Monday 19 September 2011

Euro Crisis News


This days euro zone is being shocked by debt crisis,by which the symptom of the crisis were began in September 2008, due to the collapse of Lehman Brothers helped trigger an economic and financial crisis that swept across the globe. As guardian wrote Europe's debt crisis has intensified after Greece's embattled government said the country's financial future would rest on a make-or-break conference call with EU and IMF officials on Monday or today.

on the other side,U.K economists announced that  200 pound stimulus in 2009/10 had significant economic effect that would intensifies new quantitative easing according to the central bank of U.K quarterly bulletin.for further reading this and related issues  use under-putted link.

Enjoy world financial latest news !

http://www.telegraph.co.uk/finance/financialcrisis/


http://www.guardian.co.uk/world/2011/sep/18/greece-debt-phone-call
http://www.ft.com/home/uk

Saturday 17 September 2011

Towards Competition on Beer Industry


Surprisingly,the buying of the labels of two beers by Heineken could lead to the sector more competitive in terms of quality and price and would settle issues on privatization.this  action also one part of privatization of state owned industries.
Cheers the news !!!!!!!

Saturday 10 September 2011

Lessons .....Setting Their Hair on Fire-No Hair No Fire


OP-ED COLUMNIST
Setting Their Hair on Fire
By PAUL KRUGMAN
Published: September 8, 2011
Fred R. Conrad/the New York Times

First things first: I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment.
Of course, it isn’t likely to become law, thanks to G.O.P. opposition. Nor is anything else likely to happen that will do much to help the 14 million Americans out of work. And that is both a tragedy and an outrage.
Before I get to the Obama plan, let me talk about the other important economic speech of the week, which was given by Charles Evans, the president of the Federal Reserve of Chicago. Mr. Evans said, forthrightly, what some of us have been hoping to hear from Fed officials for years now.
As Mr. Evans pointed out, the Fed, both as a matter of law and as a matter of social responsibility, should try to keep both inflation and unemployment low — and while inflation seems likely to stay near or below the Fed’s target of around 2 percent, unemployment remains extremely high.
So how should the Fed be reacting? Mr. Evans: “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.”
But the Fed’s hair is manifestly not on fire, nor do most politicians seem to see any urgency about the situation. These days, the best — or at any rate the alleged wise men and women who are supposed to be looking after the nation’s welfare — lack all conviction, while the worst, as represented by much of the G.O.P., are filled with a passionate intensity. So the unemployed are being abandoned.
O.K., about the Obama plan: It calls for about $200 billion in new spending — much of it on things we need in any case, like school repair, transportation networks, and avoiding teacher layoffs — and $240 billion in tax cuts. That may sound like a lot, but it actually isn’t. The lingering effects of the housing bust and the overhang of household debt from the bubble years are creating a roughly $1 trillion per year hole in the U.S. economy, and this plan — which wouldn’t deliver all its benefits in the first year — would fill only part of that hole. And it’s unclear, in particular, how effective the tax cuts would be at boosting spending.
Still, the plan would be a lot better than nothing, and some of its measures, which are specifically aimed at providing incentives for hiring, might produce relatively a large employment bang for the buck. As I said, it’s much bolder and better than I expected. President Obama’s hair may not be on fire, but it’s definitely smoking; clearly and gratifyingly, he does grasp how desperate the jobs situation is.
But his plan isn’t likely to become law, thanks to Republican opposition. And it’s worth noting just how much that opposition has hardened over time, even as the plight of the unemployed has worsened.
In early 2009, as the new Obama administration tried to come to grips with the crisis it inherited, you heard two main lines from critics on the right. First, they argued that we should rely on monetary policy rather than fiscal policy — that is, that the job of fighting unemployment should be left to the Fed. Second, they argued that fiscal actions should take the form of tax cuts rather than temporary spending.
Now, however, leading Republicans are against tax cuts — at least if they benefit working Americans rather than rich people and corporations.
And they’re against monetary policy, too. In Wednesday night’s Republican presidential debate, Mitt Romney declared that he would seek a replacement for Ben Bernanke, the Fed chairman, essentially because Mr. Bernanke has tried to do something (though not enough) about unemployment. And that makes Mr. Romney a moderate by G.O.P. standards, since Rick Perry, his main rival for the presidential nomination, has suggested that Mr. Bernanke should be treated “pretty ugly.”
So, at this point, leading Republicans are basically against anything that might help the unemployed. Yes, Mr. Romney has issued a glossy, well-produced “jobs plan,” but it might best be described as 59 bullet points with nothing there — and certainly nothing to justify his assertion, bordering on megalomania, that he would create no fewer than 11 million jobs in four years.
The good news in all this is that by going bigger and bolder than expected, Mr. Obama may finally have set the stage for a political debate about job creation. For, in the end, nothing will be done until the American people demand action.

