Archive for July 5th, 2021

Regulating oligopolistic stock exchanges

July 5, 2021

Giovanni Cespa and Xavier Vives in this voxeu article:

30 Years of India’s Economic Reforms: Taking stock of banking sector

July 5, 2021

2021 marks 30 years of India’s economic reforms.

My article in Moneycontrol taking stock of India’s banking sector in the last 30 years.

A brief economic history of Swadeshi

July 5, 2021

Nitin Pai in the recent edition of Indian Public Policy Review traces history of Indian swadeshi movement:

This paper traces the history of the swadeshi idea from its origins to the present day, identifies its political trajectory, assesses its impact on the Indian economy and outlines how it could be interpreted in the context of an independent, liberal democratic republic. It shows that swadeshi has always been a political project cast in economic terms and its empirical track record is far less impressive than its exalted place in the popular narrative. It concludes by arguing that India’s national interest is better served by acquiring capability than self-reliance and most importantly, by embracing an open economy. 

Distrust or speculation? the socioeconomic drivers of U.S. cryptocurrency investments

July 5, 2021

Raphael Auer and David Tercero-Lucas in this BIS paper analyse drivers for crypto investments:

Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivatedby distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.


From a policy perspective, the overall takeaway of our analysis is that as the objectives of investors are the same as those for other asset classes, so should be the regulation. Cryptocurrencies are not sought as an alternative to fiat currencies or
regulated finance, but instead are a niche digital speculation object. A clarifying regulatory and supervisory framework for cryptocurrency markets may be beneficial for the industry. In fact, regulatory announcements have had a strong impact on
cryptocurrency prices and transaction volumes (Auer and Claessens, 2019, 2020), and those pointing to the establishment of specific regulations tailored to cryptocurrencies and initial coin offerings are strongly correlated with relevant market gains.

Better regulation may also be beneficial – quintessential in fact – for the industry when it comes to the basic security model of many cryptocurrencies. This is so as the long-term viability of cryptocurrencies based on proof-of-work is questionable. Auer (2019a) shows that proof-of-work can only achieve payment security (i.e., finality) if the income of miners is high,43 and it is questionable whether transaction fees will always be high enough to generate an adequate level of income to guarantee save transactions and rule out majority attacks. In the particular for the case of Bitcoin, the security of payments will decrease each time the “block subsidy” declines (Auer,2020). Potential solutions often involve some degree of institutionalisation, which in the long-run may require regulation or supervision.


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