Archive for September, 2019

RBI’s First Balance Sheet as on 31 Dec 1935…

September 23, 2019

Given the interest in RBI Balance sheet recently, it is interesting to see RBI’s First Annual Report/balance sheet. The first balance sheet was for a 9 month period (1-April-1935 to 31-Dec-1935).

The RBI took over the currency function from Paper Currency Department of Government and management of Public Debt and government account from Imperial Bank. Further:

It was, however, not till the 4th of July 1935 that the Bank assumed one of its most important function as a Central Bank by announcing the first official Bank Rate of the country. The next step was to establish contact officially with the scheduled banks. This was accomplished on the 5th of July 1935, the date on which the scheduled banks lodged their statutory deposits with the Bank in accordance with the provisions of Section 42 of the Reserve Bank of India Act.

We take all this for granted now!

RBI was a shareholder bank. Of the Rs 5 crore subscribed capital (which remains until today), Rs 2.2 lakh was held by the Government. The process of share subscription required lot of planning given the restrictions over who could be shareholders:

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The persistent low interest rates might lead governments to become pension provider of last resort…

September 23, 2019

As governments push their central banks to lower policy rates (Trump succeeds as well), they should know most economics decisions imply trade-offs. The luring prospect of trying to remain in power by all means could lead to disastrous consequences.

Lars Rhode, Governor of Denmark central bank in this speech points to some of the risks. It is interesting to note that the entire yield curve in Denmark is negative! He says the big impact of low/negative interest rates are pension markets:

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When banks use economic nationalism to drive up customers: Case from NZ

September 23, 2019

With Nationalism being the flavour of the day, how can economic nationalism remain behind? Infact both have coexisted for as long as one can imagine.

Recently Kiwibank, a NZ based bank issued an ad hitting out at competitors.

Kiwibank 1

Michael Reddell, who writes a terrific blog on NZ economy disapproves the tactic:

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Are Trump’s tweets undermining Federal Reserve’s independence?

September 23, 2019

Reinhart and Reinhart in a Proj Syndicate Piece wrote how Federal Reserve’s easy monetary policy will basically lead to Trump reelection:

Probably to Powell’s deep and never-to-be-expressed frustration, the Fed is setting monetary policy in a way that increases the likelihood that Trump will be reelected next year. That instruction is not contained in the Federal Reserve Act, of course, but the Fed is supposed to deliver maximum employment and stable prices. Its mandate of sustainable economic growth thus requires Powell to attempt to offset the effects of policy uncertainty under Trump.

Fed officials are not thinking of intentionally letting the economy stumble between now and the 2020 election. Thus, if Powell succeeds, Trump will not bear the cost of his words and actions. This will invite more of the same.

There is a reason that Powell often has a haunted look, and not just at Jackson Hole.

In a new NBER paper, authors actually show how Trump’s tweetstorm (hatestorm?) leads to lower Federal Funds rate:

This paper presents market-based evidence that President Trump influences expectations about monetary policy. The main estimates use tick-by-tick fed funds futures data and a large collection of Trump tweets criticizing the conduct of monetary policy. These collected tweets consistently advocate that the Fed lowers interest rates.

Identification in our high-frequency event study exploits a small time window around the precise time stamp for each tweet.

The average effect of these tweets on the expected fed funds rate is strongly statistically significant and negative, with a cumulative effect of around negative 10 bps. Therefore, we provide evidence that market participants believe that the Fed will succumb to the political pressure from the President, which poses a significant threat to central bank independence.

Interesting times!

Why is it important to revive Modi script?

September 23, 2019

Madras Courier has a piece on reviving Modi script:

the historical and cultural treasure, the Modi script, which was used for official documentation for over seven hundred years, now remains buried in the sands of time. But how did Modi script evolve? How did it vanish into thin air? Can it be revived? If so, how?

I had the privilege to see the archives of Haribhakti Family, the indigenous bankers/merchants from Baroda, currently being digitised my MS University Baroda. The accounts and various other details are in Modi script and there are very few people around who understand the records.

The impact of digital money on educating kids about money

September 23, 2019

As of now, kids learn about basic math using money. Most math textbooks teach kids additions, subtraction, decimals etc using money. Money is visually depicted in the books to help students see and do math problems.

What happens to this useful way of learning math once digital money rules the world?

Johannes Beermann of Bundesbank  poses this question too:

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Hong Kong as a risk management hub

September 20, 2019

Amidst all the developments in financial markets, the thing of international financial centres competing with each other remains on the sidelines but is an exciting area.