Lessons .....Setting Their Hair on Fire-No Hair No Fire


OP-ED COLUMNIST
Setting Their Hair on Fire
By PAUL KRUGMAN
Published: September 8, 2011
Fred R. Conrad/the New York Times

First things first: I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment.
Of course, it isn’t likely to become law, thanks to G.O.P. opposition. Nor is anything else likely to happen that will do much to help the 14 million Americans out of work. And that is both a tragedy and an outrage.
Before I get to the Obama plan, let me talk about the other important economic speech of the week, which was given by Charles Evans, the president of the Federal Reserve of Chicago. Mr. Evans said, forthrightly, what some of us have been hoping to hear from Fed officials for years now.
As Mr. Evans pointed out, the Fed, both as a matter of law and as a matter of social responsibility, should try to keep both inflation and unemployment low — and while inflation seems likely to stay near or below the Fed’s target of around 2 percent, unemployment remains extremely high.
So how should the Fed be reacting? Mr. Evans: “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.”
But the Fed’s hair is manifestly not on fire, nor do most politicians seem to see any urgency about the situation. These days, the best — or at any rate the alleged wise men and women who are supposed to be looking after the nation’s welfare — lack all conviction, while the worst, as represented by much of the G.O.P., are filled with a passionate intensity. So the unemployed are being abandoned.
O.K., about the Obama plan: It calls for about $200 billion in new spending — much of it on things we need in any case, like school repair, transportation networks, and avoiding teacher layoffs — and $240 billion in tax cuts. That may sound like a lot, but it actually isn’t. The lingering effects of the housing bust and the overhang of household debt from the bubble years are creating a roughly $1 trillion per year hole in the U.S. economy, and this plan — which wouldn’t deliver all its benefits in the first year — would fill only part of that hole. And it’s unclear, in particular, how effective the tax cuts would be at boosting spending.
Still, the plan would be a lot better than nothing, and some of its measures, which are specifically aimed at providing incentives for hiring, might produce relatively a large employment bang for the buck. As I said, it’s much bolder and better than I expected. President Obama’s hair may not be on fire, but it’s definitely smoking; clearly and gratifyingly, he does grasp how desperate the jobs situation is.
But his plan isn’t likely to become law, thanks to Republican opposition. And it’s worth noting just how much that opposition has hardened over time, even as the plight of the unemployed has worsened.
In early 2009, as the new Obama administration tried to come to grips with the crisis it inherited, you heard two main lines from critics on the right. First, they argued that we should rely on monetary policy rather than fiscal policy — that is, that the job of fighting unemployment should be left to the Fed. Second, they argued that fiscal actions should take the form of tax cuts rather than temporary spending.
Now, however, leading Republicans are against tax cuts — at least if they benefit working Americans rather than rich people and corporations.
And they’re against monetary policy, too. In Wednesday night’s Republican presidential debate, Mitt Romney declared that he would seek a replacement for Ben Bernanke, the Fed chairman, essentially because Mr. Bernanke has tried to do something (though not enough) about unemployment. And that makes Mr. Romney a moderate by G.O.P. standards, since Rick Perry, his main rival for the presidential nomination, has suggested that Mr. Bernanke should be treated “pretty ugly.”
So, at this point, leading Republicans are basically against anything that might help the unemployed. Yes, Mr. Romney has issued a glossy, well-produced “jobs plan,” but it might best be described as 59 bullet points with nothing there — and certainly nothing to justify his assertion, bordering on megalomania, that he would create no fewer than 11 million jobs in four years.
The good news in all this is that by going bigger and bolder than expected, Mr. Obama may finally have set the stage for a political debate about job creation. For, in the end, nothing will be done until the American people demand action.

Saturday 3 September 2011

Ethiopian Economics - News Views and Researches.: Macro Modeling

Ethiopian Economics - News Views and Researches.: Macro Modeling

Macro Modeling

By Paul Krugman,1999

 

THE WORLD'S SMALLEST MACROECONOMIC MODEL
I learned this model from Robert Hall back in 1975. It can seem silly and trivial; but it seemed to me then, and still seems to me now, to capture the essence of what is going on in "demand-side" macroeconomics, and to clarify points that both the general public and, I'm sorry to say, quite a few Ph.D. economists often seem to find confusing. It also maps pretty well into my favorite economic parable, the story of the baby-sitting coop ("Baby-sitting the economy") that I have put to good use a number of times.
There is only one good, produced at constant returns by the single factor of production, labor. Choose units so that one unit of labor produces one unit of the good; then the price level and wage rate must be the same, and can be referred to with a single symbol, P.
There is also only one asset, money. Agents start the current period with M dollars, and end with M' after spending on consumption and earning from the sale of their labor. They derive utility both from consumption and from the expected purchasing power of the money they hold at the end of the period. (The utility of money presumably reflects its usefulness in providing future consumption; but we sweep this implicit dynamic problem under the rug). The utility function is assumed to take a specific form:
U = (1-s) ln(C) + s ln (M'/Pe)
Where Pe is the expected price level. However, consumers are also assumed to have static expectations, so that Pe = P.
Finally, people are assumed to be endowed with L units of labor.
First, let us consider the full-employment version of the model. If labor is fully employed, then the budget constraint is
C + M'/P = L + M/P
But if the money supply is constant, M' = M; also, C = L. Given the utility function, consumers will spend a share 1-s of their initial wealth on goods, s on money. So we can represent equilibrium either by the condition that demand for goods equal supply,
L = (1-s)(L + M/P)
or by the condition that demand for money equal supply,
M/P = s(L + M/P).
Both ways of looking at it imply the price-level equation
P = [(1-s)/s)](M/L)
so the price level is proportional to the money supply.
But now let us introduce some rigidity of prices. Suppose that for some reason - never mind why - the price (wage) level is fixed above the level consistent with full employment, so that real balances M/P are too low. There are two ways of describing the problem this poses. You could say that at full employment the demand for real balances would exceed the supply:
M/P < s(L + M/P)
Or you could say that at full employment aggregate demand would fall short of output:
(1-s)(L + M/P) < L
These are just different ways of looking at the same thing.
What must happen, then, is that output is demand-constrained. But that in turn means that employment, and hence income, is also demand-constrained: the equation for consumption, which must equal output, is
C = (1-s)(C + M/P)
which has an immediately identifiable "multiplier" flavor.
The clear policy implication is that one should increase output by increasing the money supply; after all,
C = ((1-s)/s)(M/P)
Or, to put it differently, the problem is that at full employment the public would want to hold more real balances than there are available; and because P will not fall, M must be increased.
This is presumably the meaning of John Maynard Keynes' famous remark in The General Theory:
"Unemployment develops, that is to say, because people want the moon: men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot readily be choked off. There is no remedy but to persuade the public that green cheese is practically the same thing and to have a green cheese factory (i.e. central bank) under public control."
What is wrong with this model? Don't get me started ... but actually there are three main objections that macro economists are likely to raise:
1. What happened to the interest rate? For most purposes we will want at the minimum a theory of employment, interest, and money; that means a model with bonds as well as money and goods, which means IS-LM. (See my note "There's something about macro").
2. More fundamentally, the quasi-static approach here is at best a crude approximation to a dynamic model in which behavior results from plans that are based on expectations about the future.
3. Finally, the output effects of money come from the assumption of price rigidity. Where does that come from? (Overwhelming empirical evidence, that's where - but why?).
All these objections help to set the agenda for the last six decades of research.
But if you are one of those people to whom macroeconomics always sounds like witch craft, who is hung up on Say's Law, who cannot even comprehend how a shortfall of aggregate demand is possible - then the world's smallest macro model is a good place to start on the road to enlightenment.