ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Role of Informality in Moderating the Impact of Adverse Macroeconomic Shocks

In the presence of informality, adverse demand shocks have a lower impact on aggregate output and adverse supply shocks have a lower impact on prices as well as output. Both would imply that countries without a substantial informal sector, largely more affluent nations, would be more exposed to higher prices following such shocks. This is consistent with contemporary evidence of stagflation in developed countries. Being the residual sector, the informal sector inevitably moves in the opposite direction to the formal sector during a bad shock episode, cushioning its aggregate effect. We then show that the argument goes through if the firms have to finance their working capital requirements by borrowing
from the market.

Inflation Theory Comes Full Circle

A public interchange among some leading macroeconomists suggests a change in the way inflation is perceived by the profession. It is increasingly being recognised that inflation can be the outcome of a conflict over income, reflected in the continuous attempt by the firms to raise prices and by the workers to raise wages in order to gain a larger share of it. At least some part of the inflation in India can be seen as a conflict over income shares and sketches a theory of inflation suited to its economy. Against this background, the effectiveness of inflation targeting is touched upon—the inflation-control strategy of the Reserve Bank of India—and the necessary steps to curb inflationary pressure in India are pointed out.

Monetary Policy and Stagflation

Monetary policies are traditionally viewed as having no direct effect on aggregate supply. This article argues that this view of neutrality of the supply side to monetary policies may change if we pay more attention to the role of money supply on the working capital requirements of firms.

Do Machine Learning Techniques Provide Better Macroeconomic Forecasts?

Machine learning techniques are now very common in many spheres, and there is a growing popularity of these approaches in macroeconomic forecasting as well. Are these techniques really useful in the prediction of macroeconomic outcomes? Are they superior in performance compared to their traditional counterparts? We carry out a meta-analysis of the existing literature in order to answer these questions. Our analysis suggests that the answers to most of these questions are nuanced and conditional on a number of factors identified in the study.

Classical Economics and Keynes

The author of Macroeconomics: An Introduction responds to the review of his book titled, “Competing Frameworks of Economic Thought” (EPW, 18 December 2021).

Simply Subbu

Futilitarianism by S Subramanian, London and New York: Routledge 2020; pp 78, 440. 

Present Values by S Subramanian, London and New York: Routledge 2020; pp 84, 440.

Competing Frameworks of Economic Thought

Macroeconomics: An Introduction by Alex M Thomas, Cambridge, New York, Melbourne, New Delhi and Singapore: Cambridge University Press, 2021; pp xx + 234price not indicated.

 

Falling behind the Curve Is Not an Option

India must jettison orthodox economics amidst the pandemic to protect employment and sustain a recovery.

 

Fifteenth Finance Commission Award for 2020–21

The first report of the Fifteenth Finance Commission has allayed many fears that arose after the notification of the terms of reference of the commission. The main report for the period 2021–22 to 2025–26 will have to factor in the devastating impact of COVID-19 on the economy and provide adequate fiscal space to the states for socio-economic response and recovery.

Dynamic Multiplier Effects of Foreign Remittances

India continues to be the largest recipient of remittances across the world, with a tremendous growth in private unrequited transfers from just ₹12 billion in 1990–91 to about ₹1,009 billion in 2015–16. Emphasising this component of remittances that India has witnessed during the post-liberalisation period, the article investigates the demand-side macroeconomic effects of the flow of private transfers on key variables such as consumption, investment, imports, and income in India during the post-reform period of 1996–2014.

A Post-Keynesian Approach to Understanding the Black Economy

Macroeconomics of the Black Economy by Saumen Chattopadhyay, Hyderabad: Orient Blackswan, 2018; pp xx + 276, ₹ 795.

 

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