Archive for the ‘Academic research & research papers’ Category

A Brazilian Adam Smith: José da Silva Lisboa as the Founding Father of Political Economy in Brazil

June 22, 2018

Interesting paper on how ideas transcend borders.

Paulo Roberto de Almeida (Brazilian Ministry of Foreign Relations; Centro Universitário de Brasília (UniCEUB)) points to works of José da Silva Lisboa> He brought Adam Smith teachings to Brazil:



Macroprudential tools, capital controls, and the trilemma: Insights from the Bretton Woods era

June 21, 2018

Jean Monnet of Paris School of Economics in this piece points how history keeps coming back in different ways:


Reviewing inflation targeting frameworks in New Zealand, Australia and Canada…

June 18, 2018

Reserve Bank of Australia conducted a conference in April 2018 titled : Central Bank Frameworks: Evolution or Revolution?

the central bank has uploaded the papers discussed in the conference and they look fairly interesting reading. There are seperate papers on Inflation targeting in Australia (which completed 25 years of IT), New Zealand (the pioneer) and Canada. Plus there are papers on mon pol committees and macropru policies.


The Many, Diverse ‘Main Points’ of Adam Smith’s the Wealth of Nations

June 14, 2018

Prof Barry Weingast of Stanford Univ in this paper:

The purpose of this short paper is to demonstrate that in the modern era Adam Smith scholars make a surprising variety of claims about the “main point” of the Wealth of Nations. In these notes, I collect a range of statements asserting the main point and arrange them by categories. Most statements focus on economic topics (60%), though some entries clearly fall under politics (40%). Nearly half of the statements in the literature argue that Wealth of Nations’s main purpose was to provide a theory of economic development. Other categories include the idea that self-interested individuals can support gains from cooperation; ideas about justice, morals, and liberty; and finally, contributions to economic theory.

The diversity of points is striking, indicating not only the work’s richness, but the many different topics to which it made substantive contributions. An obvious interpretation of these results is that no single, over-arching theme can be said to be the purpose or main point of the Wealth of Nations. This work made so many fundamental or foundational contributions to economics, government, history, law, politics, sociology, and normative political theory that it is difficult to say that any one contribution dominates.

It is a nice summary of different perspectives on Adam Smith’s work.

Hayek’s Two Epistemologies: Economics and Sciences in General

June 13, 2018

Nicolas Cachanosky of Metropolitan State University of Denver and Gabriel J. Zanotti of Universidad Austral in this paper try and deconstruct Hayek’s core ideas:

Hayek’s work on epistemology shows a consistent evolution from his early work on economics to his later thought on science in general. Hayek identifies economics as a type of complex phenomena with two important characteristics. Its object of study, human beings, have purposeful behavior, and the information required for the market to be in a situation of stable coordination cannot exist absent a market process in the first place. This results in the question of how is it possible that there is market coordination when the required information is not given to, and cannot be given to, anyone in particular.

Science in general, however, deal with complex phenomena. But, their complexity can be of a different kind. The complexity can be in the output of a phenomena, or on its input or building blocks. Hayek argues that economics has looked for methodological implications in science dealing with a different type of complexity. The result of this is not less than the application of unfit tools to answer the economic problem. A telling implication is the number of decades that economic theory has evolved without paying due attention to the entrepreneur, no less than the driving force behind the market tendency to equilibrium.

Hayek’s work is still driving contemporary research programs and influencing debates and schools of thought. Hayek’s insights offer a different view of the economic phenomena to the one found in formal mainstream economics. This offers both, difficulties in applying Hayek theories to formal theory, but also larger gains from trying to do so.

It is such a pity that we have reduced most economics discourse to Keynes vs Hayek and so on. There is a lot to figure and understand from people who have thought deeply about the subject.

What makes a central banker a hawk or a dove? What moulds those who change their tune?

