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The Double Side of the Fed’s Balance Sheet Unwinding

Otaviano Canuto | Posted : April 19, 2018

In its March 2018 meeting, the Federal Reserve raised the target range for federal funds rate by a quarter point to 1.5-1.75 percent and Fed officials are now projecting a steeper path of hikes for the next two years. Recent inflation data would hint at the Fed staying firmly on track for another 25bp rate hike in June. As producer price inflation hit a seven-year high and a tightened labor market is exercising upward pressure on wage growth, there is no wonder expectations have slid toward Fed officials lifting rates for a total of four times this year.

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Development through gender equality

Otaviano Canuto | Posted : March 07, 2018

Brazilian conditional cash transfers are small amounts of money the government distributes directly to very poor households on condition that their children attend school and are vaccinated. The money goes to the women of the household, because research undertaken in the 1990s – and later confirmed in other countries – showed an increase in babies' height and weight when women have more control over household income. Greater control over household resources by women can strengthen an economy where poverty dominates, as spending patterns tend to be shaped in ways that benefit children. There is also strong evidence that improvements in women's education and health are associated with better outcomes for their children.

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New political economy of micro-stability

Otaviano Canuto | Posted : February 19, 2018

Household, community-, or national-level stability in income, consumption, or assets, and the supporting foundations thereof are a neglected area of analysis and concern among economists and policymakers. Household- and firm-level investment decisions are clearly made with regard to a variety of factors, including but not exclusively the macroeconomic environment that sets the framework for other decisions. Economists typically disregard such diversity of factors when they approach stability either only at aggregate levels or based on micro-foundations of hyper-rational agents and smooth/efficient market adjustments. 

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Can services replace manufacturing as an engine of development?

Otaviano Canuto | Posted : January 23, 2018

Manufacturing expansion has been special as a vehicle for job creation, productivity increases, and growth in non-advanced economies since the second half of the last century. First in Latin America, followed by Asia, and a renewal of production systems in Eastern Europe, rising manufacturing levels served as a channel to transfer labor from low-productivity occupation to activities using more modern technology coming from abroad.

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Latin American economies face political crossroads in 2018

Otaviano Canuto | Posted : January 10, 2018

The cruise speed with which Latin American economies are starting 2018 will be constrained by low investments and weak productivity growth in the recent past. Positive global economic prospects, the regional cyclical recovery, and policy initiatives to lift productivity are presenting Latin America’s leaders the opportunity to improve that trajectory. Nevertheless, political risks loom ahead.

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The Metamorphosis of Financial Globalization

Otaviano Canuto | Posted : September 15, 2017

After a strong rising tide starting in the 1990s, financial globalization seems to have reached a plateau since the global financial crisis. However, that apparent stability has taken place along a deep reshaping of cross-border financial flows, featuring de-banking and an increasing weight of non-banking financial cross-border transactions. Sources of potential instability and long-term funding challenges have morphed accordingly.     

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How Did Cuba Make It Online ?

Otaviano Canuto | Posted : August 28, 2017

Dual transitions are under way in Cuba. The island is slowly opening its economy, and a new crop of younger political leaders, potentially more open to democratic norms, waits in the wings. A third transition, the rise of digital access, is also in an early stage. But it is this third transition that arguably has the most momentum and could significantly accelerate the first two.

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Does Brazil’s Sector Structure Explain Its Productivity Anemia?

Otaviano Canuto | Posted : June 20, 2017

Brazil’s labor and total-factor productivity (TFP) have featured anemic increases in the last decades (Canuto, 2016). As we illustrate here, contrary to common view, sector structures of the Brazilian GDP and employment cannot be singled out as major determinants of productivity performance. Horizontal, cross-sector factors hampering productivity increases seem to carry more weight.

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