Archive for April 8th, 2011

Emergence of Chinese Automobile sector

April 8, 2011

Mark Baker and Markus Hyvonen of Reserve Bank of Australia have written a nice writeup on the topic.

People might not be knowing this – China has become the largest producer of automobiles in the world. Authors say:

(more…)

Advertisements

History of clearing houses..

April 8, 2011

In case some have missed it, Bernanke’s recent speech on clearing houses is a good read.

What are clearing houses?

(more…)

Is QE by Fed fueling the Rise in Commodity Prices?

April 8, 2011

No says Reuven Glick and Sylvain Leduc of FRBSF in this paper. Their paper shows it is actually an opposite case. Fed passing QE signals that US economy is weak and there would be lower demand. This leads to lower commodity prices and not higher as most make it out to be.

This Economic Letter examines the effects of Fed LSAP announcements on commodity prices and other financial variables. Using daily data, we show that commodity prices actually tended to fall following such announcements. These effects suggest that market participants may have viewed LSAP announcements as signaling lower future economic growth in the United States or indicating greater risk rather than implying higher inflationary pressures.

(more…)

Importance of Rational Inattention in economics

April 8, 2011

Antonella Tutino of Dallas Fed writes this amazing research note.

Most economics models assume rational expectations i.e. people understand and react to information quickly. They react in a symmetric fashion meaning reactions to price rise is similar to price decline as well.

However, Rational Inattention theory has different take. People have limited ability to focus and process information. Hence, they react differently to certain information based on their situation/understanding. The responses are also asymmetric. They may react differently to price rise vs price fall. Then they also tend to focus on information selectively and may miss out on more important information.

This is how people are and has huge importance and implications in economics.

(more…)


%d bloggers like this: