Archive for June, 2019

Rise of Estonia’s populist right sends journalists packing

June 28, 2019

DW reports how Estonia’s polity calls their opponents (which includes media) as Pink Slime!:

At a recent international security conference in Tallinn dozens of participants wore weird looking brooches — what looked like pink-colored piece of torn and dirty cloth on a pin. Their anonymous producers are making a brisk business via an Instagram page called “Pink Slime.” The expression recently became a battle cry of sorts for Estonia’s liberals and leftists in the Baltic country of 1 million people.

“Pink slime” is what Mart Helme, former ambassador to Russia and leader of the Conservative People’s Party of Estonia — known by its acronym, EKRE — and his son, Martin, routinely call their political opponents. These are left-wing intellectuals, NGOs that support migrants, the LGBT community, “Brussels bureaucracy” and mainstream media. Until this spring this was just the private opinion of two members of Riigikogu, Estonia’s parliament, expressed on their talk show on one of the country’s privately owned radio stations. But in March EKRE joined the government of Center Party Prime Minister Juri Ratas as a junior partner together with another conservative party, Pro Patria. It has five ministerial portfolios. Mart Helme is interior minister, Martin Helme finance minister.




Tearing up Mankiw’s economics textbook!

June 28, 2019

Alex Tabarrok in MR Blog discusses a recent article which suggests tearing up the economics textbook which is basically one written by Greg Mankiw:

Robert Samuelson, the economics columnist, has written a column titled, It’s time we tear up our economics textbooks and start over. What he actually says is we should tear up Greg Mankiw’s Principles of Economics:

But as a teaching device, [Mankiw’s] “Principles of Economics” has fallen behind. There’s little analysis of the impact of the Internet and digitalization on competition and markets. I couldn’t find either Apple or Facebook in the index; Google gets a few mentions.

Likewise, little attention is paid to the 2007-2009 Great Recession, the worst business downturn since the Great Depression, which also receives scant coverage relative to its significance. (Together, the two recessions receive about three pages, from 725 to 727.)

There’s some misleading information about the Great Recession and parallel financial crisis. On Page 691, we have this: “Today, bank runs are not a major problem for the U.S. banking system or the Fed.” This would surely surprise the Fed, which poured trillions of dollars into the economy to prevent financial collapse.

Mankiw’s assertion can be defended on narrow, technical grounds. There was no run by retail depositors (people like you and me) against commercial banks. We were protected by deposit insurance. But there was a huge run — a panic — by institutional investors (pension funds, hedge funds, insurance companies, endowments) that withdrew funds from traditional banks, investment banks and the commercial paper market.

…Mankiw’s textbook needs more than a touch-up; it needs a major overhaul. It has very little history: for example, the industrialization of the 19th century. Nor is there much about the expansion of the global economy. China gets a few mentions.

The market for principles textbooks, however, is competitive and there are alternatives to Mankiw. Krugman and Wells, for example, have a lot of very interesting boxes on the world economy and historical events. Modern Principles of Economicsdoesn’t use boxes but we illustrate the principles of economics with historical events and, of course, we use tech companies such as Facebook and Apple to discuss network effects and coordination games. Samuelson is a bit harsh on Mankiw, however, because it’s very easy to overwhelm students with details. Like physics, economics is powerful because it explains many things with a handful of principles. It’s true that Mankiw’s book doesn’t have much history or color–his paradigmatic market is the market for ice cream–but abstraction can focus attention. The tradeoff, of course, is that it can also lead to vanilla economics. But the Mankiw text is clearly written and the micro text is especially well organized, one reason we chose a similar organization for Modern Principles.

In Modern Principles we illustrate the ideas with more interesting markets but we work with them repeatedly so students don’t become overwhelmed. Our paradigmatic market is the market for oil. We use it to teach supply and demand, cartels, and the importance of real macroeconomic shocks. Using the market for oil also lets us teach about some important events in world history such as the OPEC oil crisis and the industrialization of China.

