Wednesday, March 29, 2017

No 47 In My List of Reasons Why Productivity Gains are so Difficult

From a batch of NBER working papers a few weeks ago (abstract; emphasis added):

CEO Behavior and Firm Performance
Oriana Bandiera, Stephen Hansen, Andrea Prat, Raffaella Sadun

We measure the behavior of 1,114 CEOs in Brazil, France, Germany, India, UK and US using a new methodology that combines (i) data on every activity the CEOs undertake during one workweek and (ii) a machine learning algorithm that projects these data onto scalar CEO behavior indices. Low values of the index are associated with plant visits, and one-on-one meetings with production or suppliers, while high values correlate with meetings with high-level C-suite executives, and several functions together, both from inside and outside the firm. We use these data to study the correlation between CEO behavior and firm performance within the framework of a firm-CEO assignment model. We show results consistent with significant firm-CEO assignment frictions, which appear to be more severe in lower-income regions. The productivity loss generated by inefficient assignment is equal to 13% of the productivity gap between high- and low-income countries in our sample.

In short, 13% of the productivity difference between rich and poor countries is due to having roughly 17% of CEOs in poorer countries not spending their time properly (relative to their industry).

And people think it’s about robots.

Technical Notes

Bandiera, Oriana & Stephen Hansen, Andrea Prat, Raffaella Sadun, "CEO Behavior and Firm Performance", NBER Working Paper No. 23248, March 2017

Tuesday, March 28, 2017

Chart of the Week: Why Seafood Prices Have Rocketed

Actually, three charts altogether:

01_production

Issue 1: Global fish landings have stagnated since the 1990s. Effectively, demand is increasingly being met through aquaculture.

02_utilisation

Issue 2: Per capita consumption has risen drastically, to over 20kg per person, tripling over the past 65 years. Roughly 85% of fish supply is now used for food, up from half in the 1970s. It’s not just population growth that is stressing fish supplies.

03_Trends

Issue 3: Only 10% of global fish stocks are underutilised. The ratio of fishing stocks that are being exploited at biologically unsustainable rates has been increasing, and is more than double what it was 40 years ago.

Technical Notes:

“The State of World Fisheries and Aquaculture 2016,” Food and Agriculture Organisation of the United Nations (FAO), 2016

Tuesday, March 21, 2017

Chart of the Week: Manufacturing Sales

Manufacturing sales versus trend forecast (RM millions):

01_sales

Boom.

Technical Notes:

Data from various issues of Monthly Manufacturing Statistics from the Department of Statistics Malaysia

Monday, March 20, 2017

The Return of Inflation?

A couple of things here:

  1. Malaysian inflation will zoom this year. No, really, for real!
  2. Uh, no, not really.

What’s with the two seemingly contradictory statements?

This is what we have up to January 2017 (log annual and monthly changes):

01_indexes

Monday, March 13, 2017

Threat or Help? Unskilled Immigrant Workers

The World Bank’s Malaysia Hub has a new brief on the effect of immigrant workers on productivity (excerpt):

Threat or Help? The Effects of Unskilled Immigrant Workers on National Productivity Growth
Sharmila Devadas

While unskilled immigrant workers have relatively low formal human capital, theory suggests that they can still contribute to productivity improvements by helping to increase efficiency and upgrading the skills of the native labor force. Empirical studies indicate that positive productivity effects do occur. This body of evidence does not provide a compelling argument for the closing of national borders to unskilled foreigners on economic grounds.

TL;DR version: The available evidence doesn’t support any negative impact on productivity, with some countries showing a positive impact. Note that this doesn’t necessarily preclude the possibility that reducing unskilled foreign workers will increase productivity, but it does make it unlikely.

Wednesday, March 8, 2017

Effective Exchange Rate Indexes: February 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

Despite relative stability against the USD in February, the MYR continued to decline on a multilateral basis. The NEER fell -0.53% mom, while the REER fell-0.91%. More moderate drops were seen in the sub-indices.

