Archive for March, 2013

Australia’s test captains and central bankers…similarities?

March 30, 2013

My earlier post drew linked Australian cricket with Minsky theorem of instability and Minsky moment. This was based on Ian Chappel’s article.

Well in his yesterday’s¬†article (29-Mar-13), Chappel laments on lack of options for captaining Australia’s test team. If Clarke is unfit as in 4th test against India, there is a problem. Amazing really to see the decline in Aus team. At one time there were so many of them in Ponting’s team and now nonw.

Anyways Chappel points to this interesting statistic:

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Efficacy of Monetary Policy Rules in India…

March 28, 2013

A nice speech by Deepak Mohanty on the topic.

I am coming directly to his analysis of using Taylor rule for Indian economy:

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Fiscal Imbalances and Indebtedness across Indian States: Recent Trends

March 28, 2013

Figuring State economics and finances has become one of the most important things given the recent surge in importance of states. The most important and also the only report to figure all this is RBI State Finances report. It is easily the best thing to read. But the report is really long and by the time you finish one, next one comes ūüôā¬†Hence, one has to find shorter papers where one gets some trends and can build upon his/her knowhow.

Here is a nice paper by NIPFP econs —¬†Tapas Sen and Santosh Dash. It conveys the trend in State finances from 2000-01 to 2010-11. For simplicity it divides the period into two 4-year periods ¬†– ¬†2000-04 and 2007-11.

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Is good economics always good politics? Not really…

March 28, 2013

A brilliant food for thought paper from Acemoglu/Robinson duo. It is titled as –¬†Economics versus Politics: Pitfalls of Policy Advice and is to feature in Journal of Econ Perspectives. As it features in JEP, it is in plain English which is such a ¬†relief. One can only be in awe of the amount of research and writing the duo does. It is not a joke..

The new paper looks at a very important issue of econs advising government. Most econs prefer to stick to economics without bothering about political consequence. The adage is ” good economics means good politics”. So don’t bother about political consequence. Right.

Wrong. The authors say we should be mindful of the political consequences as well:

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The Economics of Political Transitions: Implications for the Arab Spring

March 26, 2013

It has been two years since Arab Spring began. So how are the various Arab economies performing since the Spring?

Padamja Khandelwal and Agustín Roitman of IMF review the economies in this paper. They also compare the performance with economies under similar political instability (PI) cases. The Arab economies indicators are broadly similar to other PI countries:

Our empirical work indicates that episodes of severe social unrest similar to those experienced in the ACTs are accompanied by a sharp deterioration in macroeconomic outcomes. Countries experiencing political instability (PI) undergo sizeable output losses. The recovery is often sluggish, and output gaps persist for about 5 years, leading to an increase in unemployment. The deterioration in fundamentals and heightened macroeconomic uncertainty lead to lower investment. Fiscal positions deteriorate and debt levels rise. Reserves decline during PI, and thereafter improve slowly. External current account balances improve over the medium-term in many cases, but not all. High external vulnerabilities can lead to added pressures and large currency depreciation, which in turn, can lead to higher inflation.

Many of the economic trends that have characterized other episodes of political instability are becoming evident in the ACT. Output declined in 2011 in Egypt, Tunisia, and Yemen, but remained more stable in Jordan and Morocco. Economic activity has remained at low levels in 2012, and similar to past episodes of PI, unemployment has increased. Macroeconomic stability has come under pressure as fiscal deficits have widened from already high levels, and external current account deficits have deteriorated. International reserves have declined. Inflation has remained muted in most countries due to weak aggregate demand.

In terms of prospects over the medium-term, the recovery in the ACT is complicated by weak external demand (especially from European trading partners), high food and fuel prices, and the need for sizable fiscal consolidation due to weak initial fiscal positions in the ACTs. Thus, economic recovery in the ACTs could be delayed even more than in past episodes of PI. Pressures on fiscal and external stability are also likely to be more intense. Although policy actions can help mitigate some of these adverse factors, weak transitional governments may  find it politically difficult to implement measures to maintain macroeconomic stability and  avoid a prolonged growth slump.

Continue with the reforms. Pain is likely to remain over medium term..

Birth of Nation as a political form…

March 26, 2013

Acemgolu/Robinson duo (and many others) look at reasons for why nations fail? However, why and how did this idea of nation come about? History tells you there were two predominant political forms- city-state and Empires. So where did nation come from?

Pierre Manent a French political scientist, looks at this very interesting question:

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The five things economics majors should know…(a micro-economist’s perspective)

March 26, 2013

There has been huge criticism/debates on how economic teaching erred and what changes need to be made in the curriculum to avoid future Occupy Harvard cases. However, much of the debate has centered around changes needed in macro and financial world.

David Hemenway of Harvard School of Public Health writes this interesting paper in the recent edition of real-world economics review (a must read journal). He gives a micro-econ perspective on what he expects a econ major to know.

He cites five things he wishes econ grads (micro ones) should know:

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How history influences the past ..Case of Poland

March 25, 2013

Irena Grosfeld and Ekaterina Zhuravskaya  in a voxeu post show how history influences Poland of today.

History influences the politics of every nation. But how exactly can we measure it? This column presents new research that assesses the influence of empires on Poland’s current political makeup. In particular, the centuries-old partition of Poland continues to influence politics through its long-lasting effects on infrastructure and religion.

