01/25/2018

Econ 190.2
Monetary, fiscal, and development policy

Noel B. Del Castillo

School of Economics, University of the Philippines Diliman

Encode the following information in the Google

spreadsheet I will share with you
by January 26, 2018:

You may use any recent but

decent picture as long as I can
recognize that it is you.

• Late submission = deduction of 3 percentage

points in student participation.
• No submission = NO grade in student
participation.

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Components of the final grade

First exam 25%
Second exam 25%
Final exam 15%
Problem sets 15%
Group report 10%
Student participation 10%
Total 100%

Attendance and punctuality

Students are expected to arrive on time so

that the instructor can start and end the
class on time. In case some students miss a
class session for whatever reason, it is their
obligation to keep themselves abreast of
whatever was discussed during their
absence.

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Class participation

To promote an atmosphere of dynamic and

lively class sessions, active participation is
required from ALL students. Active
participation is not just answering questions
posed by the instructor but also asking
questions.

On absences during exams:

1. In the event that the student failed to take the exam on
the scheduled date, she will have to present a valid excuse
(e.g. medical certificate) to avoid getting a grade of zero in
that exam.

2. b. Should the instructor accept the reason of the student

for his/her absence during the exam, the student will be
graded on the basis of the other exam/s that s/he has
taken/will be taking. Hence, if a student fails to take the
first exam but presents a valid excuse, the weight of the
remaining exams now becomes 75 percent. No make-up
exams will be given.

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No grade of INC or 4.0 will be given.

Honesty

Dishonesty is not tolerated in this course.

Any dishonest act performed by the student
may result in the student getting an
automatic grade of 5.0 for the course.

HONOR BEFORE EXCELLENCE.

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INTRODUCTION

Econ 190.2: Monetary, fiscal, and development policy

What is economic development?

We once had a narrow view of economics…
Traditional economics - concerned primarily with the efficient,
least-cost allocation of scarce productive resources. It assumes
economic “rationality” and a purely materialistic, individualistic,
self-interested orientation toward economic decision making.

Political economy - goes beyond the traditional to study, among

other things, the social and institutional processes through which
certain groups of economic and political elites influence the
allocation of scarce productive resources now and in the future,
either for their own benefit exclusively or for that of the larger
population as well.

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What is economic development?

Figure 1. GDP per capita over the last centuries (1500)

Source: Roser (2015)

What is economic development?

Figure 2. GDP per capita over the last centuries (1800)

Source: Roser (2015)

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What is economic development?

Figure 3. GDP per capita over the last centuries (1900)

Source: Roser (2015)

What is economic development?

Figure 4. GDP per capita over the last centuries (1950)

Source: Roser (2015)

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What is economic development?

Figure 5. GDP per capita over the last centuries (1970)

Source: Roser (2015)

What is economic development?

Figure 6. GDP per capita over the last centuries (1990)

Source: Roser (2015)

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What is economic development?

Figure 7. GDP per capita over the last centuries (2000)

Source: Roser (2015)

What is economic development?

Figure 8. GDP per capita over the last centuries (2010)

Source: Roser (2015)

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What is economic development?

…eventually, we started looking at the bigger
picture
Development economics – concerned, not only, with the efficient
allocation of existing scarce (or idle) productive resources and
with their sustained growth over time, but also with the
economic, social, political, and institutional mechanisms, both
public and private, necessary to bring about rapid(at least by
historical standards) and large-scale improvements in levels of
living for the peoples of developing (low/middle-income)
nations.

What is economic development?

Figure 9. Income share held by lowest 10 percent
(2010-2014)

Source: World Bank

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What is economic development?

Figure 10. Life expectancy at birth, total
(2010-2014)

Source: World Bank

Growth vs. development

Economic growth – expansion of a country’s

national output

Economic development – sustained increase in the

economic standard of living of a country’s
population

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Growth vs. development

Four wheels of
Four wheels of growth
development
Human resources Human resources
Natural resources Natural resources
Capital formation Capital formation
Technology Technological change
and innovation

all about how to expand the country’s production

concerned improving the quality of life

The “tale” of 2 countries: PHL & SKR

“In the 1950s, some experts judged the

Philippines to be one most likely to succeed from
among a group of neighbours in the East Asian
region, given the problems and resources that
they individually faced during those times. Today,
some of these places that had suffered in earlier
comparison to us – like South Korea, Taiwan, Hong
Kong and Singapore – are well ahead of us
economically.” [Sicat 2003:I-1]

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Source: http://img.photobucket.com/albums/v245/Lainnir/ManilaafterWWII.jpg

Source: http://img.photobucket.com/albums/v245/Lainnir/1945-burningManila.jpg

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Source: http://www.lakbaypilipinas.com/blog/2007/06/23/carriedo-manila-then-and-now/

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Source: http://indiohistorian.tumblr.com/page/41

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The “tale” of 2 countries: PHL & SKR

GDP per capita of independent East Asian countries

in 1950 (Int$)
2,500

1,921
2,000

1,500

1,070
1,000 916
854 854 817 803
645 643 619
500 496 448 435 396

Source: Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD
Angus Maddison, University of Groningen

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The “tale” of 2 countries: PHL & SKR

One of the concrete

evidences of Dr. Sicat’s
statement can be found
in the book written by
Song Byung-Nak in
1990.

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South Korea during/right after the Korean

War

Source: http://headmuscle.wordpress.com/2009/11/15/a-tale-of-two-cities/

South Korea during/right after the

Korean War

Source: http://headmuscle.wordpress.com/2009/11/15/a-tale-of-two-cities/

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South Korea today

Source:
http://headmuscle.wordpress.com/2009/11/15/
a-tale-of-two-cities/

South Korea today

Source: http://headmuscle.wordpress.com/2009/11/15/a-tale-of-two-cities/

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The “tale” of 2 countries: PHL & SKR

Source: http://on.wsj.com/MZfG4l

Role of policies in development

• Development, over time, can be achieved if economic growth
can be sustained for a long period.
• Sound and consistent policies can provide a conducive
environment to usher in sustainable growth.

Monetary policy – the setting of the money supply by

policymakers in the central bank. (e.g. printing more money,
adjusting the interest rates)

Fiscal policy – the setting of the level of government spending

and taxation by government policymakers. (e.g. imposing the sin
tax, construction of trans-regional railway)

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Role of policies in development

Source: World Bank

Role of policies in development

Source: World Bank

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How can development be achieved?

Development is not an overnight project
• Development is not a purely economic phenomenon.
• Economic progress is an essential component, but it is not the
only component.
• It must encompass more than the material and financial side
of people’s lives, to expand human freedoms.
• Development is a multidimensional process involving the
reorganization and reorientation of entire economic and social
systems.
• It involves radical changes in institutional, social and
administrative structures as well as in popular attitudes and
even customs and beliefs.

END

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