Archive for October 26th, 2009

Japan’s lost decade – how could it have been avoided?

October 26, 2009

I was just quick reading this interesting paper from Daniel Leigh of IMF. As it is quite technical, I just read the english bit. A paper on Bank of Japan and lost decade is just too tempting.

Bank of Japan has been hugely criticised for making a Japanese recession a prolonged slump or what is called as Japan’s lost decade.

(more…)

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A profile of Jurgen Stark – ECB Chief Economist

October 26, 2009

FT has an interesting profile of Jurgen Stark, chief economist of ECB. He is clearly not happy with US economists and is a highly conservative economists. He is also concerned with the massive monetary and fiscal stimuli which are leading to worsening of the moral hazard problem. He says intervene to minimise crisis but it should be cautious.

The profile is also very interesting as it gives you insights into German economics.

Stark cultivates a hardline image – his surname is the German word for “strong” – but that morning there were light, or at least sardonic, touches. In the US, he noted dryly, “everything is great”. There was the “Great Depression” of the 1930s and the “Great Inflation” of the 1970s. Stark paused. “I’m not so sure it was so great,” he said. Then there was the “Great Recession”, as some people are calling this period. Stark wanted to explain the ECB’s “exit strategy” – how the central bank would unwind “in a timely fashion” all the exceptional measures it has taken – and to warn governments of the perils of not quickly reining-in public sector debt. But pointed criticisms came quickly. He railed against economic growth “based on large and growing imbalances, reflected in asset prices and credit bubbles as well as global current account imbalances, which ultimately proved to be unsustainable”. And he attacked “potentially flawed indicators and concepts” used by US-trained economists

🙂 You often come across this grudge European economists (and elsewhere as well) have against US economists.

You get a glimpse of German School of Economic thought- Ordnungspolitik

His initial speciality was in labour markets, and the prevailing school of economic thought was Ordnungspolitik – the distinctly German tradition (without a real translation or equivalent in English) that allows markets to operate freely, but with clear rules and limits. The framework developed as a reaction to the brutal interventionism of the Nazi regime. Together with an abhorrence of inflation dating from the hyper-inflation of the 1920s, a reliance on exports stemming from postwar necessity and a long-established German industriousness, Ordnungspolitik helps explain how German policymakers have thought since 1945.

And yet the global economic crisis that erupted in August 2007 forced a policy reaction that appeared to have little to do with Ordnungspolitik.

Read on for more details…….


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