Archive for February 8th, 2012

A Guide to RBI’s Weekly Statistical Supplement – Part II

February 8, 2012

As promised, here is part -II of guide on RBI’s WSS. This includes tables on banks operations and money supply. It explains critical concepts and calculations like SLR, CRR, Adjusted SLR etc.

This is to be read with Part-I.

Happy following WSS (it is really complicated, so be patient)

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Death of fiscal policy as a stabilization tool?

February 8, 2012

I so wish economists stop using words like death of a theory. We have had so many deaths in the economic research history. There have been papers claiming Death of Beta, Death of money as a target for inflation, Death of Keynesian economics etc. And each time they come back making it look like a bollywood movie/ hindi soap opera where leading characters keep coming back after deaths!!

I was really surprised by this paper from James Bullard, head of St Louis Fed (exec summary here, ppt here). He says the crisis proves there is no use for fiscal policy as a stabilization tool and hence there is death of this theory. I was even more surprised to see someone calling death of fiscal policy for stabilization purposes as we have seen some real action in this crisis.

He says this crisis led to resurgence of fiscal policy but the results were disappointing:

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Fed’s QE leading to inflation finally?

February 8, 2012

Daniel Thornton of ST Louis Fed watches every Fed move and does not really like what Fed has done in the crisis.

In his recent research he says till now QE did not lead to any inflation etc. Reason most QE financing was basically via bank reserves. These reserves instead of getting lent etc sat on Fed’s balance sheet. And as a result no real impact on inflation or economic activity.

However, recently times have changed. It seems one measure of money supply – M1 (Currency+Demand Deposits) – is rising. This is because there is a  rise in demand deposits (in US they call them checkable deposits):

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Understanding Psychology for Responsible Financial Behaviour

February 8, 2012

It is always good to hear policymakers talk about psychology and behavioral economics.

RBI Dep Gov. HR Khan gives this nice  speech on the topic. He covers how certain asopects of behavior lead to market movements, market anomalies etc. The summary is:

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