June 11, 2018

Interesting paper by Michael Bordo and Istrefi Klodiana:

Narrative records in US newspapers reveal that about 70 percent of Federal Open Market Committee (FOMC) members who served during the last 55 years are perceived to have had persistent policy preferences over time, as either inflation-fighting hawks or growth-promoting doves. The rest are perceived as swingers, switching between types, or remained an unknown quantity to markets. What makes a member a hawk or a dove? What moulds those who change their tune? Michael Bordo and Klodiana Istrefi highlight ideology by education and early life economic experiences of members of the FOMC from 1960s to 2015. This research is based on an original dataset.

…We find that the odds of being a hawk are higher when a member is born during a period of high inflation, graduated from a university linked to the Chicago school of economics (‘freshwater’), and was appointed by a Republican president or by the board of a regional Federal Reserve Bank with established institutional philosophies. A dove is most likely born during a period of high unemployment, like the Great Depression, graduated in a university with strong Keynesian beliefs (‘saltwater’), and was appointed by a Democrat president. Swingers share several background characteristics of the doves, but not always.

In addition we show that, hawks dissent predominantly for tighter policy, doves for looser policy and swingers dissent on both sides. The odds of dissenting for a tighter policy are higher when a member graduated from a university linked to the Chicago school of economics (‘freshwater’). In turn, we observe that FOMC members born during the Great Depression have dissented more on the side of easer policy than FOMC members born before or post Great Depression.


Hyping economic prospects only fuels future crisis…

June 4, 2018

There is this classic political problem: How should Governments/policymakers present economic prospects? If they present a sober prospect then they are unlikely to be elected. If they present over the top prospects, they might be elected but it will have its own set of consequences.

In this paper, IMF economists say over-optimism leads to crisis in future:

Is over-optimism about a country’s future growth perspective good for an economy, or does over-optimism also come with costs? In this paper we provide evidence that recessions, fiscal problems, as well as Balance of Payment-difficulties are more likely to arise in countries where past growth expectations have been overly optimistic. To examine this question, we look at the medium-run effects of instances of over-optimism or caution in IMF forecasts. To isolate the causal effect of over-optimism we take an instrumental variables approach, where we exploit variation provided by the allocation of IMF Mission Chiefs across countries. As a necessary first step, we document that IMF Mission Chiefs tend to systematically differ in their individual degrees of forecast-optimism or caution. The mechanism that transforms over-optimism into a later recession seems to run through higher debt accumulation, both public and private. Our findings illustrate the potency of unjustified optimism and underline the importance of basing economic forecasts upon realistic medium-term prospects.

Not surprised to read this. It happens all across time and countries. How Great Moderation converted into a global financial crisis is there for all to see and figure.

It is also interesting that IMF econs have written this paper. IMF itself is guilty of presenting overoptimism in world economy for several years now…

A 1300-year-old family business…

May 28, 2018


Hoshi Ryokan (Ryokan means Inn in Japnaese) was established in 718 and has been run by 46 consecutive generations! Here is a video of the longest running family business. Quite something..

Countries that adopted clocks early, grew faster

May 25, 2018

This is a great time to learn how earlier inventions and technologies led to economic growth. We take certain things for granted today and don;t think them as technologies. But things like clocks were a technology of earlier years and must have led to some changes in the economies and daily life.

Came across this article which discusses this 2015 LSE paper. It tries to figure what impact clocks had on economies:

It might seem obvious that new high-tech inventions can be an economic boon — and in this case, the authors do find that early adopters of the clock saw high population growth, a proxy for premodern economic growth, of about 30 percentage points between 1500 and 1700 — but not everyone agrees. “A well-established literature,” Boerner and Severgnini point out, “has claimed that the impact is negative because advanced machines lower wages, which in turn reduce population and income growth.” In the late 1980s, moreover, the economist Robert Solow found that the adoption of computers coincided with a productivity slowdown in the 1970s. And even today, fretting about our future among the robots is commonplace.

