Archive for October 9th, 2013

Should the ECB publish its minutes?

October 9, 2013

Well ECB member Joerg Asmussen has expressed that ECB should publish its MPC minutes. The proposal has been controversial from the beginning as this opens the bank to political and public pressure.

Hans Gersbach and Volker Hahn propose that publish minutes but do not disclose who said what:

The publication of attributed voting records and minutes of the ECB council’s meetings would increase the influence of national governments and discourage pro-Eurozone behaviour. This column argues that this would be undesirable. Publishing non-attributed summary minutes, however, would enhance the ECB’s accountability towards the public.

Well, markets are pretty good at guessing. So it is always difficult to hide this. BoE does follow the same but people can figure who said what based on voting recrod. Same with RBI which publishes its TAC minutes (not a MPC though) but people can guess what the Governor would have said based on his policy decision ..

The thing is  — it is usually difficult to keep things somewhat transparent. Either you do it or don’t do it as markets have their ways of making out anyways..

It is not about low cost housing but affordable and working habitats..

October 9, 2013

Superb piece by Prof Ricardo .

He says people do not demand low cost housing. They instead want a habitat:

Most developing countries, and many rich ones, define their housing deficit according to the number of families living in units deemed socially unacceptable. But what is meant by unacceptable varies greatly from country to country. Piped water, sewerage, and electricity are seen as essential in the Americas, but not in India.

The problem is that people do not demand houses; they demand habitats. A house is an object; a habitat is a node in a multiplicity of overlapping networks – physical (power, water and sanitation, roads), economic (urban transport, labor markets, distribution and retail, entertainment) and social (education, health, security, family, friends). The ability to connect to all of these networks makes a habitat valuable.

This leads to distorted policies:

So, if the deficit being measured is one of houses rather than one of habitats, the solutions often do not solve the real problem. A housing minister who is told to build a certain number of houses will likely fail to build an equivalent number of well-connected habitat nodes. After all, much of what makes a house a habitat lies outside of his department’s purview.

Moreover, if the housing deficit is diagnosed as a dearth of adequate housing, then the solution is to build more houses for those who lack it – that is, the poor. But this is like assuming that new cars should be built for those without them – that is, for people who could buy second-hand cars from those seeking to upgrade. It confuses the construction industry, which builds new homes, with the much larger housing market, which includes all homes.

It gets worse. Because the poor cannot buy adequate housing on their own, public resources must be used. In order to target these subsidies to low-income households, governments typically treat families of different income levels differently: the rich must fend for themselves, middle-class families are provided with assistance to secure mortgage loans, and the poor are offered public housing. To maximize the number of units built, housing ministries make sure that projects meet minimum specifications below a certain per-unit cost threshold. As a result, developers look for the cheapest land, which is obviously the least connected to the networks that would make it more valuable.

Indeed, because many of these developments are so remote, residents often face a long, uncomfortable, and costly daily commute to reach good jobs. No wonder so many prefer to stay home and work on their own, which may explain why so many developing countries are becoming more urbanized but not more productive..

Superb stuff..

Monetary Policy frameworks in East Asia: Experience, Lessons and Issues

October 9, 2013

A nice paper by Peter Morgan of ADB Institute.

He summarises the frameworks of various central banks in East Asia (one of this blogger’s favorite research interests).

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