Macroeconomics

Italy tries to skirt a populist revolt: With Paolo Gentiloni named as the new Prime Minister and changes in the country’s electoral law (a one stage election with bonus seats being available only to a party that receives more than 40% of votes) it may seem that Italy is safeguarding itself from the rise of a populist government. However, Italy may not be wholly insulated. The possibility of a coalition government formed by the 5 star government cannot be ruled out – owing to a growing nationalist sentiment across the globe. While a break out of an Italian banking crisis now seems to have been evaded, questions around how the government will deploy its $ 21.4 billion fund to support the banking system, whether a state rescue of Monte dei Paschi is consistent with EU rules and whether Brussels will give its approval on terms of compensation offered to investors who may have been inappropriately sold junior bonds still remain. Two smaller banks need another capital injection after being rescued last year by Atlante, a private sector industry-funded bank rescue vehicle. Whether these funds will be allocated by Atlante or whether the banks will be eligible for a state bailout is also unclear.

While these systemic risks need to be addressed urgently, there is a bigger structural risk that Italy faces – a high public debt burden. Italy has faced challenges of operating in an open, global economy with its SMEs being heavily dependent on bank lending and too resistant to outside capital that critically impacts the boost to growth and productivity in Italy. An inefficient judicial system, inflexible labour laws and pervasive corruption are telling indicators of the need for far reaching reforms in Italy. Continue reading.

German pride shifting to frustration in role as motor of Europe: A jump in inflation to 1.7% in December, has made German economists and monetary officials wary of economic challenges facing the country ahead. While German monetary officials are urging the ECB to do away with the monetary stimulus, officials at ECB believe that German inflation is an indicator of faster German growth and that core inflation of 1% is still quite under the tolerance threshold. They further challenged a debate of a spiralling inflation by pointing out that German companies are only partially passing on higher costs to clients and that Germans haven’t noticed a significant rise in the price level. Wage growth is also subdued and does not indicate an upward pressure to core inflation. More here.

Euro zone bailout fund – Greek public debt is manageable: The euro zone bail out fund has declared Greece’s debt crisis to be manageable although IMF has estimated the Greek debt burden to reach 175% of GDP by 2020, 164% by 2022 and thereafter explode to 275% of GDP by 2060. However, a spokesman from the Eurpoean Stability Mechanism has assured that the euro zone has promised to offer Greece additional debt relief subject to it delivering on all its reform promises. However, Germany – facing elections – is strongly opposing any additional relief until 2018 when Athens finally delivers on its promises. Euro zone governments are also hesitant on providing additional support to Greece. Read more.

Facing unemployment, austerity and scandal, Brazil struggles to keep it togetherWith Brazil struggling to fight a recession owing to a slowdown in China, falling commodity prices and a fiscal consolidation programme by Dilma Rousseff, each passing day seems to be a challenge for the country. A country already having lost faith in its political system due to a widely criticised and under investigation political scandal, the new government under Temer seems to be taking some harsh and controversial steps – freezing of the fiscal budget for the next two decades in real terms at the 2016 level, adopting of certain controversial pension and labour reforms – to deal with its fiscal deficit. The result is a general discontent in Brazilian society that shows signs of a political turmoil in the near future. What is more unnerving is the growing support for Congressman Jair Bolsonaro who is seen openly associating Brazil’s ‘good old days’ to its military dictatorship.

Compiled by Swara Dharmaraj

Data Analytics

 

Data analytics firm Manthan has launched an artificial intelligence-powered conversational analytics application, as its new offering within the range of analytics capabilities.The product that can answer complex business queries in natural language using company’s data available on Manthan’s analytics suite cost the Bengaluru-based company over $7.5 million in R&D cost.

It allows a voice assistant like Amazon’s Alexa or Apple’s Siri to be one’s most-trusted employee if they are a large business owner and use Manthan’s new capability Maya. Moving beyond personal assistance tasks like sending emails or giving weather updates, voice-based assistants – integrated with Maya’s information system – can now answer business queries to a CXO looking for last month’s profit report or wanting to know why the company’s sales was down last weekend. More about Manthan here.

This editorial charts out the growth forecasts for the data analytics sector, while mentioning some applications that are slated to see a spike such as Coca Cola’s Freestyle dispensers which allow users to specify mixtures of flavors from the brand for a custom drink. The company captures information on what drinks are dispensed and at what time of day, among other data elements. This data is used to fine-tune stocking and inventory even for non-Freestyle vending machines.

A TechCrunch article details the vagaries of big data. It claims that companies can only harness their true potential through applications of predictive algorithms since their beauty lies in the fact that they don’t need to understand the cause and effect behind statistical relationships in order to work incredibly well in practice. “For an enterprise to glean the benefits of prediction, it must first give up trying to deduce why things are a certain way, and start trusting the lines of code which tell us that they are”, it says.

Big data stands to transform economic measurement in substantial ways. The volume and precision of data available allows economists to revisit the foundational assumptions underpinning common indexes. This column presents a new empirical methodology that leverages big data to translate nominal numbers into real output or welfare. ‘The unified approach’ nests major price indexes and addresses implicit biases in these measures. An examination with barcode data suggests that standard methods of measuring welfare overstate cost of living increases by ignoring new products and demand shifts.

Compiled by Reshu Natani

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