Monday, October 3, 2016

Macroeconomic Balance as the Basic Concept of Modern Economics

 There are a lot of questions that we have in mind on why other countries experienced rapid growth in incomes over the past decades, while others are lagging behind and experienced severe poverty. There are other countries that have very high prices while others maintain stable prices. Why do we experience recessions and depressions—recurrent periods of falling incomes and rising unemployment—and how can government policy reduce the frequency and severity of these episodes? Macroeconomics, the study of the economy as a whole, attempts to answer these and many related questions[1].
Macroeconomics is an important branch in economics. Apart from studying the economy as a whole, it also analyzes how economic agents as a whole react to variations in the economic environment. It also studies how their action feedback on the economy. It focuses on the determinants of total national income, deals with aggregates, such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices. In a nutshell, macroeconomics deals with the key economic issues and problems of the day. In order to understand these issues, we have to reduce the complicated details of the economy to manageable essentials. Those essentials lie in the interactions among the goods, labor, and assets markets of the economy and in the interactions among national economies that trade with each other.
            Balance in the macro economy is monitored through the three major concerns in the aggregate economy; inflation, output growth and unemployment. Inflation talks about the increase in the overall price level of goods and services in the economy. Inflation is a major concern in macroeconomic balance, since its erratic movement (rapid increase and decrease) affects consumption, savings, investment and aggregate demand.  Output growth on the other hand, pertains to the total value of final goods and services produced in the domestic economy (Gross Domestic Product) and by the citizens of the country (Gross National Product). The analysis of output growth can be the expansion of output in the economy in the long-run (Economic Growth) or the cycle of short-term ups and downs in the economy (Business Cycle). Meanwhile, unemployment rate pertains to the large portion (percentage) of the labor force that is employed.
Macroeconomic balance as the basic concept of modern economics is the major basis for decision making of government policy makers who would like to have low inflation, high output growth and low unemployment rate. Government has a crucial and important role because they enact policies that used to influence the macro economy. They imposed government policies concerning taxes and expenditures (Fiscal Policy). Government can cut taxes and/or raise spending to get out of a slump (Expansionary Fiscal Policy) or they can raise taxes and/or decrease spending to bring the economy out of inflation. Central Banks can control the quantity of money in circulation (Monetary Policy). Meanwhile, contractionary monetary refers to the decrease in the quantity of money in circulation, with corresponding increases in interest rates, for the expressed purpose of putting the brakes on an overheated business cycle expansion and to address the problem of inflation. Finally, supply side policies are government policies that focus on stimulating aggregate supply instead of aggregate demand.  Therefore, in order to attain the macroeconomic balance, government should lead the direction of growth in the economy. But this is not possible without the households (people who consume), firms (who invest) and the foreign sector (partners in foreign trade). The four sectors are very important in the circular flow of payments and income in the modern economy.

Case, Karl. et al.  Principles of Economics . Prentice Hall, 2011. 
Mankiw, Gregory.  Macroeconomics. Worth Publishers, 2002. 
Samuelson, Paul and William Nordhaus.  Economics.  McGraw-Hill Education, 2009.

[1] N. Gregory Mankiw, Macroeconomics (Worth Publishers,2002), 2.

Sunday, September 11, 2016

The Jennifer Erazo Hinlo Life Story

On the dawn of February 15, 1986, the day of the Presidential Snap Election between Ferdinand Marcos and Corazon Aquino, a baby girl was born in a small farm house, wrapped in flour sack, in the middle of the rice field in Lucena, Prosperidad, Agusan del Sur. She was the eldest daughter of Rustico Erazo, a family driver, and Bellaflor Bsanal, a plain housewife. She was born from a poor family and her parents only finished elementary. Her parents wanted her to finish school and break the cycle of poverty that they are experiencing. As a kid, she helped her parents in tending their sari-sari store and she also helped them in selling bangus in the public market. She has a little brother named, Jon Jellow, born on September 25, 1997 (when she was 11 years old). Even though she has experienced hardships in life, financially and emotionally, it did not matter to her, because she is a fighter that never quits and a positive thinker that always move forward.  This girl grew up to be a happy person, as what her parents like her to be.
Even with meager resources, her parents worked hard for her to study in a private school during her elementary years (1993-1999) at the University of Mindanao. In high school, she was lucky to pass the exam at the Laboratory School of the University of Southeastern Philippines (USeP), at least her parents were not paying the monthly tuition anymore. During the elementary and high school years she was a consistent honor student (First Honorable Mention in elementary and With Honors in high school) and a student leader (Class Mayor in elementary and Vice Governor in high school). Even in her younger years of leading a group, she was very sociable and approachable to her classmates.
She has continued her student leadership service in college (USeP, 2003-2007). She took a degree in BS Economics at the School of Applied Economics (SAEc). She was the Class Mayor in her freshman year, Vice Governor in her sophomore year, Governor in her junior year and Vice President for External Affairs in the Obrero Campus Student Council (OCSC).  Being a student leader, it was very hard for her to balance work and study, but she was able to finish the degree on time.

