Archive for July, 2008

Understanding finance and growth models

July 23, 2008

Thorsten Beckis one of the leading financial economist. He along with Ross Leveine, Asli Demirguc Kunt  have devoted substantial time unravelling (and defending) financial systems role in various ways.

I came across this fantastic paper where Beck for a change shows how he analyses various issues related to finance. In this paper he discusses various models used to understand how finance helps in growth etc.

This paper reviews different econometric methodologies to assess the relationship between financial development and growth. It illustrates the identification problem, which is at the center of the finance and growth literature, using the example of a simple Ordinary Least Squares estimation. It discusses cross-sectional and panel instrumental variable approaches to overcome the identification problem.

It presents the time-series approach, which focuses on the forecast capacity of financial development for future growth rates, and differences-in-differences techniques that try to overcome the identification problem by assessing the differential effect of financial sector development across states with different policies or across industries with different needs for external finance. Finally, it discusses firm-level and household approaches that allow analysts to dig deeper into the channels and mechanisms through which financial development enhances growth and welfare, but pose their own methodological challenges.

Though, he tries his best to explain in English, it is slightly tough to grasp all the concepts. Anyways a nice reading on the various econometric models.

The first best and second best schools of financial systems

July 23, 2008

In 2007, BIS conducted its annual conference and the theme of the topic was the same – Financial system and Macroeconomic resilience. BIS has been raising concerns over the dangers of financial system for a while (in particualr economists like William White, Caludio Borio etc) but has found deaf ears.

Earlier BIS posted papers presented at the conference and now it has also released detailed comments presented at the conference. ( I will try and write about the papers presented as well)

Bill White sets the agenda.  He talks about calm financial market conditions and macroeconomic reselience (great moderation) and says:

What are the specific channels through which identified changes in financial markets might have contributed to the welcome set of macroeconomic circumstances just identified? This line of reasoning leads to two different schools of thought. Let us characterise them as the “first best” and “second best” schools of thought.

One is essentially supportive of the hypothesis, while the other is also supportive, but only to a point. In particular, the latter cautions that much of the good news to date might be at the cost of significantly worse news looking forward. Both schools stress the interaction of monetary policy and recent structural changes in the financial system. Evidently, however, they come to quite different conclusions as to what macroeconomic outcomes these interactions might produce.

What do they mean?

The “first best” school looks at monetary policy over the last two decades and concludes that it has done an excellent job. The growing commitment to price stability and associated policy actions produced price stability and an associated credibility. The firming of inflationary expectations, around a low level, allowed economic upturns to go on longer than would have been normal earlier. It also allowed a rapid easing of monetary policy whenever growth seemed under threat for whatever reason.

The “second best” approach agrees with some of the above, but asks whether there might not also be some significant downsides, in a world where neither markets nor our understanding is yet complete. Consider an alternative view of monetary policy over recent years. Perhaps low inflation, and low inflation expectations, actually owe more to positive supply side shocks than to the credibility of monetary policy. After all, the growth rates of financial and monetary aggregates have been unusually high in recent years. Moreover, real rates of interest have generally gone down, even as the potential growth rate of the global economy seems to have gone up.

We all know now second best school is more in line with reality. I have always believed in this second best school more than the first school.

I was also reading Fed Vice Chairman Donald Kohn’s views (page 4):

I will base my remarks on our experience in the 1987 and 1998 market episodes. In my view, one lesson of those episodes is that central bank actions to counter financial distress can rely more on macroeconomic policy tools, which carry less potential for moral hazard, than on discount window credit to fund individual banks, which was often used when bank weakness threatened the intermediation process.

I actuallly read that statement many times. He says a lesson is to use macroeconomic policy tools and not discount window credit to fund individual banks. Though, he does not specify what he means by macroeconomic policy tools, still Fed seems to have reversed its stance by first lowering the discount window rate and then opening up various other discount windows (TAF, TSLF, PDCF… it is ironical that problems in one set of alphabet soups -CDO, CLO, CDS, CPDO etc has led to another set of alphabet soups – TAF, TSLF, PDCF etc). And Fed then also helped Bear Sterns and now has extended support to Fannie/Freddie.

The entire document is a good reading on various perspectives of the first and second school.