Samuelson is correct that the financial crisis was a run on the shadow banks but he’s incorrect that this isn’t taught to students of Econ 101. Here’s Tyler on the financial crisis. He covers leverage, securitization, asymmetric information, bank runs, fire sales and the rise of the shadow banking system. Students with the right textbook are well informed about the financial crisis and the economic principles that can help us to understand, analyze and perhaps avoid future financial crises.


Who would have thought anything like this will be wrotten for Greg Mankiw’s books which are used across the world.

Here is Mankiw’s response:

Washington Post columnist Robert Samuelson argues “It’s time we tear up our economics textbooks and start over.” He uses my book as a prime example. Perhaps not surprisingly, I disagree. My summary of Samuelson’s article: Economics textbooks should be more like economics journalism, says an economics journalist.

Mr. Samuelson fails to fully appreciate the difference between journalism and textbook writing. Journalists are always looking for things that are new, for how the world has changed. That’s why we call it the news. The editor of the science section of a newspaper would not be interested in a article explaining that Isaac Newton figured out the workings of gravity. Not newsworthy, the editor would say.

Textbook writers, on the other hand, emphasize those things that are true, important, and unknown to the typical reader (an 18 year old college freshman). Newness has little relevance. The lessons of Adam Smith do not apply only to the 18th century, the lessons of David Ricardo do not apply only to the 19th century, and the lessons of John Maynard Keynes do not apply only to the 20th century. They are timeless ideas that may not make good news stories but should be central to introductory economics. Just as Newtonian mechanics should remain central to introductory physics.

Yes, textbooks need to evolve as we learn more and as the world changes. New examples also show students how to apply the classic ideas to the issue of today. (The 9th edition of my principles text, available in about six months, includes a feature discussing social media like Facebook as a common resource.) But it would be a mistake for teachers of introductory economics to focus excessively on today’s hot topics at the exclusion of timeless truths.

I had a 6th grade teacher who used to refer to newspapers as a “perishable commodity.” That seems right, given their relentless focus on newness. Good textbooks, however, are more like durable goods. They do not go out of date nearly as quickly.


The rise of part-time work: A German-French comparison

June 28, 2019

New research by Petra Marotzke of Bundesbank:

I study possible determinants of part-time employment among women in France and Germany using microdata of the Labour Force Survey. Voluntary part-time work is substantially more widespread among women in Germany than it is in France. Estimation results show that while the presence of children and marital status are related to the choice to work part time in both countries, their impact is substantially greater in Germany. Controlling for several factors, the probability of working part time in Germany exceeds that in France among married women and among women with children, while there is hardly any difference among single women and women without children living in the same household. Further results suggest that, besides financial incentives, social norms and cultural legacy play a role in choosing to work part time.

Did the Versailles peace treaty trigger another world war?

June 28, 2019

Professor David Reynolds (international history at the University of Cambridge) in this interesting article says there is more to 1919 treaty than is understood:

In trying to unpack the argument that the peacemakers – deliberately or not – sowed the seeds of future conflict, we need first to remember that the fate of Germany was not the only issue on their agenda. The whole map of Europe had been ripped apart by war and revolution, bringing down four great dynastic empires – the Romanovs, Habsburgs, Hohenzollerns and Ottomans – that had ruled the centre and east of the continent for centuries. Out of the debris, nationalist politicians and their armies were already creating new states, such as Czechoslovakia, and resurrecting old states like Poland. So, the Paris conference was an attempt to clean up the mess: the peacemakers did not start with a blank slate.

Nor were the three major Allied powers of one mind. Clemenceau and the French were focused obsessively on controlling Germany, whose population was 50 per cent larger than that of France and whose economy in 1913 had been the most advanced in Europe. The British prime minister, David Lloyd George, though anxious to gain reparations from Germany, saw the German economy as vital to the recovery of Europe. He feared that too punitive a peace would feed a desire for revenge and encourage the spread of Bolshevism across the continent. US president Woodrow Wilson was more detached from European specifics: his consuming ambition was to create a League of Nations to guarantee peace and security.