Mr Norman T L Chan of HKMA discusses how HK’s international financial centre is shaping as a risk management hub:

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How advent of pension policy led to lower education in children: Case of Indonesia and Ghana

September 20, 2019

Prof Natalie Bau of UCLA in this voxeu piece point to really interesting findings from her new research.

She says that families funded children’s education so that latter could take care of former during old age. However, as pension policy was introduced, this old age care was not needed which led to decline in education!

In the paper, I examine whether the introduction of government pension plans changed cultural practices in Indonesia and Ghana. I study a set of cultural traditions that determine whether daughters (matrilocal), sons (patrilocal), or neither gender (neolocal) continue to live with parents after marriage and care for them in their old age. In matrilocal ethnic groups, daughters stay with parents, while in patrilocal ethnic groups, sons stay with them. Traditionally, both practices are widespread, and therefore potentially important determinants of economic behaviour. In anthropological data on 1,265 ethnic groups around the world, 69% are traditionally patrilocal and 16% are traditionally matrilocal (Morduck 1967). Studying these practices provides me with an unusual opportunity to measure how cultural practices change in response to new policies. This is because, unlike the practice of many other customs, whether households practice matrilocality or patrilocality can be directly observed in most census or survey data.

I hypothesise that when households belong to matrilocal ethnic groups, parents are relatively more likely to invest in their daughters’ education. This is because they will share in the returns from that educational investment when their daughter supports them in their old age. Similarly, parents from patrilocal ethnic groups will be relatively more likely to invest in a son’s education. I further hypothesise that when governments introduce pension policies, parents – who no longer need as much old-age support – will be less likely to transmit matrilocal and patrilocal traditions to their children. As a result, both the educational investment incentivised by these traditions and the practice of these traditions themselves will decline. So, the new social policies that often accompany economic growth may lead to the decline of traditional cultural practices. 

…..

To establish whether the Indonesia results apply in another, very different, context, I then turn to Ghana. Like Indonesia, Ghana instituted a pension plan in the 1970s. However, Ghana and Indonesia have very different cultural and religious make-ups. Indonesia is predominantly Muslim, and Ghana is predominantly Christian. While in Indonesia I compare traditionally matrilocal and non-matrilocal females, in Ghana the variation is between traditionally patrilocal and non-patrilocal males. Therefore, studying different genders and cultural traits in these very different countries provides further evidence that the results in Indonesia are not driven by an unobserved variable correlated specifically with matrilocality.

In Ghana, sons in traditionally patrilocal ethnic groups receive more educational investment (relative to their sisters) than sons in non-patrilocal groups, resulting in approximately 0.18 more years of schooling. The timing of the pension plan, which was introduced in 1972, allows me to evaluate whether traditionally patrilocal males who were more exposed to the plan as children behave differently. Indeed, these males were less likely to complete primary school and are less likely to practice patrilocality as adults. 

Altogether, the results from Indonesia and Ghana are symmetric. Matrilocality incentivises educational investment in females, while patrilocality incentivises it in males. The introduction of pension plans crowds out these educational investments and reduces traditional practices. So, though culture is often persistent, the introduction of new laws and policies can cause cultural change. 

Talk about unintended consequences of policy!

Differences between Euro and Libra: Good way to think about digital money..

September 20, 2019

Just a few days back, ECB member Yves Mersch criticised Libra vehemently asking Europeans to reject the treacherous sirens of Facebook’s Libra currency.

After a few days,. another ECB member Benoît Cœuré in another speech is more hopeful of benefits of Libra.

Price stability remains, and will remain, a precondition for a currency to gain widespread use, whether digital or not. For this reason, central banks worldwide have adopted price stability as their primary mandate. And this is why unstable crypto-assets, such as bitcoin, whose price in fiat currencies is highly volatile, will never be able to serve as a reliable means of payment. “Stablecoins”, if they meet their promise of stability, are the natural next step in the evolution of digital assets.

This was already understood nearly 50 years ago when Friedrich Hayek proposed abolishing the government monopoly on money issuance, arguing that competitive forces would exert disciplinary effects on issuers and incentivise them to provide stable money.[26] Ultimately, the currency with the lowest inflation rate would crowd out its competitors.

Next to stability, other factors are likely to play a growing role in the digital age. Convenience is a prime candidate.