They show how earlier partition of Poland determines the infra of today:

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Role of an Economist in Economic Development..(Student vs Saviour)

March 25, 2013

Peter Boettke and Christopher J. Coyne of GMU have this nice paper on the topic. It also has some advice for current and wannabe econ advisers for government on development issues.

They review the history of dev econ in brief and show why there is no holy grail for development. The factors for development have varied from  investment to innovation to human capital and now to instis. The authors show why all these ideas have failed broadly. I am skipping all this..

On instis, they say development eco does not include (read model) the role of informal, indigenous institutions. They point to the concept of metis:

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Minsky moment for Australian cricket?

March 25, 2013

P0st 2008-crisis, many econs/ideas have risen from the ashes and many have been buried (or in the process of being buried). One such case of rise is Hyman Minsky whose Minsky moment has become one of the most quoted phrases.

Minsky turned the basic premise that we should not worry in good times. Infact it is in good and prosperous times (when ppl say this time is  different) that financial fragility/risk starts to build into the system. This euphoria then leads to excessive risks and then comes the Minsky moment when all the sand castles simply get washed away.

Well, I think Minsky and his moment could be applied to most walks of life. Just as you think, things are going well (in career, job, relationships etc.) you get a Minsky moment..

So this piece from Ian Chappel on Australian cricket stirred me a bit and took me to Minsky.

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Estimation of Counterfeit Currency Notes in India

March 22, 2013

A nice paper¬†on an important but relatively unknown area. It is by RBI econs –¬†Shri Sanjoy Bose and Dr. Abhiman Das.

They give a broad understanding of various research and issues on counterfeiting of currency and propose a method to estimate counterfeit of currency in India:

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Building LEGO company brick by brick…

March 22, 2013

A super case study by HBS Profs. on LEGO-  the revered toy company. HBSWK reviews the broad findings of the case.

Broadly the case tells you how the business principle of keeping things simple and superior quality matters no matter which century you start. Its founder Ole Kirk Kristiansen¬†had this logo – “Only the best is good enough”. This still stands true:

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Fed credit policy during the Great Depression..

March 22, 2013

Though lot is known still it is always int to read on Fed policy during Great Dep.

Here is  a note from  Tim Sablik of Richmond Fed. The credit policy of Fed has been criticised by many for providing support  to selective firms/markets. He says Fed used the same policy even in GD, albeit in a limited manner:

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East India Company: The Original Too-Big-to-Fail Firm..

March 22, 2013

Super stuff from Nick Robins. There is huge criticism on too big to fail firms and why it should end. So Robins tells us  East India Company was perhaps the first TBTF. There is large research on East India company and this is quite a read.

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Why is Zimbabwe growing strongly despite poor eco fundamentals?

March 21, 2013

It is interesting to note a different kind of paper on Zimbabwe. We usually read papers on hyperinflation and Mugabe when it comes to Zimbabwe. To read papers on higher growth is really a surprise.

Craig Richardson of Cato who is a Zimbabwe expert points Zim eco has zipped recently. However, it is going to be short-lived as it is based on aid/grants from abroad, excessive govt. expenditure (oh no, not again) and rise in prices of commodities it exports:

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Mixing Hayek’s thoughts with Friedman’s..a case of bad history..

March 21, 2013

There is huge confusion over the ideologies of these two guys. Both are usually seen as torch-bearers of free market camp.

Angus Burgin¬†(assistant professor of history) at¬†Johns Hopkins University says Hayek’s views differed from Friedman on regulation. Hayek supported regulation but Friedman did not. Both however opposed central planning/government intervention which is dubbed usually as Keynesian (which is also wrong whatever little I read).

The same mistakes are being made by Republicans:

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Macroeconomics of Populism..(In Latam, India and everywhere else)

March 21, 2013

I came across this paper by Rudiger Dornbusch and Sebastian Edwards. It is based on a NBER conference hosted by the duo to understand the economics of populism in Latam. There is a much bigger paper with detailed experiences on latam here.

I am actually surprised that this paper is not quoted anywhere with respect to Indian economics. This sums up all there is to understanding India’s economics since independence and recent decline. ¬†The Economic Survey and RBI speeches/reports which try and make sense of the recent slowdown blaming Eurozone, RBI policy (RBI defends it ofcourse) etc should just point to this paper. Nothing else is needed really.

For instance, in the opening para which is on Latam, you just replace Latam with dashes and fill it with  India and you get the picture:

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Emerging Geopolitical Trends and Security in the ASEAN, China, and India..

March 20, 2013

An insightful paper by C. Raja Mohan of Observer Foundation. A different kind of reading. 

It tells you the geo-political relations are changing in Asian region with growing powers of China and India:

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Where Will the Next Financial Crisis Begin?

March 20, 2013

Richard Rahn of CATO institute tries to answer the question.

He lists countries on this variable called growth-deficit ratio..

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Using statistics to understand economic history when data is limited..

March 19, 2013

The title of the post is a paradox of sorts. It is based on this paper by prof Pter Temin of MIT.

The paper investigates whether there was an integrated wheat market in early Roman empire. However, data available is limited. Prof. Temin shows how to use limited data into stats to get the desired results.

Frankly, I did not understand the stats bit much. What amazed me the approach to figure whether the wheat market was integrated:

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