Welcome to Applied Macroeconomic Centre

A theory is appropriate as long as it fits into the fact; when a theory doesn't fit in the fact, it's wise to walk with the fact.

Wednesday, February 29, 2012

The 4 Ways to Spend Money

In his book 'Free to Choose', Milton Friedman described four ways to spend money.





On Whom Money is Spent

Whose Money is Spent

Yourself
Someone Else
Yours
Economize and
seek highest value
Economize, but
don’t seek highest value
Someone Else’s
Don’t economize,
but seek highest value
Don’t economize
and don’t seek
highest value





Here is the video link on how he explains.

Sunday, February 26, 2012

Proper conduct of monetary policy

Dr. Sadiq Ahmed, Vice-Chairman, Policy Research Institute writes on the monetary policy management 'why it is required for a tightened monetary stance by the central bank?'. A significant number of issues one can learn from this article on the ongoing efforts of the central bank.

However, I think, the lessons that Dr. Sadiq attempted to provide to the private sector seem too much to grasp. To me, the private sector has some valid reasons to be concerned about money liquidity process in the banking system as the government has been drastically taking out liquidity from the banking system. For your information, as our new 6th Five Year Plan reveals:
1. Private sector contribution has been estimated at Tk.10.4 trillion (77.2% of total Plan Investment). The question is whether the new monetary stance will ensure this. 
2. Ensuring adequate levels of domestic credit for the private sector over the Plan period, within the aggregate limits of the targeted broad money expansion will require containing credit to the government (net) and other public entities within reasonable limits (Page 88). The question is whether the new monetary stance believes this. 


As one of the member in the 6th Five Year Plan committee, I hope, Dr. Sadiq believes on what they set for the private sector in the Plan. 

Here is the link of the article.

Savings rate increased...

The government raises the rates on all types of savings certificates by as much as 2.64% effective from 1 March in order to increase its borrowing from non-bank sources. For your information, the borrowing target of the government from the banking system in FY12 has already exceeded. Because of this action, the budgetary cost of the government will surely increase; however, it will ensure the smooth money supply in the banking system. The high rates on savings certificate will also ensure more investments in government-owned saving instruments which were previously unattractive due to higher deposit interest rates in the banking system.

Here is the news link.

ADP to be slashed...

The government decided to reduce the Annual Development Programme in FY12 by Tk5,500 crore to Tk.40,500 crore, basically due to the less fund from foreign sources and more expenditure on subsidy.

Here is the news link.

Tuesday, February 21, 2012

Wage rate and inflation in BD

Rejaul Karim Byron from the Daily Star writes on the recent inflationary impulse and the corresponding wage growth rate. He attempts to show that wage increase in FY11 doesn't match with the inflation rate, which eventually brings misery on peoples' living standard.

Here is the link of the article.


Comment: Against the claims of the pro-market economists, the strong demand side impact of recent high growth (or, the effect of money supply growth) is not reflected in the data of wage rate growth. That means, the second round effect of food inflation (higher food inflation - higher nominal wages – higher demand for goods – higher inflation again) is clearly weak in the current economic situation.

I partially agree with what Mr. Zahid Hossain, Senior Economist from the World Bank explained.

(i) I completely agree with the issue that the overseas employment of Bangladesh workers has a permanent impact on the employment (and wages) in domestic market, but only on the unskilled jobs (and wages). And I will suggest policymakers to think for an optimum level of overseas employment to keep the local unskilled employment at the competitive level. It is particularly important for the export-oriented industries to keep them competitive in the world market.

(ii) But I don’t agree with the claim that the whole employment market will react only with the overseas employment because we don’t export the skilled workers. The wage rate reported in the article not only represents the wages of unskilled workers, but also skilled workers (please read what MS Rahman, an employee in a private company in the capital says). Moreover, we know that the overall economy has been under pressure since the beginning of FY11 because of global economic turmoil (please look at the growth of export and imports) and stock market crash, back in December 2010 and these have an impact on the wage increase. A part of the blame must go to the ongoing economic slowdown.




EIU Country Report (Feb 2012)

Economist Intelligence Unit (EIU) publishes its Bangladesh Country Report (February 2012 edition) with political and economic updates.

Here is the link of the report.

Monday, February 20, 2012

Concern on rising fuel prices!

A legitimate concern grows, both in the domestic and international arena, with the rise in fuel prices in the world market following political tension has been prevailing in the Middle-East region. Definitely, renewed tensions on Iran add to stimulate on rising fuel market.     

Oil price already touched $119 a barrel and possibly is going to reach the old records!

On this background, what is the preparation of Bangladesh? Please remember a few things before you think and comment.

1. The government already raised the domestic fuel prices on several times in this fiscal year;
2. As government claims, it still provides a substantial amount of subsidy on petroleum prices;
3. The government already borrowed a substantial amount of money from the banking system, to basically finance oil import;

Please, think about all three points for the future and the impact of those on other economic indicators.

Sunday, February 19, 2012

Statement on IMF Mission (February 2012)

An International Monetary Fund (IMF) team visited Dhaka during February 7−15, 2012 and here is the link of the statement on the mission. 

Wednesday, February 15, 2012

Interview of Mahabub Hossain

Dr. Mahabub Hossain, a renowned economist and currently Executive Director, BRAC talks with the Daily Star on rural and agricultural development of the country. One may find the discussion useful to enriched information.

Here is the link.

Trade deficit widens...

Trade deficit widens by about 22.0% to $4.2 billion during the first half of FY12, mainly due to higher fuel oil import.

Here is the news link.

Monday, February 13, 2012

Export growth: short of target!

Export earnings during July-January FY12 registered a growth of 14.3% to $13.92 billion and still were 5.0% short of periodical target.

Here is the news link.

'গনি মিয়া' বনাম 'মুহিত সাহেব'

অধ্যাপক আনু মুহাম্মদ দেশের বর্তমান অর্থনৈতিক অবস্থা, প্রসংক্রমে সরকারের ভূমিকা নিয়ে দৈনিক প্রথম আলো-তে একটা লেখা লিখেছেন। বাংলাদেশের অর্থনীতিতে বিদ্যমান রাজনৈতিক অর্থনীতি জানার জন্য এর ছেয়ে ভালো কোন রচনা সমসাময়িককালে দেখা যায়নি। যতই অস্বীকার করা হোক, কিছু সত্যকে কখনোই মিথ্যা করা যাবেনা।

লিংকটা এখানে পাবেন।

Sunday, February 12, 2012

CAB turns into positive in Dec

Current Account Balance returns into positive territory after being negative in November, thanks to restrained imports (imports fell by 2.5% in December).

Here is the report on the BoP condition until December 2011.

Political economy of MPS?

Dr. Zaidi Sattar writes about the political economy part of recently announced MPS, its unkind relation with private sector activities (or, kind relation with the government).

Here is the link of the article.

Thursday, February 9, 2012

Stock market debacle: blame goes to BB

Time Magazine published an article on the debacle of Bangladesh stock markets and it mainly blames the central bank's poor and lethargic policies for the disaster. Although it is not sure whether those policies were taken intentionally for giving a ground to greedy influential, but the outcome was definitely disastrous for petty investors. Is it part of the so-called inclusive growth strategy of the central bank?

Here is the link of the article.  

Wednesday, February 1, 2012

Enjoy the power tariff hike from today !

Power tariff for bulk and retail consumers goes up by 14.4% and up to 7.8%, respectively from today as per earlier decision, took by Bangladesh Energy Regulatory Commission in November 2011.

Here is the new link.