Archive for September 17th, 2013

Why do we worry over falling growth but not high inflation?

September 17, 2013

In the last 2-3 years or so, I have usually noted media cry over falling markets/slowing growth but not much worried over spiraling inflation. As IIP and CPI are released on the same day, the next day reports celebrate/cry over IIP trends but not much is written over CPI trends. Even analysts tend to focus more on IIP and not much worried about CPI.

This blog has always supported a quick regime shift to CPI for monetary policymaking. How many countries look at PPI/WPI kind of measures to assess inflation for policymaking?  How many people buy products based on WPI?

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Dr Rajan, please stop this practice of revealing outcome of mon policy upfront to FM/PM/whosoever…

September 17, 2013

There is huge hype around Dr. Raghuram Rajan’s first mon pol meeting on Sep 20. As always media is going crazy over expectations from Dr. Rajan. Despite macro fundamentals remaining weak, both media and markets have their own set of stories.

Anyways, this blog had hoped that Dr. Rajan had rightly set his contract with finmin before taking the job. But this story does not really suggest any improvement in the situation.  Once again, the policy seems to have been told upfront to PM/FM:

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Coase’s idea on monopolies..

September 17, 2013

Literature has poared post the sad demise of Prof Coase. Much is written about how his ideas about transaction costs and property rights transformed economic systems.

However, I was unaware of his work on monopolies. Kevin Bryan Doctoral student at Kellogg School of Management points to his work on monopolies. Prof Coase said monopolist is unable to earn rents as suggested my micro-1:

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Does voting rights lead to financial development…

September 17, 2013

A really interesting paper connecting political systems to financial systems. It is written by Hans Degryse (KU Leuven, Tilburg University and CEPR), Thomas Lambert (Université catholique de Louvain and Université Lille 2 ) and Armin Schwienbacher (Université Lille Nord de France – SKEMA Business School).

They say countries which get voting rights also end up banking systems before other countries. Countries which delay voting rights lead to development of capital markets:

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