Archive for December 19th, 2018

4 historians explain motivations behind their award winning writings..

December 19, 2018

Nice bit:

History delves into small corners and vast, sweeping places and eras, presenting new perspectives on what may be old issues or opening up new fields of research on questions that have not been fully considered.

Four members of the University of Virginia’s Corcoran Department of History have recently been honored for doing this through their research and writings.

  • Fahad Bishara received the Peter Gonville Stein Award from the American Society for Legal History for his 2017 book, “A Sea of Debt: Law and Economic Life in the Western Indian Ocean, 1780-1950.”
  • Cynthia Nicoletti received the American Society for Legal History’s Cromwell Book Prize for her 2017 book, “Secession on Trial: The Treason Prosecution of Jefferson Davis.”
  • David Singerman won the inaugural 1500 Penn Prize of the Treasury Historical Association for his paper, “Science, Commodities, and Corruption in the Gilded Age.”
  • Will Hitchcock’s 2018 book, “The Age of Eisenhower,” has been named one of the top 20 history books of the year by Amazon’s editorial board.

UVAToday asked each of them to describe their award-winning work.

All the featured histories look great reads…

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Central Bankers and Ornithology: Hawks, doves, owls and lame ducks…

December 19, 2018

Rajeev Malik in this Mint piece:

Das should also take note of the following: First, differences in opinion will often exist. However, domain specialization doesn’t mean a licence to be selectively accountable, or to switch off the common sense approach to communication and consultation. Equally, governments cannot continue treating the RBI like a vacuum cleaner, to sort out the mess caused by, say, their delayed actions, policy mishaps, or unexpected outcomes of their shoddy implementation.

Second, central banking isn’t a popularity contest. Given the sweeping powers the current RBI Act gives to the government, it is only the strength of the spine of the RBI governor that prevents a government from bulldozing its way through with politically self-serving and reckless initiatives that could compromise long-term economic stability. The legality of an initiative isn’t the final word on deciding if it is responsible and in our long-term interest.

Third, central banks are prone to forecasting errors. This isn’t appreciated by those who don’t have to be accountable for forecasts, or by those blessed with selective amnesia about their own forecasts. Recall that the majority was singing the same worry in October when Brent oil prices were threatening to march towards $90-100 per barrel.

Separately, the RBI should review its forecasting track record and explain the misses to enhance its transparency and credibility. Also, liquidity management is one of the most basic jobs of a central bank. It is worth exploring why the RBI has often struggled with it and done a dissatisfying job of answering the concerns.

Finally, there has to be a greater focus on ensuring sustained macro stability, not just enjoy it as a lucky outcome. India’s growth is frequently interrupted by concerns about macro stability because policymakers rely heavily on optimistic assumptions and insufficient policy buffers. People in government pump up how big the Indian economy will be in 10-20 years, but there is no thoughtful assessment of how to get there.

RBI governors are kept on a tight leash by New Delhi via the typical initial appointment for a mere three years. It is up to Das to become a dove, a hawk, an owl or any other monetary bird, but hopefully not a lame duck.

Lame duck looks like a new addition to the ever growing list of tagging central bank governors as some bird type…

20 years of Euro: Why single market is not just an extension of the globalisation process

December 19, 2018

Interesting speech by Mario Draghi of ECB.

He discusses the Euro project and tries to dispel several myths around the project. European countries were struggling after WW-II and wanted to avoid future wars. This led to the political leaders to try and build economic integration within members. They first started allowing easier trade policies between the  countries. After initial gains from intra-EU trade, the growth from trade began to plateau. This was largely because trade was mainly done in intermediate goods.

The Single Market was conceived during a period of weakness in the European economy. Annual growth had averaged just 2.2% from 1973 until 1985 in the 12 countries that would go on to form the euro area[1], down from 5.3% between 1960 and 1973. Growth potential had also fallen from about 5% per year at the beginning of the 1970s to around 2% per year by the beginning of the following decade.

The typical response of governments to low growth was to increase fiscal deficits. From 1973 to 1985, public deficits in the euro area 12 averaged 3.5% of GDP, while in Italy the average was 9% of GDP. Unemployment rose from 2.6% in 1973 to 9.2% in 1985 for the euro area 12. In Italy, it climbed from 5.9% to 8.2% over the same period.

But the EU had a powerful tool at its disposal to raise growth: the common market. 

One reason that growth potential had decelerated was that intra-EU trade growth had stalled in the early 1970s, because the common market covered mainly intermediate goods where growth was already saturated. Trade in sectors with high R&D and skill content was restricted by non-tariff barriers, preventing productivity spillovers.[2]

The Single Market offered a way to remove these barriers, reverse the decline in economic potential, and bring more people back into work.

The Single Market was different than Globalisation:

(more…)


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