Archive for August 27th, 2007

SEBI initiates fast track issuance

August 27, 2007

SEBI is getting really active on various securities market activities. I had mentioned this earlier as well.

Now, we have some developments on the primary markets segment. SEBI has proposed selected companies can raise capital with minimum procedures. There is a criteria for the selected companies mentioned in the press release.

This is an excellent initiative and would help companies raise capital more efficiently. Read JR Varma’s views on teh development.

Newspaper coverage: ET, IE, BS

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Mundell vs Friedman on exchange rates

August 27, 2007

I came across this debate on random surfing on Bob Mundell, the 1999 Nobel laureate who got the same for his work on exchange rates. His most famous work is what we call today as impossible trinity (see my few posts on this here and here)

This is a debate between 2 economics stalwarts and was done sometime in May 2001. It may be old but is very relevant even today and is a pleasure to read. However, to understand the nuances fully, one has to be on his toes and is a not a light read as I thought it would be.

They begin with basics of exchange rates (Mundell is for fixed, Friedman for flexible), then discuss Euro (Mundell lauds the success, Friedman sceptical about its success). They share their views on Bretton Woods, Gold Standard, and finally on World Currency. It is an excellent primer on so many topics.

Both have many differences on the topics. But there is a similarity as well. Yes, both are from Univ of Chicago :-)Friedman was  always in Chicago and Mundell has done majority of his research in Chicago.

Rudi Dornbusch has written a nice write-up in middle (page 11-14 of PDF) on the University:

Every so often there was a gladiator event, a workshop where for some reason faculty from different areas got together and got at each other. Mundell vs. Friedman were special events. Friedman obviously admired the sheer creativity of Mundell but would not let him get by, sparks would fly. Mundell  recognized Friedman as an icon but understood that he could play the bad boy with success. I remember the unspeakable from Mundell: “Milton, the trouble with you is you lack common sense”.  

Assorted Links

August 27, 2007

1. Ajay Shah throws some light on India’s pension system reforms. If there is so much delay on India’s most happening sector, I can’s talk about others.

2. WSJ Blog points out Fed has more ways to boost markets.

3. Rodrik points out to a blooper.

4. ET has an excellent profile of Dr. Rangarajan, Chairman, PM’s Economic Advisory Council. I like this one in particular:

Mr Rangarajan also has the patience of a good teacher who believes in explaining things painstakingly. Recently, ET asked him how policy makers determine the appropriate level of capital inflows from a macro policy standpoint. This has been hotly debated in the context of capital flows creating a rush of liquidity and stoking inflationary pressures.

Mr Rangarajan put it succinctly, “If your money supply growth target is 17%, then you have to determine what level of capital inflows are consistent with a 17% growth in domestic money supply. In my view, a net capital inflow of up to $26 billion, after meeting the current account deficit, is consistent with 17% growth in money supply.”

I am still thinking, how did that number $ 26 billion come from. I wonder, why didn’t his team explain these numbers and methodology for the same in the EAC report?

5. AV Rajwade on sub-prime.

6. CRISIL economists say agriculture growth to be around 3.2% to 3.6% in 2007-08. It is based on their DRIP methodology which measures rainfall deficiency in key regions and likely impact. I have my doubts whether agriculture can grow by that much.

7. Arvind Panagariya is bang-on on problems with Mumbai. This line says it all:

Intellectuals in India have been vigorously debating how to turn Mumbai into a Global Financial Centre by 2020. But they need to understand that this ambition is hollow if we cannot turn Mumbai into a global city. 


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