Archive for January, 2013

Why don’t Indian farmers grow more fruits and vegetables?

January 31, 2013

A brilliant post by Dr. Richa Govil of Ashoka India on IFMR’s BLog.

She asks why farmers don’t grow fruits and veggies over cereals?


Bhagvada Gita: A Sociological Reading…

January 31, 2013

Devika Mittal of South Asian Univ has this nice short article on the topic.

She compares Bhagvad Gita principles/values with  other sociological texts of western thinkers like Weber and Burke.

Bhagavada-Gita is roughly 2,000 years old yet it has retained its importance as one of the most valuable Hindu scripture. It consists of the sermon of Lord Krishna that was delivered to Arjuna during the mythical Mahabharata war between the Pandavas and the Kauravas. Krishna recited the meaning of “dharma”, the path to liberation from the material word and to attain “nirvana” or salvation. In this paper, an attempt has been made to cull out the social values embedded in the text. The paper also attempts to relate these prescribed values to the theories of 19th century sociologists like Emile Durkheim, Max Weber and Edmund Burke to determine if similarities can be drawn between a 2,000 year old and some 2 centuries year old texts.

Basically and also expected, Bhagvad Gita stands the test of time…It is still relevant and helps understand many of the social changes etc..

I haven’t read any of these texts so have nothing to share..Just wanted to share this as it does point to some common areas between these texts written across time..

Japan’s lessons for America’s budget warriors…

January 31, 2013

Comparison between US 2008 crisis vs Japan’s 1990 crisis is expected to continue for a long long time.

John Makin of AEI points to lessons for US. He says US should avoid fiscal austerity and stimulate economic activity. It should not follow policies of Japan’s stop and go approach towards stimulus.


How and why Paul Samuelson shifted based from Harvard to MIT…

January 31, 2013

Roger Backhouse of University of Birmingham writes this nice paper. This is pretty much folklore in economics that how  MIT’s econ dept became the force as Paul Samuelson joined MIT.

However, Backhouse nicely stitches this tale of how and why Samuelson quit Harvard to joint MIT .


From Monetary Science, Fiscal Alchemy to monetary alchemy, fiscal science

January 30, 2013

A nice article by Jeff Frankel. He says earlier we thought monetary policy was a science and fiscal was alchemy. Time to think otherwise..

2013 is a 100 year anniversary for 2 institutional innovations- income tax and Federal reserve..


Prof. Avinash Dixit’s suggestion to curb corruption (based on Lin Ostrom’s insights)

January 30, 2013

Prof Avinash Dixit has this interesting paper on resolving corruption in India (and elsewhere). He is to discuss the paper at IGIDR in early Feb as well.

His suggestion is very different from Kaushik Basu’s who wanted different incentives  for bribe taker and bribe giver. But am sure like Basu’s suggestion this should also bring some interest and discussion.

Prof. Dixit uses the community approach on lines of Lin Ostrom. Here corporates ostracize those companies which are found engaging in corruption. And this ostracisation is going to happen on terms agreed mutually by the industry.


RBI’s Third Quarter review of mon policy..

January 29, 2013

Here is the analysis of RBI’s Q3 mon policy. In line with our expectations. RBI cut both repo and CRR by 25 bps each.

Also read the main policy doc and the macro report. The macro report did send fears y’day that perhaps no rate cuts in the policy. But it did come..


How Mauritius changed its sugar industry following Schumpeterian creative destruction..

January 29, 2013

A nice speech from Rundheersing Bheenick, Governor of the Bank of Mauritius. He speaks on the occasion of Omnicane raising Medium term notes with StanC as its financial partner. It is a big event as Mauritius is looking at developing its orporate bond market. Omnicane is a sugar company in Mauritius.

In the speech, he speaks how Mauritian sugar industry responded to challenges imposed as Mauritius joined WTO:


How Iceland’s recovery from crisis was different…

January 29, 2013

A super analysis from Már Guðmundsson, Governor  Central bank of Iceland.

He shows how Iceland had a very different experience with respect to policy responses to the crisis and recovery from the same.

