Using Behavioral insights in monetary policy…

September 26, 2016

Mark Calabria of Cato has a nice short paper reviewing the literature on the topic.

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How corporate greed and corruption has deep roots..

September 26, 2016

Prof Raman Mahadevan has a superb piece on Indian business history. It is really rare to read about Indian business history in regular media.

Prof Mahadevan says there is lot of discussion and criticism on rising corruption and greed in corporate India. But this is hardly anything new and the seeds were sown much earlier:

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Cow dung capitalism: As babas turn to businesses, businesses turn to cows…

September 26, 2016

Lhendup Bhutia  of Open Magazine has a fascinating piece (HT: MR blog). It is old for today’s age as it came 10 days ago.

As Joan Robinson quipped  – each and its opposite is likely to be true in India. These golden words remain true all this while:

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Chameleons: The misuse of theoretical models in finance and economics

September 23, 2016

Well Paul Romer’s paper scathing state of macro has been much talked about. Romer even defended the paper.

However, there are others as well who have been questioning state of economics who are not as well known. Here is a 2014 paper by Paul Pfleiderer of Stanford (what is it with Profs named Paul!?) who says we have a new problem. There are certain models which are full of assumptions yet are played at a policy/real world level. These models obviously don’s meet the filter of real world once assumptions are done away with. Still they remain the main ideas.

He calls such models as chameleons:

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Making business research more relevant to business practitioners?

September 23, 2016

In this publish or perish world hitting all streams, research is becoming more and more irrelevant to the real/practitioner world.  I mean other disciplines can still excuse themselves from connecting to real world, but business research has no such choice.

Carmen Nobel of HBSWK looks at this paradox – to publish or to make research relevant:

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New Zealand’s remarkable economic transformation – an unsung story

September 23, 2016

Daniel Mitchell has a post on the small open economy which is hardly in anybody’s focus. Being from Cato, Mitchell obviously makes it a more market less government story:

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Why is Indian Finance Ministry worried over low ratings of credit rating agencies?

September 22, 2016

Such news developments are actually laughable.

It is one thing for “leading global rating agencies” to say India not doing enough so ratings not being revised upwards. It is completely another to see Finance Ministry officials of all people to be worried over the country ratings not being revised.

All these ratings have been thoroughly exposed in the ongoing crisis. Whatever they rated as AAA has come kaput and what they rated as BBB and lower etc is hardly as bad. So for all you know, by not revising the India ratings, the economy might be  doing well.

These agencies prism of country doing well is around such narrower domains – low inflation, low fiscal/current account deficit, disinvestment, privatization etc. They can never really appreciate anything more than these 3-4 variables. And ironically, India is doing well on all these 3-4 variables!!

Bank of Japan to control the Japanese yield curve!!

September 22, 2016

One is completely fed up of the tactics being deployed by central bankers worldwide to keep controlling and planning the financial economy. I did read news of yield curve control by Bank of Japan here and there in the morning, But somehow thought it must be some rumor or one of those crazy suggestions to keep hings going.

But it is true. Bank of Japan indeed is going to control the yield curve!:

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Singapore as a model for economic transformation – case of state planning or markets?

September 22, 2016

Recently Govt of India invited Singapore PM Tharman Shanmugaratnam for the inaugaral Niti Aayog’s transformation lecture. As expected, much of discussion which followed was around we could use Singapore’s market driven model to drive economic growth.

Prof. Pulapre Balakrishnan disagrees with the narrative.  He says it is Singapore’s history of development is as close to socialistic planning as it can get. This is even more ironic as the lecture was held at Niti Aayog which recently replaced Planning Commission:

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Why the father of modern statistics (Ronald Fisher) didn’t believe smoking caused cancer…

September 22, 2016

Ben Christopher has a superb piece on history of statistics and the age old debate in statistics – does smoking cause cancer?

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Indian financial media continues to spin stories on Indian central bank….

September 21, 2016

One does not like writing such posts but just can’t help it. There is only so much one can ignore.

The positive spinning of news on Indian central bank continues to be a big issue.  Despite central banking exposed widely across the world, we are continuously made to believe of godly powers of people at helm of Indian central bank.

Came across this recent piece which  again tries to spin a story. It argues how the new chief  has had the best start this century as far as bond markets are concerned.

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The Trade of the Century: When George Soros Broke the British Pound

September 21, 2016

Rohin Dhar has a nice piece narrating the trade of the last century:

In 1992, George Soros brought the Bank of England to its knees. In the process, he pocketed over a billion dollars. Making a billion dollars is by all accounts pretty cool. But demolishing the monetary system of Great Britain in a single day with an elegantly constructed bet against its currency? That’s the stuff of legends.

