Archive for the ‘Academic research & research papers’ Category

History of macroeconomic models from 1930 to today..

January 18, 2018

This is an interesting PPT from Benjamin Moll of Princeton Univ:

The Main Point of My Talk
• Macroeconomics and inequality is a two-way street
inequality ⇐⇒ macroeconomy
1. macroeconomic shocks and policies affect inequality
2. inequality affects macroeconomic aggregates
• This idea may sound obvious to you but  it only made its way into mainstream macro relatively recently
• lots of people (economists, journalists, …) frequently forget
• Another theme: large gap between  
• current research in academic macroeconomics
• macroeconomics in media/blogs, undergraduate teaching

One atleast gets some clarity about the different models. He divides these models across 3 generations.

Lots to ponder and think about.


Videos: The History of Europe, South Asia and South East Asia

January 18, 2018

Utopia – you are standing in it blog has three fascinating videos.

The videos show how these three regions have changed over centuries:



When a journal on “Rebuilding Macroeconomic Theory” has papers only from mainstream…

January 15, 2018

Prof Steve Keen writes on this special issue of Oxford Review of Economic Policy: Rebuilding macroeconomic theory.

His is a typical Australian response if one may call it that:


Rise of non-bank finance in India..

January 4, 2018

Researchers at RBI- R. Ayyappan Nair, M V Moghe and Yaswant Bitra- point to this interesting ongoing development in Indian financial markets.

They show that non-bank sources of finance have risen significantly over the years. The share of banks as a source of finance has declined from 56.3% in 2010-11 to 38.4% in 2016-17 and share of non-bank sources has increased from 43.7% to 61.6%. This rise of non-bank finance is mainly via rise in inflows towards debt mutual funds which in turn have invested in corporate bonds:

The significant increase in inflows into mutual funds and their subsequent deployment is altering the scope of disintermediation in India. We look at this evolving milieu and its implications for bank intermediation in general and credit portfolio of banks in particular. We find that there is, (i) a gradual shift in corporate borrowings from banks to mutual funds as reflected in the contraction in corporate spreads for near-investment grades; and (ii) a significant differential between the risk-free rate and the benchmark lending rate for banks, viz., Marginal Cost of funds based Lending Rate (MCLR), which has given rise to disintermediation of bank credit for quality corporates.



The rate of return on key asset markets in advanced economies from 1870-2015…

January 2, 2018

I have just started to read this long paper by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor.

But they just put the summary on voxeu.

They find equity and housing give similar returns and surprisingly volatility is much higher in housing, One would expect equity to have lower volatility as one has the option to diversify in this market. Then even in bond markets, volatility is high making it even worse for bondholders compared to equity ones. Then rate of return on capital is much higher than rate of growth than Piketty showed in his research.


The social origins and IQ of inventors

December 28, 2017

Interesting research but one could have guessed the results. Philippe Aghion, Ufuk Akcigit, Ari Hyytinen and Otto Toivanen look at the social profile of the investors:


Assessing the risk of inverting yield curve in US…

December 22, 2017

Speech by James Bullard of St Louis Fed given on 1 Dec 2017.

He says based on current trends and future projections, US yield curve could begin to invert around late-2018:

• Let’s suppose that longer-term yields remain near the average since 2012.
• Let’s also suppose that the FOMC remains on track to raise the policy rate at the pace suggested in the SEP.
• Under this scenario, the U.S. nominal yield curve would invert in late 2018.
• This scenario would not play out if either (1) the FOMC does not raise the policy rate as aggressively as suggested by the SEP, or (2) longer-term rates begin to rise in tandem with the policy rate.

And then as we know, inverted yield curve is a great predictor of recessions.

We are back to full circle with so much monetary interventions and policies. It started with US yield curve inverting in 2007 whose signs were ignored. This was followed by failure of Lehman and AIG leading to all kinds of monetary interventions. And now 10 years later, we are again seeing signs of inverted yield curve…

Crisis and Response 2008–2013: Perspective from Federal Deposit Insurance Corporation (FDIC)…

December 22, 2017

The central banks are always in the thick of things during both good and bad times. Most commentary is driven from their perspective. However, in US case typically FDIC plays a fairly crucial role. It has to deal with the muck created by policies of both central banks and the government.

FDIC has released a report giving its perspective on the 2008 crisis.


The evolution of Hayek’s thought on gold and monetary standards

December 20, 2017

Uneasy Money posted about Rise of Hayek and his inconsistent views.

Here is another paper by James Caton of North Dakota State University:


Changing history of Financial centres: Hong Kong set to lose global IPO crown as New York and Shanghai rise…

December 19, 2017

History of financial centres has been a long drawn one and is one of the most interesting aspects of finance. How and why global financial activities cluster in a few places across the world? It is a combination of both political, economic and geographic which makes these so called global financial centres. What is also interesting how these centres keep changing with one rising over the other.

Just recently, we saw how Paris got a shot in the arm in in its bid for global financial centre as European Banking Authority shifted from London to the French capital. France has long hoped to compete with the Britain over control of global finance. It was nowhere in the race till Brexit happened.

