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Machine Learning for Economists: An Introduction
Full text linkMachine Learning (henceforth ML) refers to the set of
algorithms and computational methods which enable computers to learn
patterns from training data without being explicitly programmed to do
so. ML uses training data to learn patterns by estimating a mathematical
model and making predictions in out of sample based on new or unseen
input data. ML has the tremendous capacity to discover complex, flexible
and crucially generalisable structure in training data. Conceptually
speaking, ML can be thought of as a set of complex function
approximation techniques which help us learn the unknown and potentially
highly nonlinear mapping between the data and prediction outcomes,
outperforming traditional techniques. 1 In this exposition, my aim is to
provide a basic and non-technical overview of 2 machine learning and its
applications for economists including development economists. For more
technical and complete treatments, you may consult Alpaydin (2020) and
James, et al. (2013). You may also wish to refer to my four lecture
series on machine learning on YouTube https://
www.youtube.com/watch?v=E9dLEAZW3L4 and my GitHub page for detailed and
more technical lecture slides
https://github.com/sonanmemon/Introductionto-ML-For-Economists
Policy-making by Understanding the Generational Economy
Full text linkThe current population age structure of Pakistan provides the
country an opportunity to reap the demographic dividend but there is no
concrete evidence on its magnitude. The National Transfer Accounts (NTA)
can fill this gap by quantifying the wealth flows taking place in a
population through an improved understanding of the generational
economy.2 The NTA provides estimates of people’s income and their
consumption at every age. What is more important, however, is that the
NTA helps to understand how do people, especially the young and the old
who consume more than they produce, support themselves. It sheds light
on whether it is through the private or public sources that the existing
deficit—the difference between income and consumption—if any is filled.
The estimation of the NTA for Pakistan, therefore, would strengthen our
understanding of the linkages between population dynamics and
development. The NTA for Pakistan provides the opportunity to look at
the economic indicators through the perspective of age. It can help
design public policies ranging from healthcare, education, gender
equality, reproductive health and social protection to economic, social
and political implications of population ageing and generational
equity
Remittances and Healthcare Expenditures: Evidence from Pakistan
No full textThis study, examines the effect of remittances on healthcare
expenditure in Pakistan by utilising the Pakistan Social and Living
standards Measurement (PSLM) survey. The total healthcare expenditure is
classified into two categories, i.e. expenditure on medicines and
expenditure on clinical services. The study analyses these categories in
case of both rural and urban areas of the country. Such data is
generally characterised by selection bias; therefore, we employ
Propensity Score Matching (PSM) instead of the commonly used econometric
techniques. Findings of the study indicate that remittances enhance
spending on both the clinical services and medicines. This result is
robust across the urban and rural areas of Pakistan. The comparison
between the clinical services and medicines shows that the impact is
higher on clinical services as compared to the impact on medicines. This
suggests that remittances help to improve the preventive nature of
health outcomes in Pakistan. JEL Classification: D10; I21; O15 Keywords:
Remittances, Healthcare Expenditure, Medical Expenditure, Clinical
Expenditure, Propensity Score Matchin
Mechanism of Volatility Spillover Between Stock, Currency, and Commodity Markets of Pakistan
Full text linkThis research aims to examine the mechanism of volatility
transmission between stock, currency, and commodity markets of Pakistan.
For this purpose, daily data covering the period August 4, 1997 to
August 31, 2016 is analysed. Empirical investigation is conducted by
using EGARCH model. The strength of the study is analysis of the
commodity market together with stock and currency markets of Pakistan.
Results of the EGARCH model suggests that bidirectional volatility
spillover exists between all the bivariate cases of the three markets
except in the case of volatility spillover from the currency market to
the commodity market. JEL Classifications: Q43, G10, C13, F31, F36
Keywords: Stock, Currency and Commodity Markets, Volatility Spillover,
EGARCH Mode
Exchange Rate, Output and Macroeconomic Policy: A Structuralist Approach
Full text linkCurrent account imbalance and concomitant macroeconomic
instability in emerging market economies have been major issues of
recent macroeconomic modelling. This paper addresses these issues by
asking how international interdependence has impinged on key
macroeconomic variables and policy options. There are three assets:
domestic bonds, foreign bonds and money. Domestic bonds and foreign
bonds are imperfect substitutes due to presence of risk premium. The
striking features of the model include endogenous risk premium and
balance sheet effect on investment demand due to exchange rate
depreciation. We use a simple open economy structuralist macro model
that explains the interaction between current account adjustment and
exchange rate dynamics. The balance sheet effect and the risk premium
together explain how fiscal expansion or monetary expansion may have
both short run and long run contractionary effect on the output level
with worsening current account balance in the short run. JEL
Classifications: F41, F32, E52, E62 Keywords: Current Account, Exchange
Rate, Risk Premium, Balance Sheet Effec
Acemoglu, Johnson and Robinson’s Notion of Exogenous Imposition of Colonial Institutions onto Colonies— A Critique in the Light of Historical Evidence
Full text linkThis paper provides critique of Acemoglu, Johnson, and
Robinson’s (2001, 2002) notion that rests on the hypothesis of exogenous
imposition of colonial institutions onto their respective colonies based
on conditions for their settlement. Our research brings forth the
logical loopholes in Acemoglu, Johnson, and Robinson (AJR) by
constructing arguments against the over-simplified assumption of
exogenous imposition of colonial institutions in explaining the
differences in development today. To prove our point, we build on two
main arguments from history to show that some degree of endogeneity did
indeed exist in colonial institutions that were imposed on the colonies.
Our first argument revolves around the theme that how Atlantic slave
trade evolved with colonialism and had meaningful technological and
institutional consequences in the colonial metropolitan state. And these
evolving conditions in coloniser’s mother country not only shaped
incentives for mercantilist colonialism at one level and at the other
became the base of institutional setup of progressive forms. In our
second part of the argument, we demonstrate the role of native agency
either in the form of local’s formal or informal pre-colonial
institutions or in the form of their hold within the colonies, were all
important in shaping what path colonisers eventually took for the
institutional transfer. Based on these historical evidences, it is
concluded that colonial institutions cannot be assumed as an exogenous
transfer based on the notion of settlement as per AJR, rather it can be
best described as an evolving fit between colonial and pre-colonial
institutions. Keywords: Acemoglu, Johnson, and Robinson’s (2001, 2002),
Reversal of Fortune, Institutions, Colonialism, Long-term Development
Difference
Exchange Rate Policy Must Seek Undervaluation!
Full text linkThis note provides overwhelming evidence that currency
undervaluation is beneficial for economic growth. A macro-econometric
model shows that the SBP continually used our scarce foreign exchange
reserves to keep the exchange rate arbitrarily overvalued throughout
history. This is one important factor that has contributed to our
repeated BOP crises and IMF programmes. We hope that this note will
inform the exchange rate policy to keep an undervalued target exchange
rate and not use reserves to fight overvaluation (see also Jalil,
2020)
Monetary Paradoxes of Baby-Sitting Cooperatives
Full text linkMany authors have described and modelled Keynesian effects in
a Baby-sitting Cooperative (BSC), which has the underlying structure of
a single good barter economy. We construct a simple model of the BSC
economy to explore this issue, and find very surprising results.
Outcomes depend on agents beliefs about the decision making process of
others, as in the Keynesian beauty contest. For some structures of
beliefs, money is neutral, while for others, money can have short and
long run effects. The value of money can be high, low, or zero,
depending purely upon expectational effects. Also, despite the fact that
this is a single good economy, partial equilibrium supply and demand
analysis do not work as expected. Some equilibria have excess supply,
others have excess demand, and none have a match between supply and
demand. Furthermore, flexible prices cannot fix this problem. An
additional paradoxical property is that excessive trading can take
place. Even though all trades are done with mutual consent, some of them
decrease welfare, and banning certain types of trade can lead to Pareto
improvements. Thus the superficially simple single good barter economy
of BSC displays some subtle, complex and counter-intuitive properties.
JEL Classifications: D71, E52 Keywords: Monetary Policy, Keynesian
Economics, Sunspot Equilibria, Neutrality of Mone
Catastrophic Health Expenditure and Poverty in Pakistan
No full textThe current study has estimated the incidences, intensity and
impacts of catastrophic health expenditures for Pakistan. For the
analysis, two thresholds are used to define catastrophic health payments
(1) if health expenditures are 10 percent or above of household
consumption, and (2) if they are 40 percent or above of household
non-food consumption expenditures. The Pakistan Panel Household Survey
(PPHS) 2010/11 is used for the analysis. The findings reveal that a
significant proportion of the population in Pakistan has been facing
catastrophic health payment issues. The presence of children, the
elderly and sick/disabled persons in the home raises the risks of
catastrophic health payments. The availability of improved drinking
water sources and toilet facilities reduces the risk of catastrophic
health payments. Households with female heads incur more catastrophic
payments as compared to households headed by males. Across the
provinces, Khyber Pakhtunkhwa and Balochistan have faced a higher
incidence of catastrophic payments. Catastrophic health payments have an
impoverishing impact on headcount poverty, measured under various
methods of propensity score matching. JEL Classifications: I13, I14, I32
Keywords: Out-of-pocket Payments, Health, Consumption, Poverty, Health
Polic
Amita Baviskar. Uncivil City: Ecology, Equity and the Commons in Delhi. 2020, Sage and Yodapress.
No full textAmita Baviskar’s latest book titled Uncivil City: Ecology,
Equity and the Commons in Delhi provides an in-depth analysis of
exclusion of the Commons from the socio-economic and political spaces of
inarguably India’s most powerful city; Delhi. The book is divided into
three sections with eights chapters encompassing book’s themes. It
starts with setting the context by explaining the reasons for titling
the book as ‘Uncivil City’. Conceptualising Delhi as Uncivil expounds
the City’s changing spatial dynamics which the author has detailed by
analysing City’s social history by doing socio-historical analysis. She
also reminisces her early-life experiences with the City; what the City
was for the Commons in the past; how infrastructural development has
excluded the Commons; what the City’s formal politics and politicised
environment is doing to the Commons and what does future entail for
them