Archive for the ‘Economist’ Category

Jean Tirole is perhaps the closest a Prize winner has been to Graduate/PhD students….

October 14, 2014

You can hate him but just cannot ignore him. The Prize for 2014 has been given to Prof Jean Tirole of Toulouse 1 Capitole University.

There were two reactions from my friends. First said never heard of him and second had perhaps only heard of him. The first one is working in the elite finance industry and second is a PhD student in economics.  I mean why would a finance professional be interested in anything but markets and how can a PhD student ignore Jean Tirole?

Doing a PhD, the name Tirole keeps coming to haunt you quite often. His stamp on the subject is so vast that you just cannot avoid him in your coursework. He has written textbooks specifically for PhD students in industrial organisation, game theory, finance, banking etc and are hugely recommended. If this is not enough, his large number of papers are obviously there. The sheer work he has produced makes one scratch his/her head if all this is real or surreal? And then most of his papers/books are not for the faint hearted. The struggle to get through a few pages is an enormous task given the math and complexity involved.

So a really interesting choice. As this second friend said- this is the closest a graduate student has ever felt to the prize winner. Most of the time, even graduate students do  not know the works of the choices in a given year unless you have specialised in the area. But with Prof Tirole this is a rarity. If a Phd student has completely missed Prof Tirole then either he/she is lucky or needs to redo his coursework.

Prof Tirole has influenced a lot of fields and continues to dominate the space. Even if you ignore the math, his illustrations in industrial organisation are quite interesting and obvious as well.  I guess now Prof Tirole should also write a book for general public as well,,,

What has led to financialisation of developed economies?

October 13, 2014

Òscar Jordà, Alan Taylor and Moritz Schularick look at this question in this paper. They summarise the findings in voxeu.

Understanding the causes and consequences of the rise of finance is a first order concern for macroeconomists and policymakers. The increasing size and leverage of the financial sector has been interpreted as an indicator of excessive risk taking1and has been linked to the increase in income inequality in advanced economies,2 as well as to the growing political influence of the financial industry (Johnson and Kwak 2010). Yet surprisingly little is known about the driving forces behind these trends.

In our recent research we turn to economic history. We build on our earlier work that first demonstrated the dramatic growth of the balance sheets of financial intermediaries in the second half of the 20th century and how periods of rapid credit growth were often followed by systemic financial crises and severe recessions (Schularick and Taylor 2012, Jordà, Schularick, and Taylor 2013).

 

They say that main reason has been shift of bank credit towards mortgage lending or for home buying. Banks over the years have become like a housing fund:

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If the unemployed formed a country, they would be the world’s 5th largest country

October 13, 2014

Sabina Bhatia of IMF reviews the recent bi-annual IMF/WB meetings (nice paid holiday trips for officials actually).

She collects the various ideas which were discussed this time. The prime issue of course being jobs:

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We should also look at redistributive effects of financial deregulation

October 10, 2014

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How (and why) Bernanke used alias Edward Quincy during crisis..

October 10, 2014

One does not know how to react to such a post from WSJ Blog.

Bernanke used an alias Edward Quincy during the crisis:

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Should ECB copy the Fed?

October 9, 2014

Daniel Gros says no.

He says the financial system is very different in Europe and so is the debt profile of nations. This is the real issue for questioning QE and not the buying of govt debt:

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Reforming NY Fed and changing its culture…

October 9, 2014

WSJ Blog interviews Professor David Beim who was behind the report to study and reform NY Fed.  Though NY Fed did not do much to change and we have quite a story on the cards now.

So what did he find in NY Fed:

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Well…Philips curve is a myth…

October 8, 2014

James Forder of Oxford Univ writes this stirring paper saying much of what we know of Philips curve is a myth. He has written a series of papers questioning the idea.

He says what we know of the famous curve is just a cooked up story. First, Philips did not really point to a new relationship. Second, he did not wish it be known as a trade-off.  Third, the glorification of how Phelps and Friedman dismantled the curve is another cooked up story. The idea of expectations was always there and their contribution was questioning that we could run inflation permanently. So, we need to reconsider how this idea has become mainstream macroeconomics where as it is just stories:

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Skills of Keynes as a fund manager…

October 7, 2014

David Chambers, Elroy Dimson and  Justin Foo have this interesting paper on Keynes and his skills in fund management. It is kind of known that he was quite skillful at managing money and left a fortune at the end. He could not see the depression and lost a lot of miney but at the end of the day (EoD as called by market guys), he was in positive.

