Archive for July 16th, 2019

Demographic changes and their macroeconomic ramifications in India

July 16, 2019

Nice short paper in RBI’s Monthly Bulletin of July-2019. It is written by Atri Mukherjee, Priyanka Bajaj and Sarthak Gulati:

This study examines the influence of demographic changes on macroeconomic outcomes in India using generalized method of moments. The estimation results show that population growth and age dependency ratio have inverse relation with the growth in real GDP and
per capita income, and positive relation with inflation. Increase in working age population, on the other hand, contributes to higher economic growth. An aging population is deflationary in nature though improves the current account balance. While the declining age dependency ratio offers a demographic dividend for India, the realisation of the same would require an environment empowering the labour force with right skills and enabling their gainful employment in productive uses.

 

 

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Ironically, Alan Turing to be the face of GBP 50 banknote (Ramanujan was in shortlist too!)

July 16, 2019

Bank of England announced that Alan Turing would be the new face of their GBP 50 banknotes.

Alan Turing was chosen following the Bank’s character selection process including advice from scientific experts. In 2018, the Banknote Character Advisory Committee chose to celebrate the field of science on the £50 note and this was followed by a six week public nomination period. The Bank received a total of 227,299 nominations, covering 989 eligible characters. The Committee considered all the nominations before deciding on a shortlist of 12 options, which were put to the Governor for him to make the final decision. 

Mark Carney, Governor of the Bank of England, commented: “Alan Turing was an outstanding mathematician whose work has had an enormous impact on how we live today. As the father of computer science and artificial intelligence, as well as war hero, Alan Turing’s contributions were far ranging and path breaking. Turing is a giant on whose shoulders so many now stand.” 

Alan Turing provided the theoretical underpinnings for the modern computer. While best known for his work devising code-breaking machines during WWII, Turing played a pivotal role in the development of early computers first at the National Physical Laboratory and later at the University of Manchester. He set the foundations for work on artificial intelligence by considering the question of whether machines could think. Turing was homosexual and was posthumously pardoned by the Queen having been convicted of gross indecency for his relationship with a man. His legacy continues to have an impact on both science and society today. 

This is quite ironic. Turing’s work laid the foundations for not just computers science but also today’s digital world. The digital world has spread its tentacles to the world of money with cryptocurrencies and digital payments challenging physical banknotes. And we have Turing as  the face of the GBP 50 banknote!

Turing was chosen from a list which included Ramanujan too:

(more…)

How to Keep Central Banks Independent

July 16, 2019

Group of economists in the piece say central banks should go back to their original mandate of financial stability:

Some observers say central banks can best mitigate risks to their independence by returning to the narrow price-stability mandate that served them so well prior to the global financial crisis. But this advice is misguided: central banks must revive their original role as guardians of financial stability.

….

Protecting central-bank independence requires adaptation. In the post-crisis world, governments and citizens will continue to delegate increasingly broad policymaking powers to an unelected independent institution. Central banks must therefore become increasingly accountable in order to maintain their legitimacy. We need a public debate to forge agreement on a framework for central banks’ objectives, tools, and communication mechanisms. Failure to have such a discussion would pose a risk not only to central-bank independence, but also to financial stability and overall social welfare.
Hmm..
I doubt this will help. Take the case of European central bankers which are part of the Eurosystem. As monetary policy is given to ECB. most of these central banks look at financial stability. Yet are under pressure from Governments.
Unless, we have better rules to prevent firing of the central bankers autonomy would always be in the hands of the government.

Corporate Governance in Banks in India: Designing a new benchmark index

July 16, 2019

Rekha Mishra and Anwesha Das of RBI in this new EPW paper:

While several committees have examined and suggested ways to improve corporate governance in banks in India, this study makes an attempt to prepare a benchmark index for the board composition aspect of corporate governance. A comparison between the indices for public sector banks with private sector banks reveals that differences in governance structures cannot be explained fully in terms of ownership only. This is a welcome feature, as with some efforts on the part of the majority shareholder, corporate governance in all the banks can be brought on par with the best-performing bank, by ensuring greater compliance with corporate governance benchmarks.


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