Friday, June 6th, 2008
Responding to Today’s Inflationary Threat
Asia Pacific Policy Makers Hold In-depth Discussion in New WB GDLN AP Seminar
As inflation becomes an increasingly serious concern across Asia, economic managers are grappling with urgent questions on how best to formulate a response.
Which management tools can be deployed to address today’s inflation?
What economic interventions are required to mitigate adverse effects on lower income groups?
To meet this need for knowledge, the Global Development Learning Network in the Asia Pacific Region (GDLN AP) launched a distance learning seminar series on Economic Management in collaboration with the World Bank. The first session, “Today’s Inflation: Global Context and Local Solutions” targeting economic decision makers in the Asia Pacific region, was held on June 5 and 6, 2008 with a total of 15 sites in 11 countries connecting over 2 days.
Meeting Knowledge Needs
The session was notable for its timeliness: conscious of the demand within the region for information sharing to combat inflation, GDLN AP coordinators approached the Bank’s Poverty Reduction and Economic Management Sector Unit (EASPR), which designated.Deepak Bhattasali (Lead Economist) to propel the program forward, applying his deep understanding of the issues confronting the region. Bhattasali participated in the seminar, but also enlisted world-class experts from the World bank, IMF and Central Bank of Chile for a comprehensive, highly relevant discussion.
The response was overwhelming. More than 700 participants including senior government officials, representatives from the donor community, financial institutions, academia as well as the private sector took part in the 3-hour session, with many others observing over the real-time webcast. Issues ranging from fiscal and monetary policy, currency appreciation, wages, India and China, as well as measures to protect the vulnerable were laid on the table in the Q & A session, with ample time for an in-depth discussion with speakers.
Grappling with a ‘Column of Smoke’
World Bank Senior Communications Officer Stanley Grant opened the seminar quoting former Australian Prime Minister Paul Keating, who once compared battling inflation to tackling a column of smoke; once you get hold of it, it simply changes shape and moves.
“This session is for you”, said Grant, moderating the session from the Tokyo Development Learning Center. “We hope you’re able to walk away at the end of it, with a greater understanding of the forces that are driving inflationary pressures now throughout the world, and also some of the policy responses that will be necessary as we grapple with this column of smoke today”.
Setting the stage for discussions, World Bank Development Prospects Group Manager Hans Timmer took the floor from Washington DC and identified the “inflationary threat” as the most important and topical issue in the global economy today, more dangerous than the slowdown in the US economy with high oil prices posing a major threat to developing countries. Timmer gave a historical perspective, touching on the current inflationary threat as well as expectations for the future and explained why it was important to act quickly to prevent a situation in which higher inflation rates prevail as in the 1980’s and 90’s.
Focus on Policy Responses
“So what can countries do?” asked International Monetary Fund Senior Economist Romuald Semblat, focusing on policy responses after reviewing the characteristics of inflation, attributing it to the recent increase in commodity prices as demand for energy and commodities remain robust. “Advanced, emerging and developing economies can contribute in ensuring that demand and supply responds”.
In the near-term, Semblat emphasized the critical role of macroeconomic policies. “Monetary policies are the main instrument to deal with rising inflationary pressures and dampen inflationary expectations”. He added that in certain cases, greater exchange rate flexibility and currency appreciation could provide support to monetary policy.
The Latin American Experience
To learn from other regions, Igal Magendzo, Adviser to the Central Bank of Chile, gave a presentation on the Latin American experience. “You cannot turn bad news into good news. Countries must face the shock” he said on managing inflationary expectations. “It is better to target inflation in tranquil times, but if you have not, you must act aggressively, tightening fiscal and monetary policy to show that you will not let inflation get out of control”.
World Bank East Asia Pacific Lead Economist Deepak Bhattasali summarized the discussions, stressing the importance of a coordinated policy response at the domestic level. “Subsidies to compensate vulnerable groups for the transitional effects of inflation must be targeted….making sure that they do not undermine longer term fiscal stability, inflationary expectations and economic management”, he emphasized. “This is not easy, as there are consequences in domestic economies that are quite serious, but it is important to keep in mind that short term solutions may not be best in the long term”.
*The following GDLN Centers participated in this event.
June 5th
Australian National University (Canberra); Asian Institute of Management – WB Development Resource Center (Manila); Chongqing Distance Learning Center,
Shanghai National Accounting Institute, Shanxxi Distance Learning Center;
Vietnam Development Information Center (Hanoi), Ho Chi Minh City Development Learning Center; Tokyo Development Learning Center; World Bank GDLN Studio (Washington DC)
June 6th
Udayana University (Denpasar), University of Indonesia (Jakarta); Dili Distance Learning Center; Mongolia Development Learning Center (Ulaanbaatar);
Papua New Guinea Development Cooperation Center (Port Moresby) ; Chulalongkorn University – Center of Academic Resources (Bangkok) ; Tokyo Development Learning Center ; World Bank GDLN Studio (Washington DC)
For more information about the program, see “Today’s Inflation: Global Context and Local Solutions” program page.
