Imagining a New Bretton Woods with old ideas of Keynes

May 6, 2016

Yanis Varoufakis looks at what Keynes missed pushing during Bretton Woods. This was of course the idea of a reserve currency Bancor and ensuring that global imbalances are a problem for both surplus and deficit countries.

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Niti Aayog’s (even India’s) real problem: Many macroeconomists, no microecons

May 6, 2016

The author picks up an important issue but like previous other pieces barely digs enough.

He says Niti Aayog is looking for economists but there is deficit:

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Why bank deposits and currency in circulation have decoupled?

May 6, 2016

Arvind Subramanian, CEA has piece on one of the puzzles facing Indian economy – why bank deposits have lagged and currency in circulation increased? This blog looked at currency in circulation reasons here.

CEA says:

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How state institutions forged during the Protestant Reformation drove development in Germany..

May 5, 2016

Jeremiah Dittmar and Ralf Meisenzahl have an interesting research on the topic. They look at role of social institutions in development.

They use the tool made popular by likes of Acemoglu/Robinson. One region gets these social institutions and other does not? What is the overall impact on one vs the other? This time the region is Germany and we have cities instead of countries. There were certain cities where Protestant movement led to development in some cities over others:

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Keynes’s critique of econometrics was surprisingly good…

May 5, 2016

Karl-Friedrich Israel has a nice piece on the topic. I mean it is something if Keynes gets some praises from scholars/followers of Austrian School:

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Central Bankers Gone Wild? A response from developed country central banker..

May 4, 2016

I had blogged about this article by Howard Davies saying central bankers have become too big for their own good.

Mojmír Hampl, Vice-Governor of the Czech National Bank responds to this criticism.

Sweeping criticisms of developed-country central banks have lately become all the rage. The main line of attack goes something like this: monetary policymakers have been far too activist since 2008, overstepping their mandates and damaging the economy. This narrative – which, bizarrely, is equally popular among otherwise irreconcilable ideological adversaries, such as libertarians and neo-Marxists – is patently wrong.

What the critics fail to understand is that modern central banks are responsible not just for fighting inflation, but for maintaining long-term price stability. Like a person’s body temperature, price levels can go neither too high nor too low without causing serious complications. Central banks must be as “activist” when combating deflation caused by weak demand as they are when fighting high inflation driven by excessively strong demand.

Though the battle is completely symmetric, the public assessment of it is bafflingly lopsided, especially in countries with financially conservative populations. This includes my own country, the Czech Republic, a nation of small savers where the loan-to-deposit ratio remains well below 100%. Czechs fear inflation, even though it hit a 13-year low last year and the Czech National Bank, of which I am Vice-Governor, has been fighting to avert the risk of deflation since 2013.

Another common complaint about developed-country central banks’ policies since 2008 is that they have redistributive effects. They certainly do, but so what? Any and all monetary-policy actions redistribute wealth. An interest-rate hike pleases savers, whereas a rate cut is a boon to borrowers. Importers prefer a strong exchange rate; exporters prefer a weak one. To make any sense at all, monetary policy must have different effects on different groups at different times. That is no mistake; it is the essence of monetary policy.

Some critics add that central banks are failing to hit their inflation targets anyway, so their activism is not only unwarranted, but also ineffective. Sometimes they even manage to fit these contradictory criticisms in the same sentence, as though they were accusing someone of firing blanks, but somehow leaving people dead and wounded.

The reality is that central banks in the developed world have – in a truly fascinating way – succeeded in maintaining price stability and the purchasing power of money during and after the global financial crisis. Had they not intervened, their economies would have faced catastrophic deflation, major asset-price slumps, and a complete meltdown of the financial and real sectors. Clearly, strong action was the right response to the crisis (the extent to which central banks might have contributed to its outbreak is another matter).

Each one to his own..

Why birthplace matters so much in human capital: Case of Sorting, learning and geography

May 4, 2016

One always believes that those born in bigger cities usually have more advantage then those in smaller places. Those in former category get better schools, public services, a wider social network and so on.

So in this article Clément Bosquet and Henry Overman look at this aspect of role of location in human capital:

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What drives growth in America’s metro regions?

May 4, 2016

Chris Benner and Manuel Pastor have been workin on a project looking at local regions in US and what drives growth in them. It is called Just Growth? Social Equity and Metropolitan Economic Performance. Here is an excerpt from the book.