Though it occurred just two decades ago, Soros made his nation-shaking bet in a very different time. Back then, hedge funds hadn’t yet entered the public consciousness, restrictions on capital flowing from one country to another were just lifted, and the era of the 24-hour news cycle had just begun. 

To appreciate how Soros made a fortune betting against the British pound requires some knowledge of how exchange rates between countries work, the macroeconomic tools governments use to stimulate economies, and how hedge funds make money. Our readers are invited to correct us if we stumble in explaining any of these concepts. 

And so onwards with the story of how George Soros led a group of traders to break the entire foreign currency system of Great Britain—and profit handsomely at the expense of British taxpayers and others who were on the wrong side of the greatest financial bet of the 20th century.

Read the whole thing..

The civic drama of Socrates trial

September 21, 2016

Prof Josiah Ober Stanford University (majoring in political science and classics) has an interesting piece on trial of Socrates. He says the Conventional wisdom sees Socrates as a martyr for free speech, but he accepted his death sentence for a different cause.

The trial and sentence show Socrates was not above the law:

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Facelift defacing 1,250-year-old Ulsoor temple…

September 21, 2016

There is nothing more irritating to see a shoddy cement job on historic sites. It just looks ugly and spoils all the beauty. We  just can’t get our acts together on preserving history.

Bangalore’s centuries old Ulsoor temple is another victim of such a job:

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How Beethoven was one of the first investors in stock of Austrian Central Bank…

September 20, 2016

The Oesterreichische Nationalbank or Austrian Central Bank is celebrating its 200 year history.

Its chief Dr Ewald Nowotny gives this interesting speech through the 200 year journey:

Milestone birthdays not only provide an occasion to gather family and friends. They also afford an opportunity to pause for a moment and reflect on one’s past as well as one’s plans and hopes for the future. The 200-year history of our institution has been eventful, to put it mildly. In its first 100 years, the Nationalbank was the central bank of a major power; in its second 100 years, that of a small open economy in the middle of Europe. The fate of the Nationalbank has always been closely entwined with the fate of Austria, for better and for worse.

Central banks never operate in isolation. The most important lesson to be drawn from our 200-year history is that the greatest threat to financial and monetary stability has been, and still is, war.

In fact, it was the twenty odd years of the Napoleonic wars which stood at the origin of the Nationalbank in 1816, as Austria strove to stabilize a currency which had undergone strong inflation and depreciation.

So the “privileged Austrian central bank” was founded as an independent institution with private shareholders. One of the first shareholders was Ludwig van Beethoven – and just for the record: this turned out to have been a very good investment for him.

:-) How good was it? Given state of central banks, one wouldn’t be surprised if Beethoven would call the investment as profitable but of bad taste…

Rest of the speech is the usual bit on World Wars,  European integration and so on. Useful to read..

 

Italian Banking woes update..

September 20, 2016

One is really sick of pointing to banking woes and upcoming crisis but they keep coming.

Italy is hardly a new player and its fiscal/banking woes have been talked for a while. The concerns have increased recently following Brexit. Infact, all this is happening in a country which apparently gave birth to idea of banking in Europe. Bankers from Italy migrated elsewhere to shape banking in other parts of Europe. And now they have just forgotten their own history lessons.

Caroline Gray of Focus Economics has an update on Italian banking:

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Karnataka government shelves Aiyya canteen initiative

September 20, 2016

Currently Tamil Nadu and Karnataka governments are at loggerheads with each other.  However, it is not as bad as one is still taking ideas from each other.

Any success at political level leads to many copy cat versions. Amma canteens started by Tamil Nadu Govt is one such measure. Keeping economics aside, it is seen as a huge political success.

Taking a cue, Karnataka govt also planned to launch its version of Aiyya canteens. The plan is shelved as of now:

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Trade globalisation in the last two centuries..

September 20, 2016

Usually accounts suggest first round of globalisation started in 1870. Though, these are just the European and US accounts which ignore historic trading ties in Asia and Middle East much before trading picked up in Europe.

Anyways, Michel Fouquin and Jules Hugot take the 1870 date a little backward. They say globalisation started in 1840:

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How and why lender of last resort function differs across the countries?

September 19, 2016

Charles Calomiris , Marc Flandreau and Luc Laeven have a really interesting paper on the topic.

Reading through Indian economic/monetary history using coins..

September 19, 2016

Prof. Pankaj Tandon who accidentally got into numismatics, now has quite an interesting story to tell.

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