Thursday, 03 September 2009

What can we learn from Africa?

The basic idea behind my research is that it is possible to learn something about economics looking at the way African economies operate. Consider for example this paper with Maria Demertzis on Inflation Targeting : in the paper you will not find a single reference to Africa or South Africa. Nevertheless observing the implementation of inflation targeting in South Africa has been an important source of inspiration for the paper. The main issue is that being transparent and inform the public are two different things: being transparent does not mean that you will be understood, or that information you convey is what the public will understand. Policy maker cannot control interpretation. Economic press is important, credibility and trust between the policymaker and the public is as important, spin doctors are important. In a situation where this relationship is imperfect, semplicity and verifiability of communication is more important than completeness. That's partly why inflation targeting is so popular in emerging countries. It provides a simple e immediatly verifiable information. It is also why it is not very popular the other modern fancy, the pubblication of the interest rate path: although in principle more complete information, in practice it might create more uncertainty in interpretation (expecially when it is constantly changed, as it should) and reduce, not increase, transparency of policy. That's a way in which being an accidental african economist, or an accidental italian economist in Africa, helps, or just make work interesting. This blog want to be all about this particular point of view that living here gives.

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