Here is an interview of Chris Benner. He says unlike what most think, more equal the region, higher is its growth:

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Why garbagemen should earn more than bankers and rise of bullshit jobs..

May 3, 2016

Rutger Bregman, a historian and writer looks at the job roles of these two people – bankers and garbage collectors. He also looks at rise of so called bullshit jobs where we are working just for the sake of it. It is hardly creating any value and in a way quite a few financial sector jobs fall in this category

One can live without banks (quoting from this Irish example) but one can’t live without garbage collectors not doing their jobs:

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As Honda Active scooter closes gap on Hero splendor motorcycle, what is Bajaj Auto thinking?

May 2, 2016

This is a great story of three companies – Bajaj Auto, Hero Motors and Honda Motorcycles:

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How Pune was at the centre of Indian Sociopolitical Evolution

May 2, 2016

Aashish Chandorkar has a nice piece on (link corrected now. thanks to Manasi for the pointer) how certain thinkers were at the centre of Indian sociopolitical changes. Even more interesting how they came from Pune. Pune was the centre of all this thinking and it is a tragedy that all this history is lost:

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How the FBI reinvented itself after 9/11?

April 29, 2016

An interesting case study by HBS Professors.

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How central bankers have become too powerful for their own good?

April 29, 2016

Howard Davies points to an important problem facing the world – the power of central bankers. They have become way too powerful and important for not just their own good but everybody else’s as well:

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Happy Birthday Mostly Economics: 10 years of Blogging!

April 29, 2016

It is amazing and humbling to see Mostly Economics complete its ten years of writing and blogging. The birthday was around a week ago but due to travel issues the celebrations got delayed.

The blog just started from a remote office corner in Mumbai due to sheer boredom and lack of work. Taking a cue from a cousin who started a blog, one just ventured into it and continued somehow.  It has been fascinating ever since and no amount of words can sum up the experience so far.

What has made it really special is to see the number of visitors coming to this blog and getting comments from some of them. In the end it is this one factor which has kept the writing going for so many years. The blog has registered 2.2 million hits so far and has 1604 subscribers who get all the blog posts for whatever they are worth. Truly humbling.

On this occasion, Mostly economics would like to thank all the visitors (both regular and once a while ones). It also requests them to chip in with their comments/suggestions on making Mostly economics a better blog. What should it do so that visitors can keep coming to this place for the next ten years as well? :-) Thanks in advance..

Till then, happy birthday once again and let the party continue.

Capital local area bank to Capital small finance bank..lessons from history??

April 27, 2016

Jalandhar based Capital Local Area Bank transitions to becoming a small finance bank. Earlier, it could operate in  just five districts and now can open pan India branches. Ujjivan is perhaps the next in line with an IPO lined up.

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The waterless life in Latur..

April 26, 2016

Prince Mathews Thomas has a piece on woes of Latur:

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Niti Aayog Internship – 2016

April 22, 2016

Have been noticing quite a few searches for Nitit Aayog internship on this blog.

Here is the 2016 notice/advertisement. Deadline for application is 30 Apr 2016. The applications started this week on 18 April 2016. So rush in your applications and pass on the word.

As caste lines blur, Iyengar bakery owners fight for survival and brand in Bangalore

April 22, 2016

Sandeep Moudgal has a great piece on the topic. How certain castes/communities come to being associated with certain products and then how they keep looking at ways to revive and stay in competition. It just makes for a great reading.

Iyengars that run bakery shops in Bangalore are one such community. They migrated from Hassan and started bakeries across the city:

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Sebi flags concern on brokers shutting shop..

April 22, 2016

This is an interesting piece of news. Given the noise on how Indian equity markets will reach new highs in future (the noise is not anything new BTW), one would imagine the equity players doing well. But one hardly sees this.

Look at most market players around – investment banks, mutual funds etc all seem to be bleeding and exiting. Most small players in these various sub-markets are shutting shop and in MF industry we have seen big MNC players exiting the space.

Broking industry is joining the exiting game as well:

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Itihasa: An app that traces history of Indian IT industry..

April 21, 2016

Interesting bit of news. Instead of writing a book on history of Indian IT industry which is the usual thing, key industry people have used the new medium of app to promote the history of the sector.

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