First Iceland did not bail out its banks. It could not as banks were nearly 10 times larger than its GDP. What they did instead was to save the depositors and conducted swap facility to provide foreign exchange. So, in the end Iceland averted a sovereign debt crisis which the developed world is facing:


Rethinking Conventional Monetary Wisdom…

January 28, 2013

Steve Hanke of Cato institute writes a food for thought piece.

He offers a monetary tour to 2013 and points to 3 ideas for 2013:


From “Man-Cession” to “He-Covery”..

January 28, 2013

Silvio Contessi and Li Li of St Louis Fed have this nice short note on the topic.

They say the recent recession was basically a mancession where men lost more jobs thean women. Why? Because they formed higher share of employment in sectors like construction and housing. These latter sectors were affected the most in the crisis. hence men lost more jobs compared to women which were in sectors like education and healthcare.

And likewise recovery is basically a hecovery where recovery led to more men getting employed as the two sectors showed growth. However, recession has led to concerns on state finances which has impacted educaiton. So recovery has not impacted  women employed in education etc. However, faster growth will lead to jobs for women in otehr sectors:


Link Between Slave Owners and Modern Management..

January 24, 2013

It seems some of the so called modern management practices have their origins in slave plantations. This is not to glorify slavery at all, just to point to the linkages.

Caitlin Rosenthal of HBS explains the findings in her ongoing proj.:


History of urbanisation in India under British Rule..

January 24, 2013

Nice paper by Prof. Howard Spodek of Temple Univ. Apparently IGNOU is designing a course on  history of urbanisation in India. He has prepared a draft for the course.

Prof. Spodek has done some remarkable work on history of Indian cities. In this paper he  covers the urban development in major cities of Mumbai, Kolkata and Chennai (all new names) during Brit times:


Understanding financial crisis via Card Games…Bridge players vs Poker players

January 23, 2013

A terrific paper from Leonardo Becchetti, Maurizio Fiaschetti  and Giancarlo Marini ( Economics dept, University of Rome).

In card games, bridge players are seen as more team-believing and altruistic. In poker games, players are seen as individualistic and selfish. Apparently Akerlof and Shiller in their famed book suggested that there are more poker players these days which has led to current bad practices in financial markets.

The authors evaluate this hypo of  Bridge/ Poker players being more trustworthy/selfish. They find the hypo to be true:


Central Banking and mathematics

January 23, 2013

A superb speech by Dr KC Chakrabarty of RBI.

He speaks at  The Vivekananda Education Society:


Citizen’s Guide to Unconventional Monetary Policy..

January 22, 2013

Interesting title.

A primer on Unconventional Monetary Policy by Richmond Fed econs – Renee Haltom and Alexander L. Wolman.

And this one is for citizens.

Nudging to make MDGs more effective..

January 22, 2013

Nice paper by Varun Gauri of WB.

She proposes using the Nudge approach to simplify MDGs. This will make countries adopt them better:


Internship program at Dept of Financial Services, Finance Ministry

January 22, 2013

Another internship program at MoF, India. This one is at Dept of Financial Services, another dept in FInMin like DEA. Deadline is  10-Feb-13.

Unlike DEA which looks at mainly macroeconomic development, DFS (as the name suggests) looks at financial sector issues. Students interested in finance may be interested..

Pass on the word..

Nine facts about top journals in economics..

January 21, 2013

David Card and Stefano DellaVigna have a paper on this. Findings explained in voxeu:

‘Publish or perish’ has been the rule in academic economics since forever, but there is a widespread perception that publishing in the best journals has become harder and much slower. This column presents new evidence confirming the perception. The number of articles published in top journals has fallen, while the number and length of submissions have risen. The profession should consider recalibrating publication demands to reflect this new reality.

 The real problem is length of papers….they keep rising and rising..

Comparing Greece in Gold Standard vs Greece in Eurozone

January 21, 2013

A super paper on the topic. Greece may be in real bad shape but its central bank econs have some decent papers on many aspects of Greece and Eurozone economies.

