Archive for May 12th, 2011

Transition from High Growth to Stable Growth: Japan’s Experience

May 12, 2011

A nice speech from Masaaki Shirakawa, Governor of the Bank of Japan. The speech is given on account of Central bank of Finland’s 200th anniversary. So there are some nice anecdotes linking Japanese economy with Finnish:

I felt it would be best to compare the experience of the Japanese economy from its high-growth period onward, with that of the emerging economies which are currently growing at a very rapid pace. Although it is not well-known, Japan’s automobile  industry  first ventured into the European markets through Finland back in 1962. At that time,Japanese automakers had little name recognition, and one firm, in order to prove the safety of its car to Finnish consumers, had the car driven off a ski-jumping hill. I have been informed that the car landed safely and the driver was not harmed. The 1960s, when such episodes of Japanese firms were born, was the heyday of the Japanese economic miracle.


He then discusses the Japan’s high growth phase:


Behavioral characteristics are as important a factor for financial distress

May 12, 2011

Yvonne McCarthy of Central Bank of Ireland writes a paper on the topic exploring cases in UK and Ireland.

He says apart from demographic and socio-economic factors, behavioral traits are as important for financial distress. importantly, more impulsive and disorganised people are likely to be more financially stressed compared to composed and organised people.


Should India’s Monetary Policy respond to Asset Prices?

May 12, 2011

A nice timely paper by RBI economists Bhupal Singh and Sitikantha Pattanaik. The question they look at it age-old should monetary policy look at asset prices? They look at the issue from RBI perspective.

The study shows that while interest rate changes cause movements in stock prices, monetary policy does not respond to asset prices. This suggests the asset price channel of monetary policy transmission exists. Within assets, credit markets explain a significant part of asset price variations over medium to long-run.

Given this, authors maintain monetary policy should not be looking at asset prices and asset price bubbles could be better addressed through micro and macro-prudential measures. These measures are enhanced when implemented in a sound macroeconomic policy environment.


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