums paid by employers this year. The average yearly cost to cover a family hit a record $15,073, up sharply from $13,770 in 2010.

Related:
Annual Capital Expenditures Survey 

Krugman's History of Macro

So, here’s the history of macro in brief.

1. In the beginning was Keynesian economics, which was ad hoc in the sense that on some important issues it relied on observed stylized facts rather than trying to deduce everything from first principles. Notably, it just assumed that nominal wages are sticky, because they evidently are.

2. In the 1960s a number of economists started trying to provide “microfoundations”, deriving wage and price stickiness from some kind of maximizing behavior. This early work had a big payoff: the Friedman/Phelps prediction that sustained inflation would get “built in”, and that the historical tradeoff between inflation and unemployment would vanish.

.....

7. The Lesser Depression arrives. It’s clearly not a technological shock; clearly, also, nobody is confused about whether we’re in a slump, as the old Lucas model required.

In fact, it looks a lot like what Keynes described, and old-Keynesian models work very well, thank you, both at explaining it and in making predictions about such things as interest rates and the effects of fiscal austerity. But the descendants of the Lucas project know that Keynes was wrong — it’s what their teachers and their teachers’ teachers have been saying all these years. They cannot accept anything resembling a Keynesian explanation without devaluing everything they’ve done with their intellectual lives.

Related: Stephen Williamson debates Krugman.

Discuss- are escalators decreasing?

Arnold Kling always gives us good brain food on economics;

There are multiple escalators in the economy. At any one point in time, some people are on up escalators, and some people are on down escalators. From 1970 to 2000, I think that cohort data would tell you that many more families rode escalators up than rode them down. From 2000 to today, my guess is that the proportion riding up escalators has not been as high.

Confidence Men

Brad de Long reviews Confidence Men;

Since the spring of 2009 I have became more and more alarmed by the economic policy choices made by the Obama administration. A new administration needs to (1) forecast what is most likely to happen, and (2) design and implement policies that will deal with what is likely to happen, The Obama administration did that. I think that some of its initial policies were wrong, but given the press of events I would give the administration moderately high marks for the policies it designed and implemented up through, say, April 2009.

Thereafter, however, things to me seemed to gradually fall apart. An administration has a third task it needs to carry out: (3) think hard about the risks--what if the administration has misjudged the situation? what if more things go wrong?--figure out what it needs to do to buy insurance against those risks, and do those things as well.
It needs to ask itself:

• What if we are wrong in our estimation of the situation--what might the world then look like three years from now? 

• What if more things go wrong in the next year or two--what might the world then look like three years from now?
• In those possible scenarios, what will we wish then that we had done today to prepare the way for dealing with the situation?
  
  ....

Why Obama chose the policies he did, why Geithner and Orszag and company were so optimistic in 2009, why the Reconciliation process was not teed up for emergency expansionary fiscal policy action if it turned out to be necessary, why Fannie and Freddie were not teed up for emergency mortgage action if it turned out to be necessary, why the administration turned so decisively away from unemployment and toward long-term deficit reduction in early 2010, why Summers and Romer did not wipe the floor with Geithner and Orszag in the long twilight bureaucratic struggle when NEC collegiality broke down, and why Bernanke forgot about the employment and output part of the Federal Reserve's dual mandate - these are all questions that I would dearly love to know the answers to.

Two and a half years ago I would have given long odds that Ron Suskind's book would provide me with a lot of the answers to these questions.

It does not.

Christine Lagarde's 4 Rs

A recent speech of IMF's Lagarde;

But before talking about solutions, we need to be clear about the problems. I would isolate three distinct, albeit related, issues—balance sheet pressures sapping growth, instability in the core of the global economic system, and social tensions.... I want to propose today four key policy dimensions needed to secure recovery and economic stability—repair, rebalance, reform, rebuild, the “4 R’s”.

First, repair. Before anything else, we must relieve some of the balance sheet pressures that risk smothering the recovery—on sovereigns, on households, on banks.

