Archive for March 30th, 2009

Have hedge funds worsened the financial crisis?

March 30, 2009

I am finding more and more literature to read. I discovered this very useful publication from Riksbank – Economic Review.

Economic Review (earlier Quarterly Review) primarily contains articles on topics relevant to the Riksbank’s field of operation, but also a monetary and exchange rate calendar, tables and diagrams depicting statistics concerning central banks, financial markets balances of payment.

In 2009’s first review has a nice discussion on hedge funds and its role in the crisis by Maria Strömqvist (A short summary is here as well). In sum it says hedge funds have not really played a role in financial crisis. They have been seriously hit by financial market turbulence and earnings have declined. It also points that hedge funds have lower assets under management compared to other investment vehicles (like Sovereign funds) and cannot really disturb markets. Moreover, most hedge funds are pretty small and cannot do damage on their own.

I don’t quite agree. It isn’t really about assets under management but leverage the funds can take up. Even in LTCM case, it was the same leverage which created enough problems. Though the author does point out that leverage is not much of a problem. But then so much is unknown about these funds that we are never sure of their performance and balance sheets. No matter what the arguments, with this crisis we cannot afford to have any secrecy in financial sector anymore.

Anyways a nice lucid read on hedge funds.


IMF Conference on Japan’s experiences

March 30, 2009

As I said earlier, IMF is on an overdrive at the moment ( I will be posting quite a bit of IMF research papers in days ahead). It organised a seminar on lessons from Japan’s experience.

There are no papers but some interesting presentations. Worth a look.

Assorted Links

March 30, 2009

1. Krugman points to his research on role of gold, money multipliers in Great Depression. He also points 

magazine cover indicator: when you see a corporate chieftain on the cover of a glossy magazine, short the stock. Presumably the same effect applies to, say, economists!!

2. TTR points to a new job for Plan Com Chief- MSA

3. ACB points should we dump the Rajan and Mistry reports?

4. Urbanomics has some interesting posts on financial regulation – one  and two

5. Nudge points Thaler and Sunstein on Time’s top 100 list.

6. Macroblog on Geithner’s bank-fix plan

7. Mankiw points Zimbabwe’s inflation now depends on Bernanke. He also points to young star econs list.

8. FCB points to new research from Fama/French which shows index funds still rule

9. Zingales (via IGMB) saysGeithner plan is a flop

10. Econb has excellent posts – Fed Monetary Base and Fed Balance Sheet

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