Årets ekonomipris till Acemoglu, Johnson är ett klokt val. Har själv tillämpat deras forskningsresultat i min egen forskning och föreläsningsverksamhet sedan en längre tid tillbaka, speciellt för att understryka institutionernas betydelse för utveckling, välfärd och tillväxt. Intressant är också att Acemoglu på sistone också hänvisat till risker som är förknippade med AI-utvecklingen.
Acemoglu, Johnson and Robinson really deserve the “Nobel Prize” in economics with their institutional research. I use their research results a lot, particularly when it comes to my research on emerging markets. Interestingly, Acemoglu also has published conclusions about neglected AI risks.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Emerging markets are usually more sensitive to weak current account balances than advanced countries. A deficit in the balance on current account urges for a currency inflow since it implies a debt for imports vis-a-vis other countries that has to be paid. This inflow can be done in the three following ways:
¤ by receiving currency reserves via foreign direct investment (which often does not work as an available or sufficient financial source),
¤ by borrowing money in foreign currency (mostly in U.S. dollar, USD), or
¤ by selling stocks, bonds, etc to foreign investors (if such financial products exist in the emerging country and foreign demand for these papers is there).
Statistics show that emerging markets borrow the lion share of their foreign credits in USD which may be challenging in times when the American dollar is strong on global currency markets. This is actually the case. Serving existing debt in USD uses to be even much more challenging.
By the way: During a meeting the other day with American financial analysts, I heard the view that the USD historically tended to be strong when investments in research and development (R&D) in the U.S. were high. This is explained by an increasing demand for American technology stocks and also foreign action for FDI in the U.S., thus leading to a high demand for the dollar and therefore to the strengthening of the American currency. I am not quite sure about the general validity of this suggested correlation. But it can be observed that such conditions can be found these days.
Back to emerging markets. What we can see today is an increasing willingness of certain emerging markets to avoid or decrease new borrowing in USD. However, this is not easy to achieve since USD markets function by far as the biggest global supplier of new loans, also to emerging markets.
The ongoing situation with the strong dollar is, of course, particularly difficult for emerging countries with high indebtedness in USD. Such countries may be found in all continents – countries that are or have been reporting growing pressure on their currencies in 2024 such as the Nigerian Naira, the Egyptian Pound, the Turkish Lira, the Indonesian rupee, the Argentine peso or the Brazilian real (watch for this the following IMF table: https://stats.bis.org/statx/srs/table/e2?m=USD). Of course, some of these and other weak currencies of emerging markets have also been impacted by other negative factors than the strong dollar, for example domestic political ones.
At the same time, there are also countries trying to reduce their exposure to the dollar (which also can be seen in the IMF table quoted above). Indonesia is such an example. However, such a trend will not be easy to achieve – but Thailand actually managed it in the past few decades. Perhaps another option may gain momentum as it is currently the case in South East Asia, i.e. trying to expand borrowing within the region at the expense of the USD.
Conclusion: Analysts of emerging markets should watch the further development of the USD and its impact on indepted emerging markets.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University Editorial board
The International Women’s Day (IWD) on March 8 has become a global phenomenon – widely acknowledged and celebrated. Theoretically, there is a broad understanding in most countries regarding the importance of female equality both politically, institutionally, economically, socially and psychologically. Practically, much more could be done for female equality – and should be done! Both in advanced and emerging countries.
Science has a lot to tell
In my view, science can give different explanations for the benefits of improving female equality. The following five conclusions from scientific research could be mentioned in the first place – most of them having an impact on economic growth and well-being (which is not the same):
¤ The impact of improved institutions on economic growth. Research has shown for quite a number of years that improved institutions mean a lot to the quality and sustainability of economic growth. Nobel Prize winners such as R. Coase, D. North, E. Ostrom and O. Williamson are particularly famous in this respect. More lately, D. Acemoglu / J.Robinson, D. Rodrik and T. Persson have done extended work on the importance of institutions. Looking more closely on institutional research reveals clearly that better institutional conditions also mean improved conditions for economic growth – but also that extended female participation in these processes logically works as a driver of such desirable economic developments. Examples for progress may be better institutional conditions for female education, health, wages, and child care.
¤ The impact of female human capital formation on economic growth. Research has shown for quite some time (R. Lucas, R. Barro, P. Romer,G. Mankiw, etc.) that improvements of human capital formation (education) also outside the pure institutional sphere can contribute substantially to better economic growth. Consequently, when further focus on female capital formation happens, we have a widened source of economic growth.
A major contribution to a future solution of the enormous burden of labor force shortage can most certainly emerge from an increasing female labor participation, both in volume and in quality terms. Such a development can also contribute to better international competitiveness.
¤ The impact of psychological satisfaction on productivity. Psychology often plays a neglected role in economic analysis, even, for example, in productivity studies for scientific work (J. Astegiano). Particularly important is the potential role of improved female labor productivity and what it means to economic growth (OECD, see https://www.oecd.org/chile/economic-empowerment-women-productive-inclusive-societies.htm).
¤ The impact of better economic conditions on the society. Since an extended and broadened female labor market participation leads to better medium- and long-term GDP growth, chances of a stable society with good ethics should increase as well (B. Friedman).
Conclusion – science shows the importance of women in the economy Putting together the brief reflections above should demonstrate that there is sufficient scientific analysis that underlines the positive impact on economic developments by increasing and improving gender well-being and improved female participation on labor markets. These processes should be considered as win-win developments – on both macroeconomic and microeconomic levels. This conclusion can be applied to both more advanced and emerging countries.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University Editorial board
