Archive for June 10th, 2014

A world without banks? a graphic short story..

June 10, 2014

John Cochrane and Doug Diamond have this cartoon strip on the need for banks.

Though, post the 2007 crisis one is not sure of the message of the cartoon. Govt isn’t as much the villain as it is made out to be..Atleast in terms of banking…Without it, we could actually have had a world without banks as most would have shut down.

I guess some lessons are still not learnt..

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How ‘Law and Finance’ paper transformed research in finance

June 10, 2014

Steven Neil Kaplan and Luigi Zingales of U Chicago review how the Law and Finance paper written by four econs – Rafael La PortaFlorencio Lopez-de-SilaneAndrei ShleiferRobert W. Vishny.  How this paper challenged the conventional wisdom on finance and made the field  richer:

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How far is the FOMC from its goals?

June 10, 2014

St Louis Fed President James Bullard has a nice ppt on the question.

He says FOMC has rarely been closer to its goals. But still the mon pol is not as per the achieved goals as uncertainty remains. The committee faces classic challenge now of exiting from its easy policy. How best it achieves these goals would be another round of test for the central bank..

Arguing for an inflation target of 4% in struggling advanced economies

June 10, 2014

Once again the talk for having a higher inflation target for troubled advanced economies has come up. Paul Krugman again raised the idea in a recent ECB symposium. Ken Rogoff discussed it further along with his idea of central banks replacing paper currency with dig currency (have to still read the main idea).

Laurence Ball now at IMF looks at the 4% idea in this detailed paper. He does not understand what is the fuss about and why central banks cannot raise the target to 4%.

First some broad theory:

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