The resulting peace treaty was therefore a messy compromise between the Big Three. The French recovered Alsace and Lorraine, ceded in 1871 after defeat to Prussia, but were not allowed to annex the Rhineland in perpetuity. Instead Britain and America offered a joint guarantee of French security if Germany attacked again. Wilson got his League of Nations, but on terms that seemed to open up the prospect of unlimited obligations to keep the peace without having adequate power to do so.


Further, what about Keynes’ Economic Consequences of Peace:

Which brings us back to Keynes and the Carthaginian peace. Was it reparations that really embittered Germans, and broke their economy? No precise bill was fixed at Paris: the Treaty of Versailles simply established the principle that Germany and its allies were responsible for the damage caused by their war of aggression (article 231), while also acknowledging in article 232 that their resources were not adequate to make “complete reparation”. Similar pairs of balancing statements were inserted in all the treaties with the defeated powers but only the Germans (for propaganda reasons) presented the reparations issue as an Allied imputation of ‘war guilt’ – a phrase never used in the treaty.

In 1921, an Allied commission meeting drew up a schedule of reparations payments for Germany of 132 billion gold marks, or about $33 billion, plus interest. This draconian headline sum was, however, largely window dressing to satisfy French and British hardliners. In practice, the amount the Allies intended to exact was about 50 billion marks over 36 years, which still seemed a huge sum.

Viewed historically, though, the reparations bill was the latest round in a Franco-German game of tit for tat. When French policymakers considered reparations in 1919, they had in mind the provisions of the Treaty of Frankfurt in 1871, which Bismarck imposed on France after its devastating defeat. He, in turn, had looked back to Napoleon’s treatment of Prussia in the Treaty of Tilsit in 1807. The 1921 London Schedule of Payments imposed at most an annual burden of around 8 per cent of German national income – less than the 9–16 per cent that France paid annually in reparations after 1871. So the bill, most economic historians agree, was not financially intolerable.

The real issue was political. The Germans had not accepted defeat and had no intention of paying. For the French, conversely, extracting reparations represented a desperate attempt to secure an economic substitute for the decisive victory that the Allies had failed to win on the battlefield in 1918. In short, as one German official put it, the struggle over reparations was “the continuation of the war by other means”.

Successive Weimar governments went to great lengths to avoid paying their regular instalments of reparations. In the early 1920s, the economics ministry bought substantial amounts of foreign currency to help push down the value of the German mark and make German exports more competitive. An export boom, according to one key economic adviser, would “ruin trade with England and America, so that the creditors themselves will come to us to require modification” of the 1921 schedule.

So much history..

When did India first host the Cricket World Cup? Not in 1987 but 1978..

June 28, 2019

Well, India hosted the first Cricket World Cup in 1978 and not 1987 as most of us believe. How? Well, it was the World Cup for Women cricket!

Benita Fernando writes this wonderful poignant story in Mint newspaper:

It would be nearly a decade after 1978 before the country would host its first men’s Cricket World Cup. In many ways, the 1978 Women’s World Cup was ahead of its time, paving the way for better performances in international championships. In 1997, the next time that India hosted the Women’s World Cup, the team would make the semi-finals for the first time. They repeated this feat in the next edition, hosted by New Zealand. In South Africa, in 2005, they reached the final. It is worth remembering that the first cricket World Cup ever held was for the women’s teams. England inaugurated it in 1973 with seven teams—two years before the first edition of the men’s Cricket World Cup would be organized.

Senior sports writer Sharda Ugra says that because India hosted its first men’s World Cup in 1987, people don’t always remember that the Women’s World Cup was held earlier. “They were ahead of what the men were going to do. Women’s achievements in sports, like we see with female scientists, haven’t been recognized enough. There certainly needs to be a formal recognition, not financially alone, but an inclusion of their names in the history of the game. The men’s game has celebrated its oldest players, but the conversations around the women’s game are like this: Who are they to earn so much money?”


It also tells us about the long struggle of women cricketers in India (and even other countries).

One of the best articles of the year and one of the all time best on cricket..



125 years of Punjab National Bank!

June 28, 2019

Missed this anniversary and important milestone for any organisation particularly a bank.