Assorted Links

July 23, 2008

1. WSJ Blog points Bernanke is the most market moving Fed official. WSJ Blog points to Fedspeak- Plosser

2. Nudges Blog points how do you nudge students to work harder?

3. Mankiw reminds– whip inflation now doesn’ t work

Can we forecast exchange rates?

July 22, 2008

Dallas Fed has released a short paper on exchange rate forecasting. The summary is – the models are not good enough as of now and best way to look at exchange rates is random walk.

Nice quick review of basics of exchange rate forecasting.

History of Macroeconomics

July 22, 2008

I read this paper by Greg Mankiw a while back and enjoyed it thoroughly. I went through the paper again and found it even more enjoyable as with blogging thinking has become a lot clearer. I always enjoy Mankiw’s writings and he has not written a paper for a while now.

The paper reviews history of macroeconomics and explains all the key ideas in macroeconomics. It is a must read and is an absolute classic.

Highly recommended and worth revisiting every now and then.

How did Germany avoid great inflation in 1979?

July 22, 2008

One of thebiggest successes and puzzles in central banking history is Bundesbank – Germany’s Central Bank. Success as it managed inflation really well when most central banks struggled and puzzle as it is the only central bank to have been successful using monetary targets ( it means they targeted growth in money supply which was also the main idea by Friedman)

I came across this superb short paper from Otmar Issing where he discusses how Bundesbank was successful in managing inflation. Nice reading.

Assorted Links

July 22, 2008

1. Mankiw points more evidence on people switching choices amidst rising oil prices

2. Rodrik points to the best dev eco blog

3. PSD Blog points climate change

4. DB Blog points poor creditor rights imply poor safety in flying

5. Nudges points to global economics forum being held. It also points to an interesting article on being nudged.

It is hightime that we review financial innovation

July 21, 2008

How much do things change in an year’s time.

In 2007, Reserve Bank of Australia conducted its Annual conference and the theme was – The Structure and Resilience of the Financial System. In the conference a paper on benefits of financial innovation was presented by Rob Hamilton, Nigel Jenkinson and Adrian Penalver. The authors do provide fall-outs of fin innov. but are more optimistic of its benefits than its fall-outs. The discussant of their paper – Jonathan Fiechter had raised some questions suggesting all is not well with fin innovation.

In 2008, RBA conference has the theme – Lessons from the Financial Turmoil of 2007 and 2008 (what else) and in this two of the authors of the earlier paper review financial innovation again. And this time, they highlight more risks.

I have never really understand the term Financial Innovation. What does it really mean? I think best way to understand it is to first understand the function of financial systems. As per Ross Levine, the best authority on the subject, a financial system has five functions:

  • Produce information ex ante about possible investments and allocate capital
  • Monitor investments and exert corporate governance after providing finance
  • Facilitate the trading, diversification, and management of risk
  • Mobilize and pool savings
  • Ease the exchange of goods and services


 So, any innovation should be broadly based to deliver any of the above 5 functions better. Isn’t it?

It is easy to see where all fin innovation is centred- the third function. Most of the fin innovation literature is focused on facilitating the trading, diversification, and management of risk. You hardly see anything happening on the other four and that is where I see most of the problems.  I am not saying there are no attempts, but they are very few given the issues.

For instance, the 2 function – Monitor investments and exert corporate governance after providing finance- is where most of the current and all crisis problems exist. However, we don’t see any innovative ways to tackle this problem and what we see is the usual responses- tight supervision and regulation which is opposed and we have a distorted (full of regulatory arbitrage system).

Likewise, the 4th function – Mobilize and pool savings – is hardly given any thought.  The best talent is usually deployed to work on the third function and we have very slow progress on this matter. Worst of all, because of not adequate work on the second function, the flow of savings in financial markets become highly pro-cyclical- is high in good times and disappears in bad times.

One of the main problem is experts think 3rd function as the sole function of a financial system. It is time we set this agenda right and make work on finance/financial innovation more balanced. Otherwise, finance is always going to be questioned everytime things go wrong.

PS. I came across a very useful paper by Bob Shiller which focuses on the 3rd function but is centred on households.  He talks about using fianncial innovation for managing risks of housing prices, oil and longevity.

Assorted Links

July 21, 2008

1. WSJ Blog points for ECB credibility is the key 

2. Krugman says oil prices are expected to decline

3. Rodrik points to the recent storming of Karachi Stock Exchange

IMF revises both growth and inflation forecasts

July 18, 2008

IMF in its mini- WEO update, has revised projections of both inflation and growth.  The research note is here and transcript of the press briefing is here.

