Archive for December 3rd, 2007

Riksbank forecasting performance

December 3, 2007

I had covered an excellent paper which analysed Fed and other private forecasters’ performance. The analysis covered how these various forecasters fared w.r.t forecasting various macroeconomic variables. The result was not very impressive.

Here is a nice summary(in the form of a speech, what else) the performance of Riksbank (Swedish Central Bank) vis-a-vis forecasting.The Riskbank performance is more impressive especially w.r.t one year forecast. It has been better at estimating inflation and unemployment but not very good at GDP and productivity.

A nice speech on forecasting.

Financial Stability and Institutions

December 3, 2007

Michael Bordo is one of the best financial historians around. I came across this excellent speech from him which covers many a issues – classification of financial crises, emerging vs advanced market crisis, what leads to financial development etc.

He links the various development theories really well- Douglass North, Rajan & Zingales, Acemoglu, Engerman & Solkoloff etc. all have been covered really well. It gives one snapshot of the literature flow w.r.t. development. (For an alternate view read Avinash Dixit’s views on development theories:-))

He also gives a very useful reference list on the subject. Nice read.

European Social Model- an asset or liability?

December 3, 2007

I came across a nice speech from Bank of Finland (BoF) Governor Erkki Liikanen. He addresses the same question as I have put in the title.

The Euopean social model is widely criticised (Read Ned Phelps’ views on the same. The general belief is that European Social Model promotes equity ahead of competition and hence is slow to adapt to today’s world. That is why US continues to thrive but Europe continues to lag behind. BoF governor disagrees.

He talks mainly about Nordic Countries and says despite ” a large government sector, high tax rates, generous social protection and highly compressed wage structures” these countries have managed to grow impressively.

He attributes the success to 3 policies:

  • Openness to competition
  • Sound macroeconomic policies
  • Strong and transparent institutional framework

Out of the three, the last one is most impressive. All Nordic countries are always there in the top 10 list of least corrupt countries. He also suggests the importance of education in these countries and the way education has helped them grow.

He also stresses on importance of public sector. However, his reasoning is different:

In Finland we face the most rapidly ageing population, so these are no longer hypothetical questions but a reality that policymakers must deal with today. The demand for welfare and health services increases as the population grows older, and at the same time, the room for financing extra expenditure by higher taxation is limited because of an already high level of taxation and increasing tax competition. How can we ensure that the public sector in general and welfare services in particular can adapt?

Read the entire speech. Nice take on European Social Model. It is a lesson for much needed inclusive growth in India.

Assorted Links

December 3, 2007

1. Ajay Shah points to some articles on global imbalances.

2. Mankiw defends himself and points to an interesting piece on Philips Curve.

3. Rodrik points to a website that contains useful development data.

4. Fin Prof asks when will sub-prime mess end?

5. After cat bonds we have windstorm bonds.

6. ESAP Blog has put all the 3 jokes to help understand health policy in developing countries.  Joke 1, 2 & 3 . Superb


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