Punjab National bank was found on May 19, 1894 and opened for business on  April 12, 1895.


Swiss central bank asked to issue digital currency for its stock exchange..

June 27, 2019

News from Swiss land:

The Swiss stock exchange wants the country’s central bank to issue a form of cryptocurrency to settle payments on its new digital securities trading platform. If the Swiss National Bank (SNB) agrees, it would represent a departure from its cautious policy on digital currencies.

Stock exchange operator SIX Group revealed at the Crypto Valley Association conferenceexternal link that traders on its forthcoming SDX platform would be able to swap cash for a new digital token. This token would be used to pay for securities bought on the exchange and could be redeemed for cash when required. Digital tokens backed by conventional currencies are known as stablecoins because the peg reduces price volatility.

SIX, which is owned by a consortium of member banks, restricts access to its trading platforms to professional “qualified” investors. Its SDX platform, that will trade digital-only versions of stocks, bonds and other securities, is due to be unveiled early next year.

“SDX member banks will be able to settle their trades and other obligations against tokenised CHF within SDX once we are up and running. To facilitate this, SDX would accept CHF payments from member banks in central bank money and issue equivalent tokenised CHF in SDX. The value of tokenised CHF would be pegged 1:1 with CHF at all times. We most definitely favour a central bank issued stablecoin,” SIX said in an emailed statement.

An SNB representative confirmed to swissinfo that the central bank is holding talks with SIX “about different options on how to settle the cash side” of trades. But no final decision has been made.


The Shifting Wealth of Nations: How Argentina fares worst amidst all countries…

June 27, 2019

Prof Tim Taylor on his blog points to this interesting research by Micheal Cembalest of JP Morgan.

Cembalist looks at socialism across world and find Nordic nations are hardly socialistic.


Indian public refusing certain coins as legal tender: Demonetisation fears keep lurking..

June 27, 2019

I recently learnt that people are not accepting certain coins of Rs 10 denominations.

RBI released yet another circular saying all coins are legal tender (see previous appeals as well):


Central banks vs populists tweet storm: ignore or fight

June 27, 2019

National Bank of Ukraine and Bank of Poland organised  their Annual Research Conference (HT:

There was a panel discussion on  Central banks vs populists: ignore or fight. The panelists were:

Olga Stankova, International Monetary Fund
Emma Murphy, Bank of England
Yuriy Gorodnichenko, University of California, Berkeley
Dmytro Sologub, National Bank of Ukraine
Miroslav Singer, Generali CEE Holding
The video of the panel is on youtube.
Miroslav Singer, former Governor of Czech Central Bank says he would rather fight and ignore 🙂 Prof Yuriy Gorodnichenko of University of California Berkeley says fight between the two has been there for a long time.
The last question asked to panelists was how to fight a tweetstorm by say Trump? All said you cannot fight the storm as President has many more followers. One can atmost clarify facts and not take it personally.
Lots of other interesting questions.

Mint newspaper is hiring..

June 27, 2019

Mint’s data journalism team is hiring. Last date is 10 July 2019. Spread the word.

Financial Gerontology: An emerging new sub-field in finance..

June 27, 2019

Haruhiko Kuroda, Governor, Bank of Japan in this speech talks about Financial inclusion in aging society:

As we get older, we all become physically weaker. Declining mobility means we can no longer take it for granted that we can easily visit bank branches. Deteriorating eyesight and hearing ability may impair our capacity to fill out a form or understand a face-to-face explanation. Declining cognitive ability may create difficulty in making financial decisions. Moreover, there is the risk that senior citizens will become victims of financial crime. In 2018, among all recorded cases of so-called special fraud in Japan — such as telephone-based identity deception — 78 percent of the victims were aged 65 and over.

Financial inclusion is therefore an extremely important social agenda in an aging society, as it ensures that senior citizens — who may have difficulty in visiting banks or making financial transactions due to age-related decline — can continue to use financial services with confidence and benefit as much as possible from these services.