The brief projections are:
      Projections Diff between Apr-08 and Jul-08
  2006 2007 2008 2009 2008 2009
World 5.1 5 4.1 3.9 0.4 0.1
Adv. eco  3 2.7 1.7 1.4 0.4 0.1
  US 2.9 2.2 1.3 0.8 0.8 0.2
  Euroarea 2.8 2.6 1.7 1.2 0.3
Dev eco 7.9 8 6.9 6.7 0.2 0.1
    China 11.6 11.9 9.7 9.8 0.4 0.3
    India 9.8 9.3 8 8 0.1
Consumer prices          
Advanced economies 2.4 2.2 3.4 2.3 0.8 0.3
Dev. eco 5.4 6.4 9.1 7.4 1.7 1.8

The growth projections have been revised marginally but inflation has been revised upwards majorly.

Simon Johnson, Chief Economist explains the reasons for growth revisions:

QUESTIONER: So, compared to your April forecast, both the growth and the inflation are higher. I just wondered if you could break down in a bit more detail why you think inflation is going to be higher than you did in April and why growth is ever so slightly higher too.

MR. JOHNSON: Sure. Let me start with the change in our view on growth. That’s relatively straightforward.

The effects of the financial disruptions which started last summer are working their way through the U.S. economy and other advanced industrial economies but somewhat more gradually than we anticipated. So, in terms of actual performance in the first quarter, there was good news. We were surprised on the upside, as you might say, for the U.S. and for Europe. But we think the second quarter is going to be weaker in Europe, and we think the third and fourth quarters are going to be weaker in the United States. So it’s taking some time to work its way through. That’s our forecast for 2008. Our forecast for 2009 is virtually unchanged. So it’s an issue of timing.

On inflation, I think that the main point there is oil prices. When we made our forecast and when we locked in our forecast and presented it back in April, oil prices were substantially lower than they are today….. When we made this forecast, we had to take into account substantially higher oil prices, which has a significant inflationary impact, affecting headline inflation in advanced economies, although not yet, as I said, feeding through into core inflation in those economies, but that’s a key thing to watch.

In emerging markets, as you know, headline and core inflation were much more similar because the consumption basket has a lot of fuel in it. It also has a lot of food, and the fuel prices are feeding into food prices. So the food price increase was already evident at the time of the Spring World Economic Outlook, and we talked about it at that time, but it has continued. Food prices have not come down very much in general. So that continues to feed through into inflation pressures. Both headline and core inflation in emerging markets and developing economies are elevated for that reason.

Fair enough. Though, what is worrying is that despite the outlook on inflation, IMF research note says central banks in developed economies may not need to do monetary tightening:

In many emerging economies, tighter monetary policy and greater fiscal restraint are required, combined in some cases with more flexible exchange rate management. In the major advanced economies, the case for monetary tightening is less compelling, given that inflation expectations and labor costs are projected to remain well anchored while growth weakens noticeably, but inflationary pressures need to be monitored carefully.

Also, IMF seems to be changing its views on fiscal stimulus. It has always told emerging markets not to use fiscal policy but has changed its stance when US used it:

QUESTIONER: You mentioned that the U.S. economic stimulus package had been well timed. Democrats in the House are calling for a second round of economic stimulus. (A) Do you have any advice for them and (B) what sorts of considerations do they need to keep in mind as they debate this?

MR. JOHNSON: Yes. Well, we don’t comment on pending legislation, as you can imagine. But I’m happy to talk about what went right with the last fiscal stimulus and what lessons we should learn from that, and that’s something which we will examining in the Fall World Economic Outlook. We will be looking at fiscal responses much more generally and look at lessons learned from the U.S. experience.

I think that the timing was really a key part of this stimulus. The problem with fiscal policy, of course, is it’s very hard to get the timing right. Even though this stimulus was done very quickly and the checks have arrived within six months really of the consensus formally that this was a necessary thing, that’s still a considerable lag. And, you don’t know what the economy is going to be like in six months. It’s very hard to call what will happen in the housing market. It’s very hard to know exactly how financial conditions will play out.

So we continue to regard fiscal stimulus as, obviously, a policy tool that can be helpful in many instances, but one that should be used with great caution and only when you feel that for some very compelling reason that monetary policy cannot, by itself, handle the problems. And, that’s speaking about the U.S.