Sunday, December 27, 2015

Extension service with a heart

Serving the community is part of my personal advocacy and doing it as a part of my job is an endearing and enjoyable experience. When I started teaching full-time at the University of Southeastern Philippines (USeP) in June 2012, I was still adjusting from the corporate setting to the academic one (I was employed for more than 5 years in Davao Chamber and Chemonics International MABS-USAID Project). The dean of the School of Applied entrusted me the Extension Coordinator designation in August 2012. At first, I did not know how to handle it and I am not that confident that I could handle the job, given a lot activities that I will implement. There were a lot of challenges that come my way in serving as an Extension Coordinator. Its not easy to handle the pressure from my direct supervisors, the school and the university targets and accomplishments. Aside from that, I have a lot of sacrifices for my family, days intended for bonding, going to church are exchanged with travels and extension obligations. But I was able to compensate those lapses, because in every stormy weather, there is a rainbow in the end. After three years of serving as Extension Coordinator, the University of Southeastern Philippines (USeP) has recognized me as the "OUTSTANDING EXTENSION COORDINATOR FOR 2015" last December 18, 2015 at the USeP Gym. All of the tears, sweat and sacrifices financially and emotionally have paid off. This award will never be possible without the support of my students, faculty, admin support and barangay beneficiaries. Truly, the most priceless reward is when you see the community (that you have served ) are empowered to create a bigger "CHANGE" in the society and in the nation as a whole.

Monday, July 6, 2015

Philippine Economy grew by 5.2 percent in the 1st quarter of 2015

The domestic economy grew by 5.2 percent in the first quarter of 2015 from 5.6 percent the previous year. The main driver of GDP growth for the quarter was the Services Sector which grew by 5.6 percent from 6.8 percent. Industry, on the other hand, accelerated to 5.5 percent from 5.4 percent posted last year.  Similarly, the Agriculture sector accelerated to 1.6 percent from 0.6 percent.

Among the three major economic sectors, Services gave the highest contribution to the GDP growth in the first quarter of 2015 contributing 3.1 percentage points followed by Industry 1.9 percentage points, and the whole Agriculture sector 0.2 percentage point.

Net Primary Income from the Rest of the World grew by 2.7 percent from 11.1 percent in the first quarter of 2014.  This, together with the GDP performance, resulted to GNI’s growth of 4.7 percent from 6.6 percent in the first quarter of 2014.

With the country’s projected population reaching 100.9 million in the first quarter of 2015, per capita GDP grew by 3.4 percent from 3.8 percent while per capita GNI and per capita Household Final Consumption Expenditure (HFCE) grew by 3.0 percent and 3.6 percent from 4.8 percent and 4.3 percent, respectively.

Click here for the itemized presentation of GDP by industrial origin and expenditure.

Sunday, April 12, 2015

Rice Supply Response in the Philippines

The Philippines is basically an agricultural economy and its principal source of income comes from agriculture. An improvement in agriculture greatly affects the welfare of the people and the national economy (Fajardo et al., 1992).  Therefore, the use of economic principles in agriculture is very vital. Proper agricultural development leads to industrialization, and this is the dream of every poor nation.

Rice (Oryza Sativa Linn.) is in the heart of Philippine agriculture. It is considered the single most important commodity because rice is the major staple food of approximately two-thirds of Filipinos. As the country’s staple food, rice accounts for 35 percent of the population (now about 77 million) to as high as 60 – 65 percent for households in the lowest income percentile (GMA, 2002).

Rice is a very important commodity in our country and the government should maintain its stable production with respect to the increasing population. Twenty-three percent (23%) of the total Philippine population directly and indirectly derives their income from the industry (Philippine Peasant Institute, 1992).

Not only is rice an important staple, it also significantly contributes to the economy of the country. Rice is cultivated in 2.7 million hectares or 30 percent of the country’s total arable land. It contributes an average of 15.5% percent of the country’s gross value added (GVA), 13 percent to the consumer price index (CPI), 3.5 percent to the gross domestic product (GDP) and 3.3 % percent to the gross national product (GNP) (Ginintuang Masaganang Ani, 2002). In the light of this contribution, the country still has difficulty to attain self-sufficiency and price stability in rice production. The government has initiated different rice programs (e.g. Ginituang Manasaganang ani), and researches in order to formulate relevant policies in the rice industry.

For the past several years, different models and approaches in studying supply response were used. Some supply response models use only few of past values in forming expectations. Some other models use the entire past history, with the past values receiving declining weights as we go further into the distant past. These models were called distributed lag models of expectations (Maddala, et al., 1992).

Distributed lag models are potential models to be used in estimating supply response. There were few attempts to use these models in estimation. The specific distributed lag model that is well-known is the Polynomial Distributed Almon Lag Model, which was developed by Shirley Almon in 1965.

Distributed lag analysis is a specialized technique for examining relationship between variables that involve some delays or lags. In particular, the Almon Polynomial Distributed Lag Model, are used in order to reduce the effects of collinearity in distributed lag setting (Greene, 1993). 

Reference: Erazo, J. and E. Cruz. 2007.  Rice Supply Response in the Philippines: An Almon Lag Approach. Unpublished Undergraduate Thesis. School of Applied Economics, University of Southeastern Philippines. Obrero, Davao City.