In the field of what is known as “financial gerontology,” there has been discussion about ways to make the adult guardianship system more effective in order to protect the rights of senior citizens with cognitive decline. The use of innovative digital technologies has also been considered. For example, using biometric technology for identity verification and mobile payments will enable senior citizens to have secured access to financial services without actually visiting bank premises. Moreover, the use of speech recognition technology will enable financial transactions to be made without the need for physical writing or keyboard skills. Advances in technology may create increasingly comprehensive financial services that are better tailored to the needs of the individual senior citizen.

These new financial services for senior citizens can also be a great business opportunity for financial institutions. On the other hand, as technology advances, the risk of technology abuse will increase, and vigilance is therefore essential to maintain security.


Though, in India we hear the opposite. How these technologies have made it difficult for aged people to access their own deposited money.

As societies age across the world, financial gerontology is going to be an important are of study.


Non-performing loans in the euro area: How they were halved?

June 26, 2019

Nice speech by Andrea Enria, Chair of the Supervisory Board of the ECB:


Recent Trends in the Business History of India

June 26, 2019

Prof Chinmay Tumbe of IIMA writes this nice encouraging short paper on Indian business history:

The past decade has seen a resurgence of interest in understanding Indian business history. A number of business history books have been published in the academic and nonacademic press. Special issues on India have appeared in leading field journals, more management schools in India and outside are engaging with the field, internship and fellowship opportunities have been initiated, and business archives have sprung up. This article documents these recent trends, examines the emerging scholarship, and identifies gaps that need to be addressed in the future.

A lot of this recent initiative has come from the author himself!

Twenty Years of the ECB’s monetary policy: Trial by Fire

June 26, 2019

Mario Draghi of ECB summarises the twenty years of monetary policy of ECB:

The euro was introduced twenty years ago in order to insulate the Single Market from exchange-rate crises and competitive devaluations that would threaten the sustainability of open markets. It was also a political project that, relying on the success of the Single Market, would lead to the greater integration of its Member States.

On both counts, the vision of our forefathers has scored relatively well. Imagine where the Single Market would be today, after the global financial crisis and rising protectionism, had all countries in Europe been free to adjust their exchange rates. Instead, our economies integrated, converged and coped with the most severe challenge since the Great Depression.

That leads me to four observations.

First, the integration of our economies and with it the convergence of our Member States has also greatly increased. Misalignments of real effective exchange rates between euro area countries are about a half those between advanced economies with flexible exchange-rates or countries linked by pegged exchange rates and they have fallen by around 20% in the second decade of EMU relative to the first.[20]

Second, the dispersion of growth rates across euro area countries, having fallen considerably since 1999, is since 2014 comparable to the dispersion across US states.

Third, this has been driven in large part by the deepening of European value chains, with EMU countries now significantly more integrated with each other than the United States or China are with the rest of the world.[21] Most EMU countries export more with each other than with the US, China or Russia. Fourth, employment in the euro area has reached record highs and in all euro area countries but one stands above its 1999 level.

But the remaining institutional weaknesses of our monetary union cannot be ignored at the cost of seriously damaging what has been achieved. Logic would suggest that the more integrated our economies become, the faster should be the completion of banking union and capital markets union, and the faster the transition from a rules-based system for fiscal policies to an institution-based fiscal capacity.

The journey towards greater integration that our citizens and firms started twenty years ago has been long, far from finished, and with broad but uneven success. But overall, it has strengthened the conviction of our peoples that it is only through more Europe that the implications of this integration can be managed. For some, that trust may lie in a genuine faith in our common destiny, for others it comes from the appreciation of the greater prosperity so far achieved, for yet others that trust may be forced by the increased and unavoidable closeness of our countries. Be that as it may, that trust it is now the bedrock upon which our leaders can and will build the next steps of our EMU.

Whatever the criticisms, EU polity continues to move ahead with the integration. People had questioned Euro right at inception and believed it would break down soon, but that has not happened.

Bosnia Presidency sacks two Board Members of the central bank..

June 26, 2019

Central bankers are under immense pressure across the world. One is seeing them being fired or resigning under pressure/humiliation. From Governors to Deputy Governors and now Central Bank Board members.