If you look more generally around the world, there’s less of a case in many instances, less of a case within industrialized countries, for using a discretionary stimulus because they have stronger automatic stabilizers. The U.S., because it has a relatively small government as a percent of GDP, has a stronger case for sometimes using discretionary stimulus. In other countries, we tend to prefer that they rely on automatic stabilizers, certainly at this point.

Assorted Links

July 18, 2008

1. WSJ Blog pointsto another report to reform financial industry. It points pressures are coming on EB to reconsider its inflation ceiling

2. NB points how to move behavioral economics forward with federalism

3. Mankiw humor– competition is good

Understanding the inflation trends in India

July 17, 2008

I wrote a paper trying to understand the inflation trends in India.

The trends are divided in two types – long term trend and a short-term trend. On a long-term the story is pretty clear- inflation has come down over the years. On a short-term (that is looking at a week to week trend), I find there is stickiness in the data. By stickiness I mean, the next inflation figure is usually around the current figure. The stickiness becomes weaker with each passing week.

This stickiness has many implications for policymakers. It implies the trends are difficult to correct (and this is applicable both ways lower and higher) and also shows why mon pol works with a lag. Though, the analysis needs to be refined and better tools have to be used.

I have also analysed the impact of mon policy measures on inflation trends. The mon pol works with a lag and it is usually noted at 1 year (that means effect of mon pol steps on rising inflation takes about one year).

Let me know of your comments.

Political economy of finance reversed?

July 17, 2008

I had pointed earlier about a superb paper from Stehen Haber where he shows why financial systems remain under-developed.

However, what we are seeing is opposite in places where fin system is developed. It has become so powerful that the entire idea of underdevelopment has been turned on its head. In this excellent roundtable conversation the questions were raised amidst who is who (Soros, John GIeve etc):

FORD: Back to the big picture. What will happen to the financial sector in Britain and the US as a result of all this? Will it shrink? Should it? Are there areas of business which shouldn’t revive because they were fundamentally unstable and unsatisfactory?

SOROS: It should shrink. It has really got overblown. The size of the financial industry is out of proportion to the rest of the economy. It has been growing excessively over a long period, ending in this super-bubble of the last 25 years. I think this is the end of that era.

Then Dr. Reddy in his recent speech said:

whether there is, what may be called, financialisation of the political economy? The attractiveness of financial intermediaries in terms of high profitability, significant growth – especially cross-border, massive spread of investors, and the inadequate scope for application of principles of rules of origin in the financial sector could have resulted in enhanced clout for these intermediaries in the political economy. Incidentally, Professor Jagdish Bhagwati’s reference to Wall Street – Washington links is relevant in this context.  

The Jagdish Bhagwati reference  Dr. Reddy mentions, I covered it here. Then one must also read this interview of Dr. Liz Warren, Law Professor at Harvard: 

The consumer financial services industry has been the single biggest contributor in the 2000 election cycle, in the 2002 election cycle, and they’re on target to do it again in the 2004 election cycle. George W. Bush’s single biggest contributor to his [2000] presidential campaign was MBNA, the second biggest credit card issuer in the country.

And let’s be clear who’s on the other side: It’s a bunch of middle-class families who are in financial trouble. They don’t give money to political action committees; they don’t hire a bunch of lobbyists; they don’t take out a lot of newspaper ads; they don’t get a big public relations campaign going. … This is about as lopsided as you can get in Washington. Sen. [Russ] Feingold, of McCain-Feingold, once remarked that the bankruptcy bill should be the poster child for why we need campaign finance reform in America. It’s a great big multibillion-dollar industry talking to Congress, whispering in their ear. …

And then you have views of Joh Bogle who always questions the developments in various forums.

The irony is a large part of the world still does not have basic bank accounts. In the same roundtable pointed above, Mark Hannam of Prospect magazine says:

Half of the world or more is still un-banked. Many communities depend on microcredit for access to finance. The opportunity for growth of financial services is still enormous. Large financial institutions based in the west can carry on growing for a long time without having to lend any more money to over-indebted western consumers.

What lessons should a policymaker take from all these developments? Unfortunately, none of the committees that are set up to review financial systems in developing countries acknowledge these developments. I agree, that the main idea is to kick-start the financial system in these places and by mentioning these risks, it won’t start. But again efforts have to made early on to ensure we don’t have a financial system we are seeing in developed world where it has become a norm- all profits are mine, all losses are yours.

