Archive for March 6th, 2018

From the late 1970s to the present day, a career banker describes the shifts in India’s banking industry…

March 6, 2018

Nice piece by O.P. Srivastava who interestingly worked for PNB Bank from 1970s to 90s and then moved to ICICI Bank. He is now a filmmaker!

In the piece he blames technology and faceless banking for the recent woes of banking. I don’t fully agree as one saw PNB type frauds even earlier minus all this technology. But yes he highlights a significant problem facing banking which is people doing banking with little background in the field:

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Women fund managers generate solid returns…

March 6, 2018

There is this stream of research which believes women do better at financial managament. For instance if there was Lehman Sisters then it might not have taken the higher risks.

This related article shows women fund managers have done well in recent years:

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Seven fallacies concerning Milton Friedman’s ”The Role of Monetary Policy”

March 6, 2018

Edward Nelson says there are 7 common fallacies around Friedman’s paper – The Role of Monetary Policy – which celebrated 50 years recently.

This paper analyzes Milton Friedman’s (1968) article “The Role of Monetary Policy,” via a discussion of seven fallacies concerning the article. These fallacies are:

(1) “The Role of Monetary Policy” was Friedman’s first public statement of the natural rate hypothesis.
(2) The Friedman-Phelps Phillips curve was already presented in Samuelson and Solow’s (1960) analysis.
(3) Friedman’s specification of the Phillips curve was based on perfect competition and no nominal rigidities.
(4) Friedman’s (1968) account of monetary policy in the Great Depression contradicted the Monetary History’s version.
(5) Friedman (1968) stated that a monetary expansion will keep the unemployment rate and the real interest rate below their natural rates for two decades.
(6) The zero lower bound on nominal interest rates invalidates the natural rate hypothesis.
(7) Friedman’s (1968) treatment of an interest-rate peg was refuted by the rational expectations revolution.

The discussion lays out the reasons why each of these seven items is a fallacy and infers key aspects of the framework underlying Friedman’s (1968) analysis.

 

Ancient Rome 101

March 6, 2018

Nice video on Nat Geo.

Infact all these 101 videos are superb.

Debating Switzerland’s referendum on sovereign money initiative…

March 6, 2018

I had blogged earlier about the new Swiss referendum on sovereign money. Under this, all money can only be created by SNB and not by banks.

SNB has released a series of documents arguing against the initiative.

Why has the SNB become involved in this political discussion in the first place?
– It is true that the SNB does not usually make pronouncements on political issues. However, it has decided to take a position on this matter as acceptance of the Swiss sovereign money initiative (Vollgeldinitiative) would fundamentally change the Switzerland’s monetary system, create new tasks for the SNB and have a direct impact on its monetary policy.

– Generally speaking, the SNB bears a responsibility when it comes to political discussions that directly concern the monetary system and the fulfilment of the SNB’s statutory mandate. In such cases, it acts on its duty to provide information to ensure that voters can make an informed decision.

SNB can shrug all  this but such demands are coming from the instability it imposed on the system..

Amidst talks of higher inflation target, Norway reduces its target…

March 6, 2018

This is interesting from Norway. In a new remit to the central bank, the Finance Ministry reduced the inflation target from 2.5% t0 2%.

The numerical target is 2
When inflation targeting was introduced, Norway was experiencing a period where substantial oil revenues were to be phased into the economy. This would entail a real appreciation of the krone, and the reasoning was that this could occur in the form of somewhat higher inflation than in other countries. This was a key reason for setting the inflation target at 2.5 percent. The period of phasing in oil revenues is now largely behind us. A key argument for maintaining a higher inflation target than other countries is therefore no longer relevant. Against this background, the inflation target for Norway is now set at 2 percent, in line with that prevailing in comparable countries.

Econs are debating about the need to have a higher inflation target. Infact, Krugman in his recent paper says inflation targeting has opened a can of worms for advanced economies.

Further, the govt, has also added financial stability to the objective, in line with global sentiments:

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