Archive for November 13th, 2009

What is a Beveridge Curve?

November 13, 2009

St Louis Fed Economists have this very useful short note on the same. They explain:

Job openings (vacancies) and the number of unemployed workers tend to move in opposite directions over the business cycle. Expansions are usually associated with plentiful vacancies and a low number of unemployed workers. During recessions the unemployment pool swells while employers seek to fill fewer job openings.

The inverse relationship between vacancies and unemployment is known as the Beveridge curve.

This is pretty interesting relationship.

The authors then track this relationship in previous crisis.

  • In the 1980s recession, the vacancies started to increase faster than decline in unemployment. The rise in vacancies then led to a fall in unemployment with a lag
  • However in both 1991 and 2001 recession vacancies hardly picked up  and unemployment persisted. This led to jobless recovery.

What about this one?

What does this all imply about the possibility of another jobless recovery? It depends on the path of the adjustment back toward the upper-right corner in the chart. During the current recession, employment declines have been more dispersed. Only one-fourth of job losses have occurred in manufacturing; the sectors hit by the housing and financial crisis (construction and financial services sectors) shouldered more of the burden. Still unknown is the extent to which these sectors will recover and rehire workers or if these workers will be forced to look elsewhere for new jobs. The latter scenario would suggest the possibility of another jobless recovery.


Here is another previous post on jobless recovery. This one looked at another useful paper by San Fransisco Fed Economists.

Paul Volcker – Article and Interview

November 13, 2009

NYT has a nice article on Paul Volcker. In the end he says:

He operates from his own offices in New York, communicating with administration officials and other members of the advisory board mainly by telephone. (He does not use e-mail, although his support staff does.) He travels infrequently to Washington, he says, and when he does, the visits are too short to bother with the office. The advisory board has been asked to study, amid other issues, the tax law on corporate profits earned overseas, hardly a headline concern.

So Mr. Volcker scoffs at the reports that he is losing clout. “I did not have influence to start with,” he said.


Minneapolis Fed has a detailed interview of Volcker. It is done by outgoing President of Minneapolis Fed – Gary Stern. I have just started to read this interview. Needless to say initial bit is loads of wisdom.

Indian political system – why don’t we see the risks?

November 13, 2009

If we could have an index for assessing the political climate it would resemble a mirror image of the equity market index. Each time it touches a new low you think this is the end, it always surprises you with a lower dip. The sensex may still decline but there is no upwards trend in the Indian political index.


RBI has released a few interesting reports

November 13, 2009

RBI has released very good reports in recent months.

All are very useful and a must read. They are all on different and important topics.  I know that is a lot but atleast read the exec summary for some broad idea.

I just finished reading the Prime Lending Report which is a very important reading. GIves you a good snapshot of what these lending rates are, history of lending rates in India and the issues with it. As they are non-transparent, the group has suggested a Base Rate which will be transparent and more forward-looking. A shift to Base Rate has ramifications for all of us. So it is to be read and understood properly. We don’t know whether it will replace BPLR system but it is important to be prepared.

Then it has also released a vision report on payments system in India for 2009-12. Payments system is one of the least understood and documented part of the financial system. Central Banks role in keeping them healthy and robust is really a thankless job.

Happy reading. 



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