But in the case of the clocks, the story is relatively happy—and relatively straightforward. First, Boerner and Severgnini set out to answer why some cities became early adopters in the 13th century. They find that those locations that experienced solar eclipses in Medieval times were the most likely to take up the technology. Eclipses and other astrological phenomena had been associated with Biblical events, and so the desire to study and understand the heavens was high, particularly in the monasteries. The authors posit that mechanical clocks could have developed in response to that curiosity and, perhaps, also out of a familiarity with other technologies, such as astrolabes and water clocks, that were used in astronomy.

As for the cities that experienced eclipses and built early public mechanical clocks, most had standout population growth in the centuries that followed. “There exists broad evidence from the 15th century onwards that the public clocks were used to coordinate such activities in many cities. The organization of markets neatly documents this change. Whereas prior to public clocks, the market time typically started with sunset and ended at noon, with the introduction of clocks, market times were determined by the stroke of the hour. Furthermore, market time was shortened and market access was granted to different groups of people at different times. For instance, market regulations offered time-differentiated access to consumers, retailers, and wholesalers.” Clocks also led to the implementation of pay-per-hour in many cities and allowed universities to better set start and end times for lectures. Simply put, the authors write, the clock was “an information technology that improves coordination and reduces transaction time.” No wonder that it led to growth.

Of course, it didn’t lead to growth right away or in every case. Boerner and Severgnini point to one example in which, as a result of a guild dispute in France, the clock was used to limit working hours and output to restrict competition. In truth, the clock was a productivity booster when the right work culture developed around it — and that culture “evolved slowly and gradually.”

What lessons for today?

Which brings to mind some of our present-day dilemmas. Will advances in automation cause massive social dislocation, as some scholars warn? Or will the rise of artificial intelligence give new life to the Great Enrichment? That will depend almost entirely on how we choose to respond.

Superb bit.

Did US ever default? It did in 1930s..

May 25, 2018

Prof Sebastian Edwards of UCLA says most believe US has never defaulted but it did in 1930s:

One of the most pervasive myths about the United States is that the federal government has never defaulted on its debts. Every time the debt ceiling is debated in Congress, politicians and journalists dust off a common trope: the US doesn’t stiff its creditors.

There’s just one problem: it’s not true. There was a time, decades ago, when the US behaved more like a “banana republic” than an advanced economy, restructuring debts unilaterally and retroactively. And, while few people remember this critical period in economic history, it holds valuable lessons for leaders today.

In April 1933, in an effort to help the US escape the Great Depression, President Franklin Roosevelt announced plans to take the US off the gold standard and devalue the dollar. But this would not be as easy as FDR calculated. Most debt contracts at the time included a “gold clause,” which stated that the debtor must pay in “gold coin” or “gold equivalent.” These clauses were introduced during the Civil War as a way to protect investors against a possible inflationary surge.

For FDR, however, the gold clause was an obstacle to devaluation. If the currency were devalued without addressing the contractual issue, the dollar value of debts would automatically increase to offset the weaker exchange rate, resulting in massive bankruptcies and huge increases in public debt.

To solve this problem, Congress passed a joint resolution on June 5, 1933, annulling all gold clauses in past and future contracts. The door was opened for devaluation – and for a political fight. Republicans were dismayed that the country’s reputation was being put at risk, while the Roosevelt administration argued that the resolution didn’t amount to “a repudiation of contracts.”

Interestingly, people filed lawsuits but the Court ruled in Government’s favour.

Choosing central bankers: three lessons from the U.S Fed’s history

May 22, 2018

Interesting post by Klodiana Istrefi of Banque De France.

The three lessons are:

1. Policymakers do have types, such as “hawk” or “dove”.

2. …but over time policymakers can change their tune. 

3. The center of gravity of the committee matters … as does committee management.

The author applies Dove-Hawk index to the tenure of Fed’s policymakers:


Will Norway issue an e-kroner?

May 21, 2018

The Norway Central Bank (called Norges Bank) has issued a research paper looking at whether the central bank will issue a digital currency.

