Archive for May 29th, 2020

Pandemic central banking: the monetary stance, market stabilisation and liquidity

May 29, 2020

Philip Lane, chief economist and Board Member ECB in this speech reviews ECB’s policy during the crisis.

In my recent blog post, I described the range of scenarios that have been developed by ECB staff to support the analysis of the near-term and medium-term macroeconomic dynamics in the context of the coronavirus (COVID-19) crisis.[1],[2] I also explained the current monetary policy of the ECB and outlined our approach to setting the future course of monetary policy. My remarks today aim to reinforce these points by presenting some additional empirical evidence.

Lots of graphs and data in the speech. One could just use similar data for other countries to evaluate macro trends and policy responses.

Success through failure? Four Centuries of Searching for Danish Coal

May 29, 2020

Kristin Ranestad and Paul Richard Sharp in this new paper:

Natural resources, especially energy resources, are often considered vital to the process of economic development, with the availability of coal considered central for the nineteenth century. Clearly, however, although coal might have spurred economic development, development might also have spurred the discovery and use of coal. To shed light on this, we suggest that the case of resource poor Denmark, which spent centuries looking for coal, is
illuminating.

Specifically, we emphasize that the process of looking for coal and the creation of a natural resource industry in itself is important beyond the obvious dichotomy of haves and have-nots. We seek to understand this process and find that prices proved an important stimulus to coal surveys.

Apart from finding the natural resource, developing the entire ecosystem is as important:

In his analysis of natural resource exploitation and the growth of international business, Geoffrey Jones presents some common features that mining industries share, which should be stressed here, and all of which we touch on below. These include the importance of geology, the capital-intensity and high risk nature of their business, and, although there are important differences in their availability, the fact that most metals and minerals are sold on the world market (Jones, 2005: 45). He finds that mineral and metal surveys and mining have been risky businesses, which is related to the nature of their operation. The extension and composition of ores has often been difficult to know in advance and operational techniques have changed along the way. There have been many uncertainties related to such production and large capital investments have often been required. These, in turn, have involved uncertainties regarding costs, completion time and operational performance. As mineral deposits are located in remote places, and sometimes in rough terrain, challenges concerning infrastructure and logistics have also been common. Finally, fluctuations in prices represent another risk factor (Jones 2005: 52). In sum, capital, knowledge about the composition of ore, and the extension of the ore deposit; as well as relevant operational techniques and infrastructure to mine and process the ore need to be in place before rational mining can occur. 

 

Revisiting Amartya Sen vs Jagdish Bhagwati debate: Was Sen right after all?

May 29, 2020

Manas Chakravarty revisits the Sen vs Bhagwati debate in this moneycontrol article:

Just before the general elections in 2014, a rather unlikely fight erupted in the pink papers. In the Left corner, wearing what some people said were bright red shorts, was Nobel Laureate and economist Amartya Sen. In the Right corner, wearing true blue shorts, was eminent trade economist Jagdish Bhagwati.

The dispute was whether social welfare and health and education were best served by rapid economic growth, which was the view from Bhagwati’s corner, or whether social equity and health and education lay the groundwork for rapid growth, which was Sen’s thesis.

These arguments became prominent in the context of the 2014 elections. The pundits said Narendra Modi stood for rapid growth, while the UPA was all about social welfare.

The UPA’s critics, who were legion, made Bhagwati their intellectual mascot and argued there could be no redistribution without rapid growth. Let India grow first, they said, by freeing markets and allowing the ‘animal spirits’ of entrepreneurs free rein and there would soon be a surplus that would trickle down to the masses. Go in for social welfare too soon, they added, and growth would falter, just as it had done under the UPA government.

…….

And then came the COVID-19 pandemic. 

 


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