Archive for April 28th, 2010

India’s core inflation – a note

April 28, 2010

On March 19 2010, RBI increased interest rates before the official policy. The main reason was rise in inflation and inflationary expectations.

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2010 South-west monsoon is expected to be normal

April 28, 2010

The amount of rains in monsoon season is always a very important economic indicator every year. This year it will be all the more as we had a severe drought last year and had deficient food production which needs to be replenished. Inflation also will depend on monsoon. India also needs to push agriculture reforms and a better growth will lead to more investments.  And then there are so many connections to monsoons in India – rural income/demand etc.

IMD has released its forecast (HT: India Industry Tracker Blog, a blog by my colleague on indian industry) for south-west monsoon (June-Sep) for 2010. IMD uses a two-stage forecasting strategy for long range forecasting of the south-west monsoon rainfall over the country as a whole. The first long range forecast is issued in April and the forecast update is issued in June.

The industry blog  further explains how IMD categorises rainfall amounts:

The IMD categorises rainfall into various sub-sections:

  • Drought — rainfall less than 90% of the LPA
  • Below normal monsoon — rainfall between 90-96% of the LPA
  • Near normal monsoon — rainfall between 96-104% of the LPA
  • Above normal monsoon — rainfall between 104-110% of the LPA
  • Excess monsoon — rainfall more than 110% of the LPA.

So, the first forecast for 2010 is:

IMD’s long range forecast for the 2010 south-west monsoon season (June to September) is that the rainfall for the country as a whole is likely to be Normal.
Quantitatively, monsoon season rainfall is likely to be 98% of the long period average with a model error of ± 5%. The Long period average rainfall over the country as a whole for the period 1941-1990 is 89 cm.

 For a graphic on India’s monsoon forecast vs actual rain, see this. Need to run some statistics on this.

Learning about economic geography

April 28, 2010

Paul Krugman recently wrote a superb paper on one of the topics he knows best – economic geography. After all his work on International Trade and international geography got him the Sweden prize.

In a typical Krugman style he titles the speech as The New Economic Geography- Now Middle Aged 🙂 In this paper, Krugman tells you about how economic geography became mainstream and how there was opposition from economists and geographers. He addresses the criticisms and then says how is his broad idea still relevant:

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How Too big to fail creates problems for monetary and financial regulatory policies?

April 28, 2010

Dallas Fed economists Harvey Rosenblum, Jessica Renier and Richard Alm have written an insightful paper on nthe subject. We all know TBTF is a serious concern but how does it hinder policies?

In monetary policy there are 4 transmission channels – securities market channel, asset prices, wealth channel and exchange rate channel.

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