On sovereigns, advanced countries need credible medium-term plans to stabilize and lower public debt ratios. This must come first. But consolidating too quickly can hurt the recovery and worsen job prospects. So the challenge is to navigate between the twin perils of losing credibility and undermining growth. There is a way to do this. Credible measures that deliver and anchor savings in the medium term will help create space for accommodating growth today—by allowing a slower pace of consolidation.

Of course, the precise path is different for each country. Some have no choice but to cut deficits today, especially if they are under market pressure. Others should stick to their adjustment plans, but be ready to change course if growth falters further. Others still are probably pushing too hard today, and could slow down a bit.

One more point—it’s not just the what of the adjustment, it’s the how. In the short run, policymakers must focus on measures with the biggest bang-for-the-buck, that create jobs and kick-start growth, and that take distributional considerations into account. The how of adjustment is also important in the medium term, where fiscal plans should seek to support growth. I’m thinking of issues like tax reform, including by broadening bases. Equally, entitlement reforms will be essential in establishing long-term debt sustainability in virtually all advanced economies.

Policymakers must also deal with household and bank balance sheets.

In light of the jobs crisis in the United States, I welcome President Obama’s recent proposals to address growth and employment. At the same time, it remains critical for policymakers to clarify in parallel their medium term plans to put public debt on a sustainable path. In tandem with this crucial employment agenda, it is important to relieve overburdened households through actions like more aggressive principal reduction programs, or helping homeowners take advantage of low interest rates.

In Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, via private sector lending, all banks must have sufficient capital buffers.

The second “R” is reform. If repair was about getting the economy moving today, reform is about laying the foundations for a more stable economic future tomorrow.

A priority here is financial sector reform. On the plus side, we have broad agreement on higher quality capital and liquidity standards with appropriate phase-in arrangements. But substantial gaps remain in areas like supervision, cross-border resolution, too-important-to-fail, and shadow banking systems. We need international cooperation across all dimensions to avoid regulatory arbitrage. The fact that so many of these issues are still unresolved three years after Lehman should be of concern to us all.

We also need to develop and fine-tune macro-prudential tools to guard against financial risks. I’m thinking here of policies like having banks hold more capital when times are good or implementing maximum loan-to-value ratios to guard against housing price bubbles.

Under the reform banner, I would also include the social dimension. Employment must be central. It not only sustains demand, but supports human dignity. In the words of Dostoevsky, “deprived of meaningful work, men and women lose their reason for existence”. This is especially important among the young, who risk losing the race even before the starting gun has sounded. We should also seek growth that is inclusive, benefiting the whole of society.

The third “R” is rebalance. This has two meanings. First, it means shifting back demand from the public to the private sector, when the private sector is strong enough to carry the load. This hasn’t happened yet.

The second rebalancing involves a global demand switch from external deficit to external surplus counties. The idea here is straightforward—with lower spending and higher savings in the advanced economies, key emerging markets must take up the slack and start providing the demand needed to power the global recovery. But any rebalancing so far is largely due to lower growth. In some countries, rebalancing is being held back by policies that keep domestic demand growth too slow and currency appreciation too modest. Some other emerging markets are dealing with dangers from capital inflows that are too rapid.

This lack of sufficient rebalancing hurts everyone. In our inter-connected world, any thought of decoupling is a mirage. If the advanced economies succumb to recession, the emerging markets will not escape. Nobody will. Rebalancing is in the global interest, but it is also in the national interest.

Woodrow Wilson would have appreciated that, I'm sure.

My fourth—and final—“R” is rebuild. Here I am thinking mainly of the low-income countries that need to rebuild their economic policy buffers—including fiscal positions—that served them so well during the crisis, to protect themselves against future storms. This will also help provide the space for growth-enhancing public investment and social safety nets—for example, allowing countries to deploy well-targeted subsidies to protect the poor from commodity price swings with minimal damage to fiscal sustainability.

