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Creative tensions between Creative tensions between statistics and economics: statistics and economics: The data-ink ratioThe data-ink ratio
SERC – Plenary Session 5Danny QuahProfessor of Economics, LSE08 August 2009
Creative tensions… Creative tensions… outsideoutsideGlobal economic crisis: “Spread
the joy, feel the burn”◦Finance and macroeconomics◦Asset pricing and economic
fluctuations
Examples:1.Global imbalances2.BRICs in the evolving global
economic landscape3.Global growth and poverty
Creative tensions - statistics and economics D. Quah 2
1. Global imbalances1. Global imbalancesGlobal savings glut, Asian thriftFlood of cheap capital onto world
marketsEver-more innovative, extreme
financial engineering“Asymmetric obligations”
Causality?
Creative tensions - statistics and economics D. Quah 3
US trade deficit and a GDPUS trade deficit and a GDP
Creative tensions - statistics and economics D. Quah 4
0
200
400
600
800
1000
1200
1980 1985 1990 1995 2000 2005
Billions US$
US Trade Deficit
India GDP
US trade balanceUS trade balance
Creative tensions - statistics and economics D. Quah 5
-300
-250
-200
-150
-100
-50
0
1980q1 1985q1 1990q1 1995q1 2000q1 2005q1
US trade balance
US-China bilateral trade US-China bilateral trade balancebalance
Creative tensions - statistics and economics D. Quah 6
-80
-70
-60
-50
-40
-30
-20
-10
0
10
1980q1 1985q1 1990q1 1995q1 2000q1 2005q1
US bilateral trade balance
China
US bilateral trade balanceUS bilateral trade balance
Creative tensions - statistics and economics D. Quah 7
-80
-70
-60
-50
-40
-30
-20
-10
0
10
1980q1 1985q1 1990q1 1995q1 2000q1 2005q1
US bilateral trade balance
China
Oil exporters
EU
US bilateral trade balanceUS bilateral trade balance
Creative tensions - statistics and economics D. Quah 8
-80
-70
-60
-50
-40
-30
-20
-10
0
10
1980q1 1985q1 1990q1 1995q1 2000q1 2005q1
US bilateral trade balance
China
Oil exporters
EU
Oil+EU
2. BRICs2. BRICsGrowth, convergenceβ, σ convergence; unit roots,
cointegration; convergence clubs; dynamic distributions
It’s just “Brazil, Russia, India, China” (Goldman Sachs thought leadership)◦“The rise of the rest”◦“The Asian century/hemisphere”
Creative tensions - statistics and economics D. Quah 9
Shifts in the global Shifts in the global economy’s centre of gravity economy’s centre of gravity … in flat world… in flat world
Creative tensions - statistics and economics D. Quah 10
Shifts in the global Shifts in the global economy’s centre of gravity economy’s centre of gravity … in flat world… in flat world
Creative tensions - statistics and economics D. Quah 11
Shifts in the global Shifts in the global economy’s centre of gravity economy’s centre of gravity … in flat world… in flat world
Creative tensions - statistics and economics D. Quah 12
Shifts in the global Shifts in the global economy’s centre of gravity economy’s centre of gravity … in flat world… in flat world
Creative tensions - statistics and economics D. Quah 13
3. Global growth and 3. Global growth and inequalityinequalityTradeoff between growth and
inequality? (Kuznets curve, Okun leaky bucket)
Cross section? Time series? Panel?
Creative tensions - statistics and economics D. Quah 14
World growth and povertyWorld growth and poverty
Creative tensions - statistics and economics D. Quah 15
World growth and povertyWorld growth and poverty
Creative tensions - statistics and economics D. Quah 16
World growth and povertyWorld growth and poverty
Creative tensions - statistics and economics D. Quah 17
World growth and povertyWorld growth and poverty
Creative tensions - statistics and economics D. Quah 18
ConclusionsConclusionsDiscussion on methodology… but
also substantive examplesOur methods come up short on
the really big questions, those observable from outer space
Edward Tufte’s data/ink ratioWhat is our value/statistic ratio?
Creative tensions - statistics and economics D. Quah 19
Creative tensions between Creative tensions between statistics and economics: statistics and economics: The data-ink ratioThe data-ink ratio
SERC – Plenary Session 5Danny QuahProfessor of Economics, LSE08 August 2009
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