The origins of the Greek-sovereign debt crisis were the country’s large fiscal and external  imbalances. The key factor that abetted those imbalances was the absence of a short-tomedium term adjustment mechanism — due to perceptions of sovereign bailouts — in the  euro-area that would have reduced members’ external imbalances. This situation  contrasts sharply with the adjustment mechanism under the classical gold standard. Under  the gold standard, countries with external deficits would experience losses of gold  reserves, higher interest rates, lower money and credit growth, and reductions in wages  and prices, which helped restore trade competitiveness. We draw two main conclusions.  First, the durability of a monetary union is crucially dependent on the existence of a wellfunctioning adjustment mechanism. Second, adherence to a hard peg is no panacea and  cannot be sustained without the support of credible fiscal institutions.

The paper has some nice basics on functioning of economies under gold standard. Even then there were core and periphery members with former having stronger finances and latter having weaker finances.

What countries were members of the classical-gold-standard club?

Historians  distinguish between “core” members of the classical gold standard and the peripheral  members. Core countries include France, Germany, and the United Kingdom, with Belgium and the Netherlands also sometimes considered part of the core category. Among the common features of these countries are that each had relatively-welldeveloped financial markets and each had a national central bank. The periphery included Canada, South Africa, the United States and parts of Latin America (e.g. Argentina,  Brazil, Mexico), Asia (including Australia, New Zealand) and Europe (e.g. AustriaHungary, Greece, Italy, Spain, Portugal, Russia, Switzerland, the Scandinavian countries).

Their economies were typically financially less-developed than those of the core countries and most of them did not have a national central bank during at least part  of the gold-standard period. Some of the peripheral countries participated in the gold standard only during part of the 1880-to-1913 period. Additionally, some countries that were not formally on the gold standard nevertheless followed policies that were consistent with a fixed price of their currencies against gold in an effort to “shadow” the gold standard. With regard to  countries that are sometimes considered to have been members of the European periphery, the following particular circumstances merit comment.

Greece became a member but opted out soon:

Greece joined the gold standard in January 1885 but dropped out in September of  1885, because, as Lazaretou (2004, p. 14) noted, the government failed to control  the fiscal deficits and thus to support the credibility of the system. It rejoined the  gold standard in 1910. Given the very-limited duration of its participation in the gold standard, and the inconsistency of its policies with such participation, in what follows we do not consider Greece to have been a member of the periphery.

So similar problems but Greece continued in EZ but dropped out of GS.

The paper nicely explains the adj mechanism in GS:

For its core participants, the gold-standard regime possessed an adjustment mechanism that served to reduce external imbalances (Scammell, 1965; Eichengreen, 1996). Consider first the operation of the gold-standard adjustment  mechanism in the absence of capital flows. To simplify the discussion, let us assume a  two-country world comprised of Greece and Germany in which Greece runs a trade deficit and Germany runs a trade surplus. Let us also assume that only gold coins circulate and prices and wages are flexible in both countries. In such a situation, the goldstandard adjustment process — called the price-specie-flow mechanism – worked as  follows: 

• Greece experiences a gold outflow, decreasing the money supply and reducing credit growth (perhaps reducing the quantity of credit) in that country, causing prices and wages to fall.
• Germany experiences a gold inflow, increasing the money supply and raising credit growth in that country, causing prices and wages to rise.
• As a result of the change in relative prices, Greece’s exports rise and its imports fall, eliminating its trade deficit. The opposite occurs in Germany.

Even this gold outflow would not be needed if central banks raised policy rates:

Capital flows reinforced the overall self-equilibrating character of the system as it operated in the late-19th and early-20th centuries. Typically, the central bank of a country experiencing a trade deficit would increase its discount rate, reducing its holdings of domestic interest-bearing assets and drawing cash from the market (Eichengreen, 1996, p. 28). This action produced two main effects. First, the money supply and credit growth in the country raising rates declined, reducing (or eliminating) the need of gold outflows from that country. In fact, capital could flow into the country as a result of the rise in the discount rate, smoothing the required adjustment. Second, the rise in interest rates would reduce economic activity in the country concerned, decreasing prices and, thereby, contributing to the elimination of the country’s external imbalance, through both relativeprice adjustment and the decrease in demand.

The pre-World War I gold standard operated in the above manner among the core participating countries (Scammell, 1965, p. 35). The core countries possessed the institutional capacity to make their commitment to the gold standard credible; therefore, they were able to issue debt denominated in their own currencies (each of which represented a certain amount of gold).

USeful read. A nice primer on GS as well..