Archive for January 22nd, 2019

Why we need to be wary of narratives of economic catastrophe?

January 22, 2019

Thoughtful piece by Prof Jeremy Adleman of Princeton Univ:

It’s important to recognise one of the catastrophist’s rhetorical moves. Stories of doom thrive on turning a tension into an incompatibility. A tension implies two forces at odds – like hot and cold, like price stability and jobs, like helping strangers and assisting neighbours; while they pull in different directions, they can be mixed. Earlier big narratives used to explain choices in terms of tension and unstable compromise. In the 1950s and ’60s, debates focused on how much the developing world could advance while being part of a wider global economy. A decade later, the tension was how to co-manage a troubled global commons.

Nowadays, the chorus of catastrophe presents differences as intractable and incompatible, the choice between them zero-sum. It’s globalism or ‘nation first’, jobs or climate, friend or foe. The model is simple: earlier leaders muddled, dithered, compromised and mixed. In their efforts to avoid hard decisions, they led the nation to the edge of disaster.

Pessimism helped exorcise post-1989 triumphalism; Piketty and Tooze are right about structural features of inequality and how the makers of catastrophe became its beneficiaries. But we also need to see how the consensus of catastrophe that straddles the ideological spectrum – but grows more dire and menacing as one approaches the extremes – favours the politics of the strong man glaring down the nation-doubters.

The alternative is not to be wistful about flat-world narratives that find solace in technical panaceas and market fundamentalisms; the last thing we need is a return to the comforts of lean-in fairy tales that rely on facile responses to a complicated world. To learn from collapses and extinctions, and prevent more of them, we need to recover our command over complex storytelling, to think of tensions instead of incompatibilities, to allow choices and alternatives, mixtures and ambiguities, instability and learning, to counter the false certainties of the abyss. If we don’t, it really will be too late for many people and species.

Hmm..

The Effect of Superstition on Health: Evidence from the Taiwanese Ghost Month

January 22, 2019

Martin Halla, Chia-Lun Liu and Jin-Tan Liu in this interesting research paper:

Superstition is a widespread phenomenon. We empirically examine its impact on health-related behavior and health outcomes. We study the case of the Taiwanese Ghost Month.

During this period, which is believed to increase the likelihood of bad outcomes, we observe substantial adaptions in health-related behavior. Our identification exploits idiosyncratic variation in the timing of the Ghost Month across Gregorian calendar years.

Using high-quality administrative data, we document for the period of the Ghost Months reductions in mortality, hospital admissions, and births. While the effect on mortality is a quantum effect, the latter two effects reflect changes in the timing of events. These findings suggest potential benefits of including emotional and cultural factors in public health policy.

Hmm..

The past, present and future of farm loan waivers in India

January 22, 2019

My new piece (and also debut piece in CNBCTV18) on the topic.

It is co-written with my colleague Tana Trivedi who brought the very useful case of Prabhashankar Patni, Prime Minister of Bhavnagar State, to my attention. Mr Patni passed a farm loan waiver in his Princely State in early 20th century, perhaps the first time in India.

 

RBNZ wins award for its excellent financial dashboard (example for other central banks to follow…)

January 22, 2019

Central Banking.com announced the winners for the year 2019. In the initiaitive of the year category, it gave the award to RBNZ for its financial dashboard:

While adherence by central banks and regulators to the Basel Accord provides important levels of bank transparency in addition to stock exchange and company account disclosures, information can be hard to pull together in a meaningful manner. And very few central banks have opened up their financial system to public scrutiny to quite the same level as the Reserve Bank of New Zealand.

Public disclosure plays a particularly important role in New Zealand because of the central bank’s ‘light touch’ and comparatively ‘lower-intensity’ approach to prudential supervision, and because there is no explicit government guarantee for deposits, Tobias Irrcher, a policy adviser for the financial system policy and analysis department at the RBNZ, tells Central Banking.

“The sheer volume of disclosure had become very large, and there were some issues about how comprehensible it all was and the fact that it was all in different places. It was difficult to compare one bank with another, and thus banks didn’t come under widespread scrutiny,” adds his colleague Toby Fiennes, head of the financial system policy and analysis department. “We wanted to invent something that was accessible.”

In May 2018, the central bank launched its Financial Strength Dashboard to increase the accessibility of the disclosure information by banks to the public. The dashboard offers a graphical overview of all major banks’ capital positions, liquidity, asset quality, profitability, balance sheet composition and credit concentration. In all, it contains more than 100 individual metrics on the financial strength of New Zealand’s banks.

Along with graphic representations, the central bank provides simple descriptions of the data available to support financial literacy. The data is also provided in an Excel file for researchers to analyse in greater depth. “We had an internal mantra of ‘insights over information’. It’s not good enough to just put numbers in a table on a website and expect users to make sense of that,” says Irrcher.

Further:

For the dashboard to be effective, people need to access and use the information. If this includes professional investors, retail depositors and rating agencies, its effectiveness as a disciplinary force will be greater still.

The dashboard currently receives more than 11,000 visits a quarter – a large increase compared with its predecessor, which typically received about six users a day and 500 in a quarter. More than 30% of the current users are repeat visitors, which suggests a number of people are using the dashboard as a reference tool. “Based on the user statistics to date, the dashboard has successfully broadened the audience for prudential disclosures far beyond the point where it was at before. This is probably the single best indication that the dashboard is having the desired impact,” says Irrcher.

Retail depositors can access this information either directly or through “super-users”, those who use the information for their own purposes or to help others understand risks, such as rating agencies, banking academics and financial journalists, says Fiennes. This improves their ability to make informed decisions on which they bank use.

“When you look at a graphical presentation, some relationships stand out that maybe you were not fully aware of before. For example, the extent of concentration in the banking sector or interesting variations in the opinions of credit rating agencies,” explains Irrcher.

The banks can also use the dashboard to benchmark themselves within the market. “We can now see more about our competitors,” Annis O’Brien, head of external reporting at ANZ New Zealand, tells Central Banking.

Increased usage should also ensure less errors are made, and if they are, they are quickly corrected.

I just saw the dashboard website. It is indeed excellent and worthy of an award. One can look at most of the indicators across the NZ based banks. Interesting to note that two Indian banks -Bank of Baroda and Bank of India – have very high capital ratios.

All other central banks should emulate RBNZ…once again the pioneer…


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