Ireland and World Economy

Ireland and the World Economy Guest Lecture from Stephen Kinsella on Vimeo.

Robert Reich at Google

Robert Reich on his new book After Shock

It hurts some times

IMF on fiscal contractions;

Second, external adjustment is not driven solely by the fall in domestic demand from fiscal consolidation. The contractionary effect of fiscal consolidation is now well established, with consequent effects on import demand, and this is something policymakers cannot ignore—fiscal consolidation hurts. But the current account also improves because exports get a boost from the real exchange rate depreciation that tends to accompany fiscal consolidation.

Chapter 4 of WEO- The Twin Budget and Trade Balances

How do changes in taxes and government spending affect an economy’s external balance? Based on a historical analysis of documented fiscal policy changes and on model simulations, this chapter finds that the current account responds substantially to fiscal policy—a fiscal consolidation of 1 percent of GDP typically improves an economy’s current account balance by over a half percent of GDP. This comes about not only through lower imports due to a decline in domestic demand but also from a rise in exports due to a weakening currency. When the nominal exchange rate is fixed or the scope for monetary stimulus is limited, the current account adjusts by as much, but the adjustment is more painful: economic activity contracts more and the real exchange rate depreciates through domestic wage and price compression. When economies tighten fiscal policies simultaneously, what matters for the current account is how much an economy consolidates relative to others. Looking ahead, the differing magnitudes of fiscal adjustment plans across the world will help lower imbalances within the euro area and reduce emerging Asia’s external surpluses. The relative lack of permanent consolidation measures in the United States suggests that fiscal policy will contribute little to lessening the U.S. external deficit.

We find that fiscal policy has a substantial and long-lasting effect on the current account. A fiscal consolidation of 1 percent of GDP improves the current account by over a half percent of GDP within two years, with the improvement persisting into the medium term. The improvement in the current account comes not only through lower imports due to falling domestic demand, but also from an increase in exports arising from a weaker domestic currency.

See chapter 4

Something to think about?

'We call the negative outliers "rogue traders". What do we call the positive outliers?

From Junkcharts

Target what you can hit- follow up

In case you don't have time to read the entire chapter 3 , please read the two boxes
- Box 3.1. Inflation in Sub-Saharan Africa during the 2008 Commodity Price Surge 
- Box 3.2. Food Price Swings and Monetary Policy in Open Economies

What accounts for the relative stability of nonfood inflation? As Table 3.1.4 indicates, the macroeconomic environment was broadly neutral during this period. There was a small increase in government spending. On the monetary front, there was a small increase in the growth rate of monetary aggregates; money targets were missed in eight countries for which there are data; and nominal interest rates stayed constant—all of which is broadly consistent with an accommodation of first-round effects.

Target what you can hit

The analytical chapters of the WEO is out. The 3rd chapter address the following questions;

-What are the effects of international commodity price swings on inflation across a variety of economies? What economic factors influence these effects?

-What is the appropriate monetary policy response to commodity price shocks? In particular, how does the approach of targeting underlying inflation rather than headline inflation perform in terms of delivering macroeconomic stability in different types of economies? Should central banks respond to persistent commodity price shocks any differently than to one-time shocks?

-Finally, what are the implications for monetary policy in today’s environment, with excess demand pressures in some emerging and developing economies and economic slack in advanced economies?

These are the main findings of the chapter:

-Food price shocks tend to have larger effects on headline inflation in emerging and developing economies than in advanced economies. On a related note, because medium-term inflation expectations are weakly anchored in many emerging and developing economies, food price shocks have larger effects on inflation expectations in these economies.

-The measure of inflation used to define a central bank’s target matters because of its effect on the central bank’s credibility. In economies with low initial monetary policy credibility and high food shares in the consumption basket, focusing on underlying inflation—that is, a measure that reflects the changes in inflation that are likely to be sustained over the medium term—rather than on headline inflation, makes it easier to build credibility. The reason is that it is harder to hit headline inflation targets when commodity prices are volatile. Higher credibility, in turn, leads to better-anchored inflation expectations and lower volatility of both output and headline inflation.

-The desirability of setting and communicating monetary policy based on a measure of underlying inflation depends on the relative importance of headline inflation and output to a country’s welfare. A headline framework can lower the volatility of headline inflation, but at the cost of significantly higher volatility in output (and hence in household income).

-Finally, in economies where central bank credibility is still limited and the share of food in consumption is high (as in a number of emerging and developing economies), a food price shock is likely to have even larger second-round effects and require a more aggressive policy response when excess demand pressures are high and inflation is running above target. This assumes that the economic costs rise as the gap increases between actual inflation and the target. In contrast, in economies where the central bank’s credibility is strong, where food accounts for a low share in consumption baskets, and where there is substantial economic slack (as in major advanced economies today), the monetary policy tightening required to stabilize inflation is more gradual.

Nepal can expand external debt?

The debt reduction has created fiscal space, but in the short run maintaining the peg calls for containing domestic borrowing close to current levels. With external debt within thresholds, the debt sustainability analysis indicates that Nepal is at moderate risk of debt distress (see Annex 1). This fiscal room could be used for building infrastructure and human capital, and for the peace process, provided spending quality is ensured. But, in the short term the worsening external position requires that domestically financed deficits remain close to current levels, while the overall deficit could be expanded provided it is funded with external grants or concessional debt. The main considerations in determining the appropriate fiscal stance are;

Debt level target. Nepal’s external debt, with an NPV of debt-to-GDP ratio of 21¾ percent, and an NPV of debt-to-exports-and remittances ratio of 63 percent, is well within DSA thresholds. Nepal’s public debt is well below the average of comparators. However, contingent liabilities of some 2–3 percent of GDP arising from the required recapitalization of state-owned banks, and potential additional liabilities stemming from the weak financial sector suggest that adequate cushions be maintained. In sum, a public debt target of around 40 percent would be appropriate to anchor fiscal policy. To stabilize the public debt-to-GDP ratio in the long run at this level, the overall deficit could rise to 3½ percent of GDP, and the domestically financed deficit would be in the range of 2¼–2½ percent of GDP, higher than in previous years.

Support for the peg and demand management. The expected slowdown in output growth would suggest a more expansionary fiscal stance in the short term. However, inflationary pressures remain high, and the peg to the Indian rupee requires that domestically financed deficits remain contained.

Crowding out and borrowing costs. A high money-to-GDP ratio suggests that, in the longer run, a somewhat higher domestic debt burden can be accommodated. However, in the short run, the expected slowdown in money growth due to the deteriorating external position, public sector borrowing may need to be contained to leave sufficient room for private credit and control interest costs

Source: Nepal: 2010 Article IV Consultation and Request for Disbursement Under the Rapid Credit Facility - Staff Report

Random Data- Nepal's Government Revenues

Random Data- What's Bhutan's Government Revenues

The answer is it depends. See also the latest Economic Update on Bhutan from the World Bank

Government Debt in Europe

Egypt, Israel and Spain

Having a bit too much fun with Google Data Explorer

Google Data Explorer is cool

Government Revenues and Expenditures

 Note to Self: IMF DataMapper users the following definitions for public revenues and expenditures.

General government revenue (National currency)
Revenue consists of taxes, social contributions, grants receivable, and other revenue. Revenue increases government’s net worth, which is the difference between its assets and liabilities (GFSM 2001, paragraph 4.20). Note: Transactions that merely change the composition of the balance sheet do not change the net worth position, for example, proceeds from sales of nonfinancial and financial assets or incurrence of liabilities.

General government total expenditure (National currency)
Total expenditure consists of total expense and the net acquisition of nonfinancial assets. Note: Apart from being on an accrual basis, total expenditure differs from the GFSM 1986 definition of total expenditure in the sense that it also takes the disposals of nonfinancial assets into account.

What's the quickest way to find public finance data on the web?

So whats the quickest way to find International Public Finance data on the web? Is it
A- Wolfram Alpha
B- World Development Indicators
C- IMF Data Mapper

Homework: Try finding the latest estimates of Bhutan's government revenues estimates?

Something for Nothing

Something for Nothing-A Novel
Michael W. Klein

David Fox (Ph.D. Economics, Columbia, Visiting Assistant Professor at Kester College, Knittersville, New York) is having a stressful year. He has a temporary position at a small college in a small town miles from everything except Albany. His students have never read Freakonomics. He thinks he is getting the hang of teaching, but a smart and beautiful young woman in his Economics of Social Issues class is distractingly flirtatious. His research is stagnant, to put it kindly. His search for a tenure-track job looms dauntingly. (The previous visiting assistant professor of economics is now working in a bookstore.) So when a right-wing think tank called the Center to Research Opportunities for a Spiritual Society (CROSS)--affiliated with the Salvation Academy for Value Economics (SAVE)--wants to publish (and publicize) a paper he wrote as a graduate student showing the benefits of high school abstinence programs, fetchingly retitled "Something for Nothing," he ignores his misgivings and accepts happily. After all, publication is “the coin of the realm,” as a senior colleague puts it.

But David faces a personal dilemma when his prized results are cast into doubt. The school year is filled with other challenges as well, including faculty politics, a romance with a Knittersville native, running the annual interview gauntlet, and delivering the culminating "job talk" lecture under trying circumstances. David’s adventures offer an instructive fictional guide for the young economist and an entertaining and comic tale for everyone interested in questions of balancing career and life, success and integrity, and loyalty and desire.

When Fiscal Adjustment is not enough

The mission and the authorities agreed that fiscal adjustment alone will not
ensure debt sustainability (MEFP, paragraph 10). It was recognized that attempts to achieve higher primary fiscal targets over the medium term would not be sustainable unless accompanied by a meaningful reduction in the public debt service burden, which will require burden sharing by all stakeholders. In this context, the authorities have retained debt and legal advisors, publicly announced to seek a comprehensive and substantive restructuring of the public debt, initiated discussions with creditors, and obtained financing assurances from the Paris Club. The authorities’ strategy (Box 4), developed with the assistance of their debt advisors, emphasizes dialogue with all creditors and information transparency (including publishing relevant information on the debt restructuring on their website).

- St. Kitts and Nevis: 2011 Article IV Consultation and Request for Stand-By Arrangement - Staff Report

Ideas for PhD

PhD in Political Economy & Government;

The PhD in Political Economy and Government is designed for students interested in the impact of politics on economic processes and outcomes, and the reciprocal influence of economic conditions on political life. It is appropriate for students whose academic interests are not served by doctoral studies in Economics or Political Science alone...

Things to consider before applying

Required quantitative preparation for the PhD in Political Economy and Government includes:

Minimum two semesters of Calculus.
Mathematics preparation up to and including Multivariable Calculus.

I want to work for IMF/WB?

A certain Praveen Kishore comments on the Dani Rodrik's blog sometime back- which worries me a bit about the type of people who get attracted to jobs at multi-lateral institutions.

For past three months, I have been collecting information regarding Ph.D. in Eco. and MPA/ID and similar other programs. I have gone through other blogs as well. However,I am still not decided about Ph.D. or MPA/ID. I like economics. I have basic undergraduate degree in Eco.and Mathematics. Thereafter, I got MBA(Finance) from Calcutta University (India) and Masters in Public-policy and Management from IIMB (Indian Institute of Management, Bangalrore, India). I am part of permanent Indian civil service (IRS - Indian Revenue Service, to be precise) with around 10 years of experience in Central (Federal) direct tax department, Ministry of Finance, Govt. of India - at operational as well as policy level. I am aged 35 years.

I want to work for IMF/WB or consulting organization. I also like academics/research.

In such a situation -What should I do? MPA/ID or Ph.D.in Eco?