Clearly more thought is needed on the topic.

Assorted Links

July 17, 2008

1. Krugman on how FF got so big? Also read his post on impact of rising commodity prices

2. WSJ Blog points Fed holds its breath on inflation. CPI in June- 08 touched 5%

3. WSJ Blog points to Venezuelan way to curb inflation.

4. Mankiw points time to pay menu cost. He also points to articles from-  Summers on FF mess and Meltzer on Fed.

5. JRV points naked short-selling is banned in 19 financial stocks in US. I have mentioned earlierthat shortselling is limited to books. I had also pointed (see this as well) that experts in India make a big hue and cry when such decisions are taken in India. It is pretty similar worldwide and it hardly changes with the nature of development.

6. MR asks what should government do to stmulate the economy 

7. DB Blog points to a new paper that shows both culture and institutions shape each other.

Why didn’t ECB adopt an inflation targeting framework?

July 16, 2008

This is a question which I ask quite often- Why didn’t ECB adopt an inflation targeting framework? It is not easy for a current central Bank to become an inflation targeting bank as there are numerous changes in the structure. However, ECB formed in 1998 and going by the popular ideas in Central Banking then (even now), it should have been an inflation targeting CB.

ECB’s mandate is:

The Governing Council confirmed this definition in May 2003 following a thorough evaluation of the ECB’s monetary policy strategy. On that occasion, the Governing Council clarified that, within this definition, it aims to maintain inflation rates below but close to 2% over the medium term.

So, the main objective is price stability and they have quantified price stability to give it a proper meaning. And to carry on the mon pol, it has the famous two-pillar approach – Economic Analysis and Monetary Analysis.

Despite all this, the question still remains unanswered- why not an inflation targeting centrak bank?

I cam across this excellent paper from Otmar Issing, previous Chief Economist ECB who is credited to have developed the ECB framework. In this paper he provides a fantastic history of the monetary policy and ECB.

He also asks a question similar to mine:

But, why did the ECB not vote for the concept of inflation targeting which seemed to emerge at that time “state of the art”? In short the main reasons were the following:

His answer:

  • Inflation targeting would have required commitment to a specific economic model or to a suite of models. Model here does not mean just a statistical forecasting model but a structural economic model that is appropriate for conducting policy exercises. To put it simply: such models were almost nonexistent for the euro area or –in the case of the ECB `s area wide model- have just come into existence, so that the uncertainty surrounding it was immense.


  • Given these uncertainties, the linkage between the forecast and the monetary policy response becomes less clear: inflation targeting becomes extremely complex, the “charm” of its seeming simplicity is lost, and communication becomes correspondingly difficult.

This is an obvious reason as there were hardly any model that could encompass the entire Euroarea. However, he continues:


  • Alongside these objections, one fundamental shortcoming of inflation targeting was a decisive factor in the ECB’s decision, namely the fact that it completely ignores the relationship – borne out by overwhelming empirical evidence – between the growth of the money supply and inflation.The models commonly used for inflation targeting are essentially models of the real economy, and thus do not assume any independent influence of monetary growth on price developments.

    More generally, the modelling of the financial system is in most cases, stylized to the extreme. Financial variables are limited in number. Developments of the yield curve, risk spreads across financial assets –to mention only a few –are hardly integrated.

    Hence, inflation forecasts, produced by these econometric models, cannot provide a full picture for monetary policy purposes. The question that remains, therefore, is why central banks should rely for their assessment of current conditions and future inflation solely on models that completely disregard this important relationship between money and prices. In an inflation targeting framework it is moreover almost impossible to take adequate account of developments in asset prices.

The third point reminded me of my previous post where I pointed to an article by Wolfgang Munchau. Munchau said the main problem in today’s times is that Central Bank models use the New Keynesian theory which ignores money,credit and financial markets. Issing also talks about the same.

As a result, ECB adopted the 2 pillar approach which tries to incorporate more information before taking a policy stance:

In a nutshell the economic analysis or pillar spans a wide range of indicators and models. In the short to medium term, prices are determined by non-monetary factors such as wages (unit labour costs), the exchange rate, energy and import prices, indirect taxes, etc. Indicators of developments in the real economy include data on employment and unemployment, data from surveys, incoming orders, and so on. This economic analysis also encompasses financial sector data such as the yield curve, stock prices and real estate prices. Asset price trends can yield information e.g. on how the wealth effect is expected to influence the growth of demand of private households.