Consider the euro area. Despite the creation of the single currency 20 years ago, cross-border e-commerce in the euro area has not taken off. Home bias remains strong. Only one-third of European e-shoppers make purchases from sellers in other EU countries.[27] And around 40% of European websites do not sell to consumers based in other member states, while almost 80% of online sales are domestic.[28]

Put differently, it is probably easier to connect a new currency to an existing network – the case of Libra – than to build a new network on an existing currency – the case of the euro. Few retailers have seen the introduction of the euro as an opportunity to build a pan-European network around it. With or without the euro, the single market for services remains incomplete.

Global “stablecoin” initiatives could work in reverse. They could turn the nature of payments on its head. WhatsApp, for example, is a messaging service. Adding a payment leg that enables direct transfers of money between registered users will not change the nature of its business. But it will provide a platform to turn a means of payment into a global currency. This is the exact opposite of what theoretical models of global currency use would predict. According to these models, payments lead and other uses follow.

Hmm. This bit is interesting. As per Cœuré, there were already existing currencies in Europe and Euro was a new network on these existing currencies. Libra on the other hand is a new currency on an existing network as it derives its values from a basket of existing currencies. Same for whatsapp as well which could use its existing network to create a new currency.

He then discusses privacy:

A second, and related, new driver of international currency use in the digital age relates to privacy.

Historically, privacy was not an issue. Anonymity is one of the salient features of paper money.[29] Private digital currencies that run through a distributed ledger have arguably restored anonymity in the virtual world, making them prone to being used to finance illegal activities, such as tax evasion or terrorism.[30]

To pass the test of faith, therefore, any “stablecoin” initiative will have to conform to international anti-money laundering and know-your-customer regulations.[31]

But assuming they do comply with the applicable regulations, “stablecoins” could differentiate themselves according to how much personal data they collect and process. Some could use or sell customer data, whereas others may give priority to protecting the privacy of their customers.

It is hard to tell just how much the privacy dimension will affect international currency use. But the effects could also work in reverse. There are significant differences across countries in terms of how much consumers value the privacy of their data. In Europe, individuals’ control over their personal data has been protected by an EU regulation – the General Data Protection Regulation, or GDPR – since May 2018.[32] Any private initiative operating in the EU will have to comply with this regulation.

Interesting to have such different viewpoints within ECB. This is how it should be…

A brief (and fascinating) history of currency counterfeiting: Focusing on Australia and some other cases

September 19, 2019

Richard Finlay and Anny Francis of RBA in this research note give a fascinating account of currency counterfeiting. They focus on Australia but pull examples from other countries too. Perhaps one of the best things that have read in this year so far.

Counterfeiting has a rich and varied history going back to the very earliest forms of money. It has been pursued for personal gain – although at the significant risk of jail time, or, in the past, death – as well as for economic and political destabilisation by hostile countries. Both high- and low-value denominations are liable to be attacked. Currency issuers and counterfeiters are, and always have been, locked in a battle of innovation, with government authorities adapting and innovating in order to deter counterfeiting. Acceleration in the rate of technological development, however, seems to have shortened the timeframe over which each new security feature remains counterfeit-resistant and, in response, currency issuers are having to upgrade their banknotes and coins more frequently to ensure that counterfeiting remains low.

Regarding Australia, government and Reserve Bank policies concerning banknote issuance have evolved over time, with past counterfeiting episodes playing a major role in this change. Early banknotes were issued by multiple banks, contained few security features and were often worn and tatty, making the passing of counterfeits relatively easy. Today the Reserve Bank is the sole banknote issuer and has in place a system of incentives that serve to ensure that dirty and worn banknotes are removed from circulation. Australian banknotes are among the most secure in the world; and absent banknote upgrades (as are currently taking place), there is typically only a single series of banknotes circulating. Past policies of paying for counterfeits served to encourage their manufacture, whereas now counterfeits are recognised as worthless. And on the law enforcement side, badly drafted laws, which potentially could criminalise every printer in the country, have been amended. It has also been recognised that federal oversight of counterfeit policing can be beneficial; this resulted in the establishment of a team within the AFP dedicated to counterfeit deterrence.

I found this case of Portugal most intriguing. A counterfeiter used Portugal’s corruption history in a really clever way:

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Sweden-based Indian couple, have named their daughter after Korean based Mutual Fund!

September 19, 2019

Talk about globalisation!

A Sweden-based Indian couple, have named their daughter after Mirae mutual fund. The couple was a regular investor in MF and were happy with the reurns:

A Sweden-based Indian couple, have named their daughter ‘Mirae’ drawing inspiration from Mirae Asset Mutual Fund, in a testament to the growing popularity of mutual funds in India. Mirae Asset Mutual Fund has been one of the top performers with two of its funds in particular, Mirae Asset Large Cap Fund and Mirae Asset Emerging Bluechip delivering strong performance relative to their category and benchmark over the past 5-7 years. The couple are resident Indians, currently in Sweden on a project for their employer.

Speaking on behalf of the family, Dr Rohan Chahande, 40, a Nagpur-based financial services professional explained that the family has invested in Mirae Asset Mutual Fund over the past few years and are extremely pleased with the consistent performance it has delivered. ‘Mirae’ means good future in Korean, he added. “It is very humbling and at the same time inspiring to hear this. I would like to wish Baby Mirae good health and a great future,” said Swarup Mohanty, CEO, Mirae Asset Mutual Fund.

The parents, Vishal and Dhanista Kharparde have invested in Mirae Asset Large Cap Fund through SIPs over the past 3 years, a period that has been relatively tough for the mutual fund industry as a whole. However Mirae Asset Large Cap Fund has delivered returns of 9.58% outperforming the 8.16% delivered by the S&P BSE 100. Over longer periods however, the scheme has delivered stellar returns: 15.91% over the past 7 years and 14.57% over the past 10 years. Mirae Asset Large Cap Fund also features in the Mint 50 List.

Perhaps there cannot be a better tribute to any MF than this…

Let hundred Dwijendra Tripathis (business historians) bloom

September 19, 2019

This post reviews the proceedings of ‘The International Conference on Indian Business and Economic History’ held at IIM Ahmedabad on 29-31 Aug 2019. The conference was held in the memory of Prof Dwijendra Tripathi, who taught business history in IIMA for four decades. Prof Tripathi passed away last year on Teacher’s day!

It was a tragedy that the course was not taught for next 25 years before Chinmay Tumbe started teaching it once again in IIMA. This conference was organised by a team led by Chinmay which wanted to take the legacy of Prof Dwijendra Tripathi forward. No words are enough for the team which put a stellar effort to make this event a reality.

Conference Proceedings:

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If You Don’t Understand Banks, Don’t Write About Them

September 18, 2019

Frances Coppola in this piece reviews this book and laments how little scholars who work on banking know:

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Opening the toolbox: how does the Reserve Bank of NZ analyse the world?

September 18, 2019

Team of RBNZ econs in this article:

This article describes how the Reserve Bank analyses international shocks and their implications for monetary policy. As a small open economy, New Zealand is particularly vulnerable to international shocks. The Bank has a long tradition of using a wide range of models to assess the impact of different types of international shocks and their spillovers to New Zealand through various channels. This modelling has explored the transmission of these shocks through trade, financial, and confidence or uncertainty linkages. As the international economy and financial markets continue to evolve, the Bank will continue to refine its modelling strategy to better understand how these shocks evolve and transmit through to the domestic economy.

Good way to review world economy and then showing how the domestic economy is placed..

Will the digital money be like the one-sided coin? History of one-sided and two-sided coins..

September 18, 2019

Superb speech by Johannes Beermann of Bundesbank.

She says the advent of digital money is like a toss with the coin still hanging in the air. Which way it will land we have to see.

She starts with how football matches are started with the toss of a coin and why two sided coins matter:

Welcome to the Seehaus right at the heart of the English Garden.

This park is a true landmark of the city of Munich, with a design inspired by British landscape architecture.

It probably comes as no surprise that football – another at least originally English pastime – is popular around here as well.

Of course, “kicking a ball” with friends in a park such as the English Garden is a more informal affair than the matches you might see in the professional football leagues, where the stakes are arguably much higher.

But the basic principles of football apply everywhere. The direction of play is the first decision to be made before any match can begin.

Depending on the position of the sun or the direction of the wind, the choice of which goal to defend first could make a difference to the game’s outcome.

A neutral mechanism needs to be put in place to decide who obtains this “first mover advantage”.

A coin toss is one such mechanism. The coin is considered “fair” if both events – the coin landing on heads or the coin landing on tails – have an equal probability of occurring.

In the history of minting, heads on the obverse and tails on the reverse have emerged as the two sides shown on coins which serve as legal tender. Although the details on each side differ at first sight, they are closely related.

To “coin” a well-known expression, heads and tails are literally two sides of the same coin. Together, they complete the coin, which also means both sides have to be taken into consideration.

In the world of payments, that is precisely what central banks do. On the one hand, we provide payment systems that function purely electronically while, on the other hand, we take part in the production and distribution of physical cash. In the prevailing set-up, one aspect of payments cannot work without the other.

Digital payments are in a state of flux. New competitors enter the market, at times trying to disrupt existing structures.

The direction of play remains unclear at this stage. It may be that the rise of one form of digital payment will lead to the fall of another. It is also possible that physical cash is used to a lesser and lesser extent until it effectively fades from existence, at least as far as transactions are concerned.

None of us have a crystal ball to tell us how the match will end. But we can look at existing evidence.  

In my brief remarks this evening, let us turn to the hypothetical question: how would the coin toss change, if one of the sides were to vanish?

She defends why we still need cash and it should coexist with the digi payments.

In the end, some history of one sided and two sided coins:

One-sided coins are not without historical precedent.

Some 800 years ago, a variety of pfennig coinage dominated monetary circulation in German-speaking areas. Known as bracteates, these coins were embossed on one side and often hollow on the other.

The relatively simple technique employed to make them was also reflected in their limited function as a store of value. In fact, these one-sided coins were infamous for their frequent and sharp devaluations.

As a result, stable coinages were introduced in the 14th century. Those were, of course, two-sided and have become a true symbol of monetary stability that has endured to this day.

Central bank money is the most recognisable means of payment. It is the local unit of account and the only legal tender. Ensuring its adequate supply is a key task for central banks, which we need to fulfil at all times.  

As technologies advance and digital forms of money increasingly enter the field, policymakers will not be able to remain “on the sidelines”.

There are two sides to every coin, after all.

On that note, I would like to wish you all a very pleasant and interesting evening. You still have to decide between an excellent red and an equally excellent white wine. The choice is yours. Perhaps a coin toss will help.

Hmmm…

Lesson from history of Rothschilds and US free banking

September 17, 2019

Lars Rhode, Governor of Denmark Central bank in this speech speaks on trust in financial services (what else to talk!).

My topic is trust and transparency in the financial system.

In recent years, the topic has surfaced again following a number of unfortunate issues that have accumulated since the financial crisis. For a long time we may have thought that this was primarily a problem that existed outside Denmark’s borders. But then cases emerged in Denmark too. There have been money laundering cases, there have been deliveries of very large banknotes to bureaux de change, and incorrect advice has been provided in connection with investment  products. The financial sector has been involved in transactions that have drained the government  coffers of many billions of kroner in dividend tax. And I am sure we could find more examples.

What these examples have in common is that they contributed to undermining trust in the financial system. Trust is low at the global level. That  has been documented by the Edelman Trust Barometer. In fact, one of the key messages in the Edelman analysis is that the financial sector is the sector that people trust the least. Danish surveys also point to low trust in the financial sector.

He picks examples from Rothschild and US free banking:

How can we learn more about the present and about how to shape the future? One way is to look back and learn from history. So I would like to start with two examples from the past.

I will begin in the 18th century. More specifically with the Rothschild family dynasty. It was founded by Mayer Amschel Rothschild. He was the head
of a poor family comprising his wife and 10 children. The family lived in Frankfurt in the late 18th century. Good ideas combined with unusual
willpower gave Mayer Rothschild a point of departure for forging business relationships with powerful men in the area. He also dispersed his
sons across Europe. The sons established their separate trading firms and were successful. Especially the son in London was doing well. He
soon became so rich that he could lend money to the Duke of Wellington. In 1814, this son became the British government’s secret banker for funding the Napoleonic wars.

My other retrospective example relates to a period of around 30 years in mid-19th century USA. Before this period, every single bank in the USA
had to have a charter through special legislation for that specific bank.  However, this changed when many states began to introduce state charters describing the general requirements to be met by banks that wanted a licence to operate. This period has been called the “free banking” era .because anyone meeting the relevant state’s banking requirements could establish a bank. 

Lessons:

What can we learn from these two historical examples? Firstly, I note that the people involved also took on the risk – they all had something at  stake. It was their own money – or their close business partners’ money – that was lent. That gave them an incentive for sound risk management. They were focused on behaving in such a way that their good names and reputations and their wealth were not jeopardised. That is no longer the case.