For most part of the history till mid 20th century, Asians were nowhere in the race in the global finance. This began changing as Tokyo emerged as an alternative as rank of Japan surged in the global economy rankings. Though, what completely surprised was the way Hong Kong and Singapore shaped as global financial centres. Unlike other financial centres which grew as their home countries grew in global rankings, these two countries were hardly much in economic size but captured the imagination of financial firms via their superior infrastructure and legal matters. It was far easier to raise funds in these two places than other centres and eventually became the preferred destinations. Earlier, the choice before an international firm wanting to raise resources was mainly between London and New York/ Now they could not ignore Singapore and Hong Kong from their list. And like most competitions this one kept the incumbents on toes.

So when one came across this news that HK loses its equity IPO rankings to NY and Shanghai (surprise!), it made an interesting read. It is interesting to note the rise of Shanghai in these rankings. HK enjoyed a long term advantage over Shanghai on financial matters due to British connections/legacy etc. Those advantages seem to have gone away now…


Should Denmark issue e-kroner?

December 18, 2017

After Sweden, Australia, NZ, we also have Denmark chipping into the debate.

Denmak Central bank looks at the issue whether they should issue a digital currency or e-kroner?

In this short research summary the central bank rejects the idea saying it will lead to financial instability:


Discussions on issuing e-New Zealand Dollar…

December 14, 2017

After Sweden, Australia, we now have some bit from New Zealand as well. Though, unlike the Sweden and Australia posts which were based on speeches of their central bank chiefs, the NZ one is from Michael Rendell, former  central banker from NZ.

He reflects on this report from the NZ central bank:


Hayek’s rapid rise to stardom and his inconsistent views: Understanding the intellectual and doctrinal background

December 14, 2017

A Hayek day.

Uneasy Money has a  post on Hayek’s rise to stardom. More importantly, how his policy views were different from his academic view:


The changing geography of US manufacturing during the 20th century

December 13, 2017

Fascinating research by Profs Nicholas Crafts and Alex Klein.

They look at how economic geography has changed in US manufacturing from 1880-1997:

Should Australia issue an e- Australian Dollar?

December 13, 2017

Just a few days ago, Riksbank chief Ingves spoke about whether and how Sweden should issue an e-krona.

On the speech, JP Koning rightly remarked that the speech does not talk about the need for e-krona to be anonymous. JP had earlier educated us about two key features which led to acceptance of paper money: anonymity and censorship.

Now, Australian central bank chief Philip Lowe speaks about whether Australia should issue an e- Australian Dollar (eAUD). He also looks at usual attributes of an e-AUD says that though cash usage is declining but cash is likely to remain, whether banks will be key to issuing this money and so on.


Does finance lead to economic growth? Summary of literature…

December 12, 2017

Alexander Popov of ECB looks at the biggest question on finance: does it lead to economic growth and if yes how?

He sums up the literature so far:

This paper reviews and appraises the body of empirical research on the association between financial markets and economic growth that has accumulated over the past quarter-century. The bulk of the historical evidence suggests that financial development affects economic growth in a positive, monotonic way, yet recent research endeavors have provided useful and important qualifications of this conventional wisdom. Moreover, the proliferation of micro-level datasets has enabled researchers to study more precise links between theory and measurement. The paper highlights the mechanisms through which financial markets benefit society, as well as the channels through which finance can slow down long-term growth. 

Nice bit..

Hayek on the Creation of Moral Hazard by Central Banks

December 8, 2017

Prof Larry White discovers an older paper by Hayek where Hayek questions role of central banks:

In section 8 of the article (pp. 145-47 in the 1999 translation), Hayek gives a favorable evaluation of free banking as against central banking. Having overlooked this passage, I had previously thought that Hayek first addressed free banking in his 1937 book Monetary Nationalism and International Stability. Hayek does not embrace free banking as an ideal, first-best system, because he thought it prone to over-issue (as I discussed in my 1999 article based on Hayek’s other writings). But he criticizes the Federal Reserve Act for relaxing rather than strengthening the prior system’s constraints against excess credit expansion by American commercial banks.

Hayek begins the passage with a caution that the intended result of creating a central bank, when the intention is to avoid or mitigate financial crises, need not be the actual result:


Primer on European Banking Union..

December 6, 2017

Riksbank economists – Markus Ehrenpil and Mattias Hector- have a short primer on the EBU:

The Banking Union is the result of the work within the EU on improving regulation and supervision of the financial sector that began after the financial crisis. The purpose of the Banking Union is to create a structure for the joint supervision and management of banks in crisis, together with a joint system for deposit insurance. Large parts of the Banking Union are now in place, but some work remains to be done before the European Banking Union is fully up and running.

Just like anything European, it is quite complicated. We see both forces of making things European yet keeping them local remaining…

An overview of Inflation-Targeting frameworks: Institutional arrangements, decision-making, & the communication of monetary policy…

December 6, 2017

Nice overview paper by Bank of Chile researchers – Alberto Naudon and Andrés Pérez – on institutional frameworks of different inflation targeting central banks:


Despite rise in less cash, why do we see rise in currency in circulation /GDP ratio across the world?

December 4, 2017

Clemens Jobst and Helmut Stix of Oesterreichische Nationalbank (Austrian central bank) analyse this paradox: Despite rise in digital money, why have cash holdings increased across most developed world after 2007?


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