So, these are the reasons why ECB did not adopt IT and instead adopted the 2 pillar framework.

Now, in India the debates are centred on whether India should have an IT framework? Most people believe it should. They should read Issing’s paper carefully to understand the issues fully. Moreover, the recent developments do tell you that IT framework is indeed too narrow.



Assorted Links

July 16, 2008

1. The most talked about event is Bernanke’s Testimony presenting the semi-annual mon pol to the Congress. WSJ Blog points to the developments

2. WSJ Blog points socialism is alive in US

3. Krugman says the term peso problem wasn’t given by Friedman but MIT lunch room

4. Mankiw humor

5. Hamilton on Fannie and Freddie mess

Fitch downgrades Indian currency, who downgrades fitch?

July 15, 2008

There has been a lot of speculation for many days now that credit rating agencies would downgrade India ratings.

Fitch was the first and it downgraded local currency default rating from Stable to Negative. The overall rating stays the same at BBB-. The press release says (requires a free login):

The revision to the local currency Outlook is based on a considerable deterioration in the central government’s fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,” said James McCormack, Head of Asia Sovereign ratings.

Fitch forecasts the central government deficit may increase from 2.8% of GDP in FY08 to 4.5% of GDP in FY09 based in part on higher on-budget subsidies, interest payments and public wages. The agency expects bonds issued to oil and fertiliser companies to reach at least 2% of GDP this year, implying an underlying central government deficit of 6.5% of GDP or higher.

The markets reacted and fell across all kinds of markets.

The higher  fiscal deficit has been one of the weakest links in Indian economy for a long time and there is no surprise. I also calculated the off-balance sheet items and clearly it makes the entire fiscal deficit much larger than reported.

However, what is ironical is Fitch downgrades India but we don’t have any mechanism to downgrade Fitch itself? I am sure Moody’s and S&P will follow as well and we all know their role in the recent sub-prime mess. Should these ratings continue to be so important that they lead to a bloodbath in markets? The markets clearly seem to be valuing them still despite they failing time and again to safeguard the markets.


I had some more thoughts. Just imagine Fitch sayinga after a few years that India downgrade on this date was due to a modelling error!!

On a serious note, I also didn’t see any of the anchors on various business television channels raise the issues pertaining to these credit rating agencies. Why couldn’t anyone say shouldn’t the raters set their house in order first? Instead. there was a big hue and cry over the entire downgrade.

I am not saying that fiscal deficit is not a problem. It surely is but again, it has always been a problem with India. Still the foreign money kept poring in.

A good review of today’s inflationary trends

July 15, 2008

The recent speech from Andrew Sentance, member MPC, Bank of England is a good one. It reviews trends, causes and future expectations over inflation.

The summary is we might have to live with high prices for a while now unless the emerging markets growth declines and lowers overall demand for these products.

Understanding the Fannie Mae and Freddie Mac mess

July 15, 2008

The sub-prime crisis doesn’t seem to end and after the private sector firms, now is the time to focus on government sponsored firms. Both Fannie and Freddie have been in limelight in the last week as people feel they are going to be bankrupt. Both are not involved in any sub-prime mortgages, However, the overall housing prices have fallen so much, that people expect that they will not be able to service their liabilities.

Treasury worked out a deal with Fed on the weekend (Market movers has an interesting take on the Paulson statement) and there have been a lot of comments on the issue.


The problems with FF have been known for a while now. Greg Mankiw had raised this systemic issue in 2003 in a fantastic speech. He had highlighted concerns and they have just been proved to be true. He also wrote an article in FT in 2004 on the same issue

Assorted Links

July 15, 2008

1. WSJ Blog points over economists’ reaction on fannie /freddie crisis. It also ponders is Fed’s mission becoming too high

2. Ajay Shah pointsto new papers on emerging markets

3. TTR points to reality in corporate boards. He says

Most boards are clubby affairs. Those invited to serve as “independent” directors are pals of the CEO, they brush shoulders in the same watering holes and they are often retired people who value the handsome fees that many companies pay these days.

He should add belong to the same alumni as well.

4. NB points to visual nudges to control speeding vehicles

5. PSD Blog points to a paper on middle class

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