On a bilateral basis, MYR is now on a nine-month losing streak against the AUD (-2.27%), though the biggest drop was against the KRW (-3.01%). Gains were recorded against the PHP (+0.79%), HKD (+0.37%) and USD (+0.32%). What’s interesting is that, despite the continued decline, the picture appears to be balancing out a little – gains were recorded against 6 currencies (out of a total of 14 in the indexes), versus 4 last month, and just 1 in December and November.

01_idx

Changelog:

  1. Indexes have been updated to February 2017
  2. CPI deflators and forecasts have been updated for January 2016/December 2017
  3. Trade weights have been updated for the 4Q16

Tuesday, February 28, 2017

In the Shadow of the Hegemon

David Beckworth thinks the Fed is the global central bank (excerpt):

The Monetary Superpower: As Strong As Ever

[A] defining feature of the US financial system is that its central bank, the Federal Reserve, has inordinate influence over global monetary conditions. Because of this influence, it shapes the growth path of global aggregate demand more than any other central bank does. This global reach of the Federal Reserve arises for three reasons.

Friday, February 24, 2017

Corruption, Crony Capitalism and Growth

This is slowly making the rounds (excerpt):

Where Crony Capitalism Rose and Prosperity Fell (and Vice Versa)
By Matthew A. Winkler

With populists emulating autocrats from Azerbaijan to Zimbabwe, free markets are being forced to confront crony capitalism.

One response is visible in the reversal of fortunes of Malaysia and Indonesia. The two nations still wrestle with the politics of ethnicity and religion at odds with the capitalism of market competition….

…But the historic advantage that Malaysia, with just 30 million people, has enjoyed over its Southeast Asian neighbor of 250 million is disappearing amid a barrage of corruption allegations challenging Prime Minister Najib Razak….

Tuesday, February 7, 2017

Effective Exchange Rate Indexes: January 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

Both the NEER and REER continued to decline in January, by 0.46% and 0.44% respectively, though the depreciation pace has dropped off substantially. Again, this marks new historical lows for these indices (since the beginning of the series in January 2000).

Looking at the breakdown, however, it’s really stability against the USD (and some gains against the GBP and INR), and negative against virtually everyone else. The biggest dropoff is against the AUD, where the MYR has been on an 8 month losing streak for a cumulative -11.8%.

01_indices

Changelog:

  1. Indexes have been updated to January 2017
  2. CPI deflators and forecasts have been updated for December 2016/January 2017

Tuesday, January 3, 2017

Effective Exchange Rate Indexes: December 2016 Update

The NEER and REER page has been updated. For convenience, I’ve added a Google Docs version of the data (link at the bottom of the table).

Summary

Both the NEER and REER continued to decline in December, by 1.2% and 1.5% respectively. I haven’t extended either index before 2000, as the introduction of the Euro in 1999 makes it hideously complicated to do so, but December marks the lowest levels for either index as far as the data goes back.

Just as in November, the decline was broad-based, with the biggest drops recorded against the CNY and the USD (both -0.3%). The Ringgit however continued to climb against the JPY, up 0.35% for the month.

01_indexes

Changelog:

  1. Indexes have been updated to December 2016
  2. CPI deflators and forecasts have been updated for November/December 2016
  3. Korea has rebased their CPI to 2015, which resulted in some revisions to the broad indexes

Wednesday, December 7, 2016

ICYMI: Talking FX on BFM

Me, pontificating on the Ringgit and BNM’s new measures, over the past week:

Tuesday, December 6, 2016

FX: Onshore Versus Offshore

Imagine you have a widget to sell, something that helps pick apples. You offer the widget to a bunch of apple farmers, who think, yes, very useful, and offer you a price for it. Then you go to another set of orange growers and offer the same widget, and they’ll say, well we could use it, but its a different shape, and offer you a price half of what you got before (I’m assuming away the ability to arbitrage).

In essence, that’s the problem facing central banks with currencies traded both onshore and offshore – while the product’s the same, the market players are different and you’ll get different prices as a result.