Today’s banks are so large that no individual or small group of people can own and operate a big bank. This means that there is no longer a close link between those bearing the risk, the owners, and the day-to-day management. When shares are as widely dispersed as they are in most Danish banks, everyone is responsible, which ultimately means that no-one takes on the responsibility. Being owned by everyone is the same as being owned by no-one.

Secondly, I note that the market plays an important role. It is good if clients vote with their feet.

You might ask whether things had been different today if we had learnt more from history.

Banking clearly has swung from one extreme to another. In earlier days it was common for banks to fail with minimal protection and markets voting with their feet. Now even bad banks do not fail..

 

Agri finance: Another year, another panel. Will things change?

September 17, 2019

RBI released a report on Agricultural credit over the last weekend. I review the report in moneycontrol.

Liquidity and funding for banks under resolution

September 17, 2019

Should the central bank provide liquidity to banks under resolution? A bank needs both capital and liquidity to survive. A bank fails if it has either of the two.

Torbjørn Hægeland, Executive Director of Norges Bank Financial Stability, in this speech discusses the policy options:

resolved or not, a bank not only needs sufficient capital, but also needs sufficient liquidity. Payment intermediation is a vital core function of banks. Being a bank means participating in the settlement of payments, which means the bank must be liquid. How liquid is a bank that opens on a Monday morning after being resolved over the weekend? A newly resolved bank is not necessarily liquid for various reasons.

One reason is that prior to resolution, the bank will probably have depleted almost its entire stock of liquid assets, including securities eligible as collateral for Norges Bank’s standing liquidity facilities.

Moreover, immediately after resolution, other money market participants may have doubts about the bank’s viability, despite the recapitalisation that has taken place following the decision of the resolution authority. This may be the case particularly if a long time has passed since a bank has been resolved. The market will then be unfamiliar with the bank resolution process and the profile of a resolved bank. The result may be that the bank will have difficulty borrowing in the money market.

In this situation, the bank will need liquidity assistance and will turn to the central bank as an obvious source of support. Liquidity assistance to resolved banks is an issue under consideration by a number of central banks. The ECB is currently working on this issue, as we at Norges Bank are also doing. 

The question I will focus on here today is:

How should Norges Bank react when a bank under resolution applies for emergency liquidity assistance (ELA)?

Hmm..

 

MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy

September 16, 2019

A team of economists at RBA in this paper explain their macro model MARTIN:

This paper introduces MARTIN – the Reserve Bank of Australia’s (RBA) current model of the Australian economy. MARTIN is an economy-wide model used to produce forecasts and conduct counterfactual scenario analysis. In contrast to other large-scale models used at the RBA – and at many other central banks – which adhere to a narrow theoretical view of how the economy operates, MARTIN is a macroeconometric model that consists of a system of reduced form equations built to strike a balance between theoretical rigour and empirical realism.

Most of the model’s equations align closely with the way RBA staff typically interpret the behaviour of individual economic variables. However, combining these individual equations in a system can bring fresh insights that are not possible without model-based analysis. In the paper we provide an overview of the model, outline its core behavioural equations and describe its empirical properties. The Online Appendix presents the full set of model equations.

 

History of GDP goes beyond the usual narrative

September 16, 2019

Jacob Assa in this paper says GDP is more of a political construct and symbol of power:

Histories of Gross Domestic Product (GDP) – both critical and favorable – have become somewhat of a cottage-industry since the global financial crisis of 2008. Following the Stiglitz Commission, numerous general-audience books have appeared, describing the rise of GDP, analyzing its limitations, and offering reforms or alternatives. These histories, however, suffer from three key problems. First, nearly all begin in the 1930s, following the Great Depression and the lead-up to World War II. Very little if anything is said of the 250 preceding years, a period implicitly thought of as a pre-history of GDP. Second, and as a result of this limited chronological lens, GDP is considered to be a statistical measure, the shortcomings and merits of which are presented as technical and ascribed to the narrow objectives facing its 20th century architects. Third, the proposed reforms are meant to improve on GDP’s statistical limitations (e.g. using dashboards, accounting for unpaid care-work or environmental costs etc.).
These three problems are related, and this paper presents an alternative history of national accounting, considering geo-political and political-economy contexts going back to the 17th century. This longer and broader view reveals the exercise of estimating national income or wealth as a form of numerical rhetoric. Rather than a statistical measure, GDP is an indicator of power (for countries, classes and industries) as well as an instrument for advocating specific policies. Therefore, any critique must go beyond technical issues and fixes, and look at the political context and consequences of various historical versions of GDP, and any possible democratic reform of it.

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