Daily Archives: Mar 5, 2015

By Vitalii Kravchuk, Institute for Economic Research and Policy Consulting

Mat O’Brien’s recent contribution to the Washington Post’s Wonkblog on hyperinflation in Ukraine has had a huge impact. Drawing on work by Johns Hopkins professor Steve Hanke, O’Brien argues that, although the official rate of inflation from the Ukrainian State Committee on Statistics (Ukrstat) is 28.5 per cent, in reality it is more like 272 per cent.

Hanke is famous for his research on Zimbabwean hyperinflation, where the government was unable to calculate inflation and an alternative method had to be used. The main argument of Hanke’s article and of O’Brien’s blog post is that when a country’s currency collapses, it pushes up the prices of imports, which spill over to other prices. In this situation, Hanke argues, the true inflation rate can be calculated using “a rather straightforward application of a standard, time-tested economic theory” in the form of purchasing power parity, based on the free-market exchange rate (often the black market rate). This formula has been bluntly used in the case of Ukraine. Read more

** FT News **

* Hanergy’s Li tops Forbes’ China rich list | Stock jump of 75% in 3 days swells wealth of solar film group’s founder

* China lowers growth target to ‘around 7%’ | Goal signals acceptance country’s economy has entered ‘new normal’ Read more

By Wolfgang Fengler of the World Bank

For a good part of my life I have been an expat, working and living with my family in developing countries. It’s easier than most people imagine. If you can afford it, you get good schooling and decent healthcare and Jakarta’s shopping malls, for example, are more stylish than those of Berlin or Vienna. My first posting was in Indonesia, where we stayed five years before moving to Kenya. Both are emerging economies, now considered “middle-income”; decade-long investments in education have borne fruit and created a sizeable and vibrant talent pool among the young, and the mobile revolution has progressed dramatically so that almost everyone now owns a cell phone. Not all is rosy though: poverty remains widespread and visible – especially if you venture outside of expat circles- and crime can also be a big concern.

The biggest difference, however, between the developed and developing worlds is the likelihood of being confronted with death. Read more

There is a natural tendency, when looking at economic development, to regard emerging markets as simply developed economies that got a late start. True, their patterns of sectoral change are broadly the same, moving out of agriculture into manufacturing and eventually into services. And just like the advanced economies, many emerging markets are now heading into a demographic headwind as their populations age and the dependency ratio of non-working to working people rises.

But there are some key differences in the way that emerging markets will have to cope with the demographic challenge. Both the way that their people have grown better-off and, now, the way that they are growing old are distinct from the paths that the advanced economies trod before them. Read more

** FT News **

* China lowers growth target to ‘around 7%’ | New goal signals acceptance country’s economy has entered ‘new normal’

* Asia downbeat after Wall Street retreat | Chinese stocks falter after policymakers cut GDP growth target to 7% Read more

It is news to no-one that Ukraine is suffering fall-out from Russia. But in a study to be published on Thursday that isolates the impact only of trade, remittances and investment flows, analysts at Fitch Ratings say the sharp slowdown in Russia’s economy is a “significant shock” for neighbouring economies, including Ukraine, Armenia, Georgia, Azerbaijan and Kazakhstan.

Source: Fitch

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