This paper tracks how Keynes managed the endowment fund of King’s College. Keynes was a bursar of the college and responsible for the endowment.Keynes shifted the fund allocation from real estate to equities and till date Kings has higher asset allocation towards equities compared  to other colleges:

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Has China’s monetary policy become more “standardized”?

October 7, 2014

The title should actually read Has China’s monetary policy become more “advance country like”? I mean whatever they do is deemed as a standard even when they are all wrong on the matter.

Anyways, this note by John Fernald, Eric Hsu, and Mark Spiegel look at how Chinese mon pol has evolved over the years. The changes in Chinese economy have led monetary policy to react just like it does in the west:

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Great news for Yellen…one in six Americans think Greenspan still runs the Fed

October 7, 2014

The survey is highly limited as it was polled across 1002 adults. That is too small really to draw results.

Nevertheless, it seems Yellen is doing a great job  as just 24% could recognise Yellen.  So much so, around 16% of Americans still think that Greenspan is running the Fed.  Bernanke did a better job of being recognised with 33% recognising him in a survey in 2009.

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Central bankers as new philosophers to fix world economy and why that is a problem..

October 6, 2014

A brilliant column by Prof Harold James bringing a lot of things under one column.

He points how Europe and US have differed on philosophy of life. The philosophy of course comes from one’s world values which are shaped by culture and history. These differences reflect in all things including economic policy. Whereas US has been much more active trying to stimulate their economies out of trouble, Europeans have dithered for a long time.

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If you want to learn how the economy works, what do you study? Not economics.

October 3, 2014

Interesting post and mostly right. I mean the discontentment with state of economic teaching is growing by the day. This is even more acute in higher level of economic programs. One can never connect the teaching to seeing the world:

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Economics of Uber..

October 3, 2014

I did not know what Uber is till it was banned in India.

Sergiy Golovin of Bruegel writes a superb primer to understand why so many countries are banning Uber. The Indian reason is very different from other countries. In other countries, the taxi companies are lobbying to get Uber banned as it eats their business.

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Re-discovering the Phillips curve and it is actually back to life in Europe…

October 1, 2014

Philips Curve showed the trade-off between inflation and unemployment. If you want low unemp, you tolerate high inflation. If you want low inflation, you get higher unemployment. The idea died during 1970s when we had both high inflation and high unemployment making the Philips Curve vertical.

However, old ideas keep coming back. In these interesting times, Europe needs both. Higher inflation and lower unemployment is not really a trade-off. They need both these.

László Andor EU Commissioner for Employment, Social Affairs and Inclusion has this interesting piece revisiting the Philips Curve. There are interesting graphs which show Philips Curve has flattened out in France, Spain and Germany:

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Why is Nouriel Roubini so surprised over surging markets?

October 1, 2014

Well, this has been the story for a very long time. Economic prospects have declined (age of diminishing expectations as Prof Krugman wrote) and continue to decline but markets remain as great as ever. So why is Nouriel Roubini surprised? I mean he even saw this irrationality build-up before the crisis .  This should not be anything new to him…

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Time for helicopter drop of money?

October 1, 2014

Biagio Bossone, Thomas Fazi and Richard Wood say none of the policies are working. We need to look at Friedman (or Bernanke) idea of Helicopter drop of money.

But the traditional Friedman view of central bank directly providing money to people cannot work. We instead need a government helicopter drop:

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Reconstructing macro theory to manage maco policy

September 30, 2014

Prof Joseph Stiglitz chips into the debate over state of macro.

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Why US yields trending lower despite Fed intending to exit?

September 30, 2014

These are the recent trends in US treasury yields:

  • US 10 Year started the year at 3% and is currently at 2.5%.
  • 30 year at 3.92% and currently at 3.18%.
  • 5 year is steady starting at 1.72% and currently at 1.77%.

Jérémie Cohen-Setton of Bruegel Blog wonders why is this happening? As Fed is expected to go off the stimulus, the yields should actually be rising. We are staring at the same problem as seen in 2005 called Greenspan conundrum (then most macro things were named after him).

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Americans work too long (and too often at strange times)..

September 29, 2014

Daniel S. Hamermesh and Elena Stancanelli point to this interesting post.

They say Americans work more on weekends and night time than Europeans:

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