It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit
analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC. The working group points in particular to three possible purposes, which require further analysis:

– A credit risk-free alternative to deposit money.
– An independent back-up solution for the ordinary electronic payment systems.
– Legal tender, if cash can no longer be regarded as “generally” available, as legal tender is normally understood to be.

On the other hand, the working group has not identified issues allowing it to conclude at present that introducing a CBDC can be ruled out. The working group has identified a number of factors that suggest caution, particularly in order to avoid conversion of bank deposits into a CBDC that is so rapid and so extensive as to impair lending. 

There is thus a need to examine the purposes of a CBDC and the most relevant solutions in more detail than permitted by the scope of this study. This will also make it possible to elaborate on the impacts of a CBDC and the cost-benefit analysis. This is planned for the project’s second phase. A premise underlying this work is that the existence and scope of a CBDC must not impair the ability of banks and other financial institutions to provide credit.


What is interesting is how these North European countries have different views on CBDC. Sweden is very aggressive whereas others are evaluating their choices.

When Soviet Jews migrated to Israel in 1990s..

May 7, 2018

Prof Assaf Razin of Tel Aviv Univ researches the impact of the immigration in this  piece:

Hmm.. A lot depends on the type of immigration…

How communist Bulgaria became a leader of tech and sci-fi…

May 3, 2018

Nice piece by Victor Petrev, a postdoctoral student at the European University Institute.

The Cold War stories did tell us how Soviets looked forward to being better than US at sci-fi and hi-tech. We have a similar story from Communist Bulgaria as well:


Examining Gross Domestic Product Data Revisions in India

May 2, 2018

RBi researchers should write more of such pieces.

In the recent Mint Memo (No. 12), a team of researchers examine GDP data revisions. They says broadly, the advanced estimates underestimate GDP:


70 Years On: Thoughts on Israel’s Imperfect Capitalism

April 19, 2018

Sami Peretz has a short piece on Israel’s 70 years of economic history which is quite similar to that of India.


Income Inequality in France, 1900-2014

April 18, 2018

Thomas Piketty along with two more researchers figures inequality in his own country:

Bertrand Garbinti, Jonathan Goupille-Lebret & Thomas Piketty combine national accounts, tax and survey data in a comprehensive and consistent manner for France, to build homogenous annual series on the distribution of national income by percentiles, from 1900 to 2014, with detailed breakdown by age, gender and income categories over the 1970-2014 period. Their new series deliver higher inequality levels for the recent decades, because the usual tax-based series miss a rising part of capital income. Growth incidence curves look dramatically different for the 1950-1983 and 1983-2014 periods. They also show that it has become increasingly difficult to access top wealth groups with labor income only. Next, gender inequality in labor income declined in recent decades, albeit fairly slowly among top labor incomes. Finally, they compare the evolution of income inequality between France and the US.

It has some interesting charts which show the evolution of inequality. US has much higher inequality than France..

Cultural differences in monetary policy preferences

April 17, 2018

An interesting paper by Prof. Adriel Jost of Univ of St Gallen and Swiss National Bank.

The monetary policy preferences of a population are often explained by the country’s economic history. Based on Swiss data, this paper indicates that while different language groups may share the economic history, they demonstrate distinct monetary policy preferences. This suggests that distinct monetary policy preferences among the populations of different countries may be determined by not only their economic histories but also their distinct cultural background.

The author tries to figure the differences using several tests and datasets. For instance: (more…)

Evolution and experiences with inflation targeting in different countries..

April 16, 2018

Interesting conference and set of papers at recently concluded conference by Reserve Bank of Australia .

Reading keeps piling up.

The paper on New Zealand Inflation Targeting is important given NZ has added employment to its price stability mandate.

Stock investors on higher floors take more risks – here’s why

April 10, 2018

Academics try and link financial behavior to all kinds of things.

Prof Sina Esteky of Miami University (Marketing area) in this research links risk taking in finance to being located in higher floors:


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