Bosnia has fired two Board members:

Bosnia’s tripartite presidency has sacked two Serb members of the central bank’s managing board, officials confirmed on Thursday, but the lack of an explanation of the decision raised concerns the move was politically motivated.

Bosnia’s inter-ethnic presidency appoints the members of the bank’s managing board and may dismiss them if they violate the law on the central bank, which manages monetary stability under the currency board arrangement pegging the Bosnian marka to the euro under a fixed rate.

The presidency session was convened on Wednesday but an official statement did not mention the decision.

A spokesman for the presidency chairman, Serb Milorad Dodik, confirmed the decision was made at Dodik’s request but could not say what the reason behind the move was. The decision was made by two votes to one after Zeljko Komsic, the Croat presidency member, agreed, but there was no consensus on new appointments, Komsic’s cabinet said. It added that Dodik had said the two board members were unfit to hold the roles.

The Board comprises of 5 members and is chaired by the Governor.

Further, the appointment of Board members is distributed across powers:

The central bank declined to comment, saying they had not received any official note on the sackings.

The managing board consists of five members, three of whom come from Bosnia’s autonomous Federation dominated by Bosniaks and Croats and two from the Serb-dominated Serb Republic.

The two Serb members had been nominated by parties which are in opposition to the SNSD party headed by Dodik.

A Western diplomat who did not want to be named said he feared the move may undermine the independence of the central bank and advance nationalist agendas.

Neither of the two board members were reachable for comment.

Dodik has long tried to influence the central bank policy, insisting that the foreign currency reserves the bank keeps at major foreign banks should be diverted to support local firms. Under the currency board arrangement, the central bank may only invest in securities of highly-rated euro zone countries that guarantee adequate capitalisation and liquidity.

The motive behind firing is the same though…

N.R. Pillai: the ICS who was appointed to succeed RBI Governor Rama Rau, but did not take up the office!

June 25, 2019

Buried in the RBI’s History ( Second Volume 1951-67, pg 710,) is this interesting trivia as a footnote:

K.G. Ambegaokar, who was Governor for a few weeks between Rama Rau’s exit  and Iengar’s coming to the Bank, also belonged to the Indian Civil Service. So did N.R. Pillai, who was appointed to succeed Rama Rau, but did not take up the office.

Fascinating. Have not seen anything written on this episode and RBI history also does not discuss anything barring this footnote. Did he not take up the position seeing what happened to Rama Rau or something else? Also, not sure how many others turned down RBI Governorship offer.

NR Pillai’s wiki profile is here. Appinted ICS in 1922, he was the first cabinet secretary of independent India.



Inflation Dynamics in the Age of Robots: Evidence and Some Theory

June 25, 2019

Interesting BOJ working paper by Takuji Fueki and Kohei Maehashi.

Over the past decade, one of the central questions in macroeconomics has been the missing link observed between inflation and fluctuations in economic activity. We approach this issue with a particular focus on advances in robots, or what are essentially autonomous machines. The contributions of the
paper are twofold.

First, using a country level balanced panel dataset, we provide significant evidence to show that advances in robots are one factor behind the missing link. Second, we ask a standard New Keynesian model to rationalize this fact. The distinguishing feature is the introduction of capital which is substituted for human labor, and can therefore be interpreted as the use of robots.

Due to this feature and developments in robot, firms can adjust their production by using robots, whose efficiency is getting higher, instead of employing human labor. Hence, the responsiveness of marginal costs to changes in economic activity becomes weakened, and thus, our model supports the empirical fact that advances in robots are one factor behind the missing link.


PIB Archives from 1947-2001

June 25, 2019

This is just a fascinating initiative from the Government.

It has put up archives of all Press releases across different Ministries from 1947-2001. IN the Search box on the right. one can search across keywords. One can also search words/text on the archival material as well.



List and Professions of RBI Deputy Governors (1935-present)

June 24, 2019

The list of RBI DGs and their Professions is as follows:


%d bloggers like this: