Archive for the ‘Discussion’ Category

Reserve Bank of New Zealand to build foreign exchnage reserves

January 25, 2023

Before 2008, the consensus was central banks should just target inflation and leave everythig else.  Post 2008 crisis, all kinds of things happening in world of central banking. The objectives are constantly expanding from monetary stability to growth, unemployment, financial stabiliy, climate change and so on.

Reserve Bank of New Zealand which pioneered inflation targeting was seen behind the pre-2008 consensus. All this is changing big time. The objective has been expanded to included financial stabiluty and employment.

As per latest developments, the central bank has signed an agreement with the government to intervene in foreign exchange markets and build foreign exchange reserves

We hold and manage foreign reserves in order to be able to intervene in the New Zealand dollar (NZD) market for financial stability or monetary policy reasons. Foreign reserves are safe and liquid assets held in currencies, such as United States dollars, Euros, and Australian dollars.

Our chairman Professor Neil Quigley says a well-functioning foreign exchange market is critical to New Zealand’s economy with many people — including exporters, importers, borrowers and investors — reliant on these markets to exchange New Zealand dollars for foreign currency.

“While foreign reserves are rarely used, it is important for us to be prepared to support the foreign exchange market in exceptional circumstances to maintain financial stability and ensure essential transactions can continue to occur.”  

As part of the framework, both the Reserve Bank and the Minister of Finance are required to agree to a level of foreign reserves that we should hold in order to meet our objectives. The level of foreign reserves had been largely unchanged since 2007. 

Given the growth in the economy and foreign exchange market since then, the Minister of Finance and our Board have agreed that an increase to foreign reserves holdings is needed. 

“The transition to this higher level of foreign reserves will take place over a number of years, in order to minimise the market impact,” Governor Adrian Orr said.

Due to market and policy sensitivities, we do not intend to make public any further details on the size or composition of this increase. However, our foreign reserves holdings will continue to be published on our website on a monthly basis.  

The Framework maintains the Monetary Policy Committee’s right to intervene in the exchange rate when the New Zealand dollar has moved to exceptionally low or high levels that cannot be justified by economic fundamentals. Interventions are expected to be rare and consistent with the Reserve Bank’s monetary policy objectives.



Tribute to Mr BV Doshi

January 25, 2023

The highly accomplished architect Mr BV Doshi passed away in Ahmedabad yesterday. I am not a student of architecture and have no idea about the subject. However, I have had the privilege to study and work in his designed architectures of excellence. I just want to thank you Sir for imagining the unimagined.

For the unititated, see his video on his thoughts and philosophy on designing campus of IIM Bangalore.  We barely pay attention on what thinking and effort goes into designing fine architecture.

Prof Chinamy Tumbe pays a fine tribute. Mr Bimal Patel of CEPT University shares memories.

University of Chicago Booth School’s 125th Anniversary

January 12, 2023

Booth School celebrating its 125 anniversary in 2023

In celebration of the 125th anniversary of Booth’s founding in 1898, the Booth community celebrates our transformative approach to business education, the innovative ideas of our faculty, our culture of diverse perspectives and collaboration, and the global impact of our entire Booth community.

Beginning now, and throughout 2023, we are celebrating our 125th anniversary. From events across the globe to an oral history project for our alumni to activities on social media and retrospective features, join us as we showcase the impact of Booth over the past 125 years, celebrate this important milestone as a community, and present to you how Booth is poised to continue to impact the future.

Dr C Rangarajan’s 91st birthday

January 9, 2023

Ahmedabad University recently celebrated and felicitated Dr C Rangarajan on his 91st birthday at its 4th annual economics conference.

What a career he has had and more importantly what a person he is despite all the achievements. Tremendous inspiration for generations. He shows why age is just a number.   He has just written an account of his policy days.

I wrote a few lines on his birthday.

Dr Rangarajan @91

As India reflects on its financial sector reforms of nineteen ninety one,
The captain who led the reforms has also turned  ninety one.
And when that captain writes a book on the reforms at that age,
We know he is a special person on the world stage.

He started career as a teacher of economics,
Appointed RBI Deputy Governor as one of the few  from academics.
He chaired many a committees at the Central Bank,
Gradually shaping himself as an economic think tank.

The 1991 crisis hit all of India’s economic targets,
Needing to change economic policy from planning to markets.
Just like Kapil Dev with whom he nearly shares his birthday,
He led the reforms which has shaped Indian economy as we see it today .

He has  served public for so long,
There is barely a policy position he has not  been on,
From being the RBI governor to holding finance commission chairmanship,
Is like running on the Friedman road and then taking a Keynesian trip.

Even Gods marvel at his work ethic,
All humans can do is to admire and applaud his magic.
We pray that Gods continue to bless him with happiness and health,
So that he can  keep writing books sharing his wealth.


Turkey: A 100-year-old democracy with ups and downs

January 4, 2023

In 2023, the Turkish republic will celebrate its 100th birthday with an election that could usher in a new turning point in its history.

The Republic of Turkey was founded 100 years ago. Since then, the country has experienced a transformation from a single-party into a multi-party system, a military coup in 1960, violence on its streets for almost a decade in the 70s, followed by another coup and many unstable coalition governments in the 90s, and an Islamist rise to power in 2002. 

Amid all these minor and major setbacks, the Turkish state, built on Western ideals such as democracy, equality, the rule of law and secularism, has survived and will celebrate its centenary year next year. 

How resilient are Turkey’s democratic institutions, though, as it turns 100?

The Best Economics Books of 2022 recommended by Jason Furman

December 14, 2022

The time of the year where people give lists for 2022 and for 2023.

Jason Furman, a Harvard economics professor and former adviser to Barack Obama, picks out five of the best economics books of 2022 and book topics he will like to see in 2023.

five books for 2022

  • The Journey of Humanity: The Origins of Wealth and Inequality by Oded Galor
  • Slouching Towards Utopia: An Economic History of the Twentieth Centuryby Brad DeLong
  • Streets of Gold: America’s Untold Story of Immigrant Succes by Leah Boustan & Ran Abramitzky
  • Of Boys and Men: Why the Modern Male Is Struggling, Why It Matters, and What to Do about It by Richard V Reeves
  • Chip War: The Fight for the World’s Most Critical Technology by Chris Miller

on 2023:

Humans are always the most important driver of economic growth, and they were an important part of the story in every one of the five books that I recommended. There is almost no limit to the study that can be done to try to understand the human aspects of economic growth.

In 2023, the spotlight will grow on the levelling-off and potential reduction of globalization that we’re going through. This will be a big issue going forward. Fifteen years ago, there was a whole raft of books about globalization. We might start to want to read or research and write about de-globalization, as we might be in the beginning of that process.

And finally, the rehabilitation of industrial policy is an area of increasing importance. ‘Industrial policy’ used to be an insult levied against ill-conceived government plans; now, governments around the world are increasingly comfortable getting directly involved in industry. I’m not sure if that is a good thing or a bad thing, but it is one of the many things worth reading about in 2023.

Industrial policy…hmmm

From Tiananmen to COVID: Modern China’s Protests in Photos

December 6, 2022

Lindsay Maizland, Author and Sabine Baumgartner, Photo Editor of CFR in this photo essay show Modern China’s Protests in Photos.


Archiving 150 years of Zurich Insurance

October 27, 2022

Zurich Insurance is celebrating 150th anniversary.

On October 22, 1872, 10 men met in the city of Zurich to found a corporate entity with the name Versicherungs-Verein (Insurance Association). The new company would become what we know today as Zurich, the global insurer. It was initially set up as a subsidiary of another marine insurance company that these same men had founded in 1869. In the Zurich region back then, the real money was in textiles. Insurance was, and still, is important for the textile industry. The many textile factories that had sprung up in eastern Switzerland, a region that includes Zurich, relied on cotton from America, India and Egypt, and imported raw silk, sending finished goods abroad. Transport and shipping were their lifelines.

It’s no surprise then that four of Zurich’s youngest founders, Heinrich Emil Streuli- Hüni, Adolf Guyer-Zeller, Carl Abegg-Arter and Robert Schwarzenbach, were running private textile businesses. With the exception of Guyer-Zeller, they took over the family-owned business when they signed Zurich into life. The latest venture was just one of many going concerns. They also engaged in politics, served on boards of several Swiss companies and took speculative bets on the risky growth industry of the age – railroads. The Northern Railway completed its first line between Zurich and Baden in 1840

Lot of stuff on the website.

Credit to the archivist team for putting things together:

Zurich’s archive team are a dedicated and fun crew that has done a lot behind the scenes to bring the 150th anniversary to life. So slip on your white gloves, break out those 19th century ledgers and get ready to belt out ‘I Will Survive’!

Thomas Inglin and Christofer Stadlin are approaching an ultra-modern, nondescript building, about the size of an airport hangar, outside Zurich’s city limits on a recent weekday morning. It’s in the middle of nowhere really, where exactly in the middle of nowhere, I can’t say; I’ve been sworn to secrecy. Direction Ikea, let’s call it.

You can understand why they are overprotective. This high-security fortress – out of a Bond film, and one of the recent Daniel Craig variety – is the new, year-old home for the archives of Zurich Insurance Company Ltd. (Zurich), which marks its 150th anniversary this month.

Considering that Thomas is Head of Corporate Archives and Christofer is the Records Manager, the anniversary is their Super Bowl, their World Cup, their Olympics, all rolled into one. This building, despite its sterility, houses the soul of Zurich – their Wembley – and they can’t stop talking about it.

The facility, they tell me, is one of only three in the world that could withstand a magnitude 10 earthquake, even if there’s never been such a thing. It’s fireproof and, apparently, could withstand a nuclear attack.

“There could be Armageddon and this building will remain,” says Christofer, a native of the nearby town of Zug, though he’s been in the city so long he considers himself a Züricher. “Aliens will come down and only find the Zurich archives.”

Zurich insurance is making all effirts to insure its history,,,,

End of crypto summer in Bali islands

September 6, 2022

Harry Jacques in IMF’s Finance and Development magazine;

The Indonesian island became a base for crypto entrepreneurs, but few priced in the crypto winter.

Many cryptocurrency speculators with an instinct for arbitrage were drawn to the possibilities of Bali’s crypto summer, with high-end amenities at far lower cost than in San Francisco or Singapore.

Few appeared to have priced in the emergence of a crypto winter—Bitcoin fell from an all-time-high above $68,000 in November 2021 to below $20,000 in June as some exchanges paused withdrawals and alternative assets collapsed.

Charles Kindleberger who wrote the famous book manias, panics and crashes would have said told ya! Human hubris and follies never cease to surprise.

Corporations under autocracy: Lessons from Russian and German history

August 23, 2022

Caroline Fohlin  and Amanda Gregg in this voxeu piece:

Political institutions have important implications for economic growth. One key channel is through the impact on industrial activity. This column compares the impact of political institutions in Germany and Russia on corporations pre-WW1 to isolate the impact of political and economic openness, as the two countries were similar in other characteristics such as their autocratic political regimes, civil law legal systems, and their late industrialisation. Russia corporations faced greater barriers to entry, which resulted in fewer corporations, and greater reliance on bank debt, due to weaker development of Russian financial markets.

What Happens when Big Brother Meets Big Tech

July 29, 2022

Lynn Parramore of INET interviews University of Tennessee law professor Maurice Stucke who has has been critical as tech firms have grown into giant “data-opolies” profiting from surveillance and manipulation. He warns that legislative inaction and wider government complicity in this surveillance are eroding fundamental rights to privacy along with the ability of federal agencies to regulate Big Tech.

Lynn Parramore: Concern over privacy is increasing right now, with people worrying about different aspects of the concept. Can you say a bit about what privacy means in a legal context? With the digital revolution, privacy obviously means something different than it did 50 years ago.

MS: Yes, privacy is not a single unitary concept. There are different strands. There’s bodily privacy and decisional privacy – the right to make important decisions about one’s life, like whether to have a child or not, without governmental interference. Within the bucket of decisional privacy would also be marriage, contraception, and things of that nature. There’s intellectual privacy (such as what one reads, watches, or thinks) and associational privacy (such as the freedom to choose with whom one associates). Informational privacy is another strand, where you can control your personal information, including the purpose for which it is used.

There used to be the idea that data protection and privacy are fundamental human rights.

Numerous supporters of privacy rights have argued that U.S. Constitution should protect an individual’s right to control his or her personal information. One of the earlier Supreme Court cases involving informational privacy tested that belief. New York passed a law requiring doctors to disclose to the government their patients’ name, age, and address when they were prescribed certain drugs. All of this information was collected in a database in New York. A group of patients and their prescribing doctors challenged the law, contending that it invaded their constitutionally-protected privacy interests. The case was decided in 1977 — before the Internet and cloud computing. The Supreme Court, however, did not perceive any threat to privacy implicit in the accumulation of vast amounts of personal information in computerized data banks or other massive government files. The Court instead noted how the mainframe computer storing the data was isolated, not connected to anything else. Today, the data are not collected and maintained on some isolated mainframe. A torrent of data is being collected about us that we may not even have thought about. When you go to purchase gas at the local station, for example, you may not think of the privacy implications of that transaction. But there are powerful entities that collect vast reservoirs of first-party data from customers, and also sources that are reselling it, like the data brokers.

Congress, unlike the Supreme Court, recognized in the 1970s that the privacy of an individual is directly affected by the government’s collection, use, and dissemination of personal information and that the government’s increasing use of computers and sophisticated information technology has greatly magnified the harm to individual privacy. The preamble of the Privacy Act of 1974, enacted by Congress, states that privacy is a fundamental right protected by the Constitution. It was a landmark law in seeking to provide individuals greater control over their personal data in government files.

But the Supreme Court, on two occasions when it had the opportunity, declined to hold that the Constitution protects informational privacy as a personal and fundamental right. A majority of the justices just punted. They said that even if one assumed that such a right existed, it did not prevent the government from collecting the information it sought in both cases. Justices Scalia and Thomas were blunter in their concurring opinion: they simply argued that there is no constitutional right to informational privacy.


MC Explains | India does not face an external debt crisis

July 14, 2022

There have been media reports over possibility of India facing an external debt crisis.

My explainer in moneycontrol on external debt in general and whether India faces a external debt crisis.

Scottish Enlightenment vs. Irish Enlightenment

July 4, 2022

In an earlier post Tyler Cowen had written on Irish economics and economists.

He follows up with a post on Irish enlightenment and compares it with Scottish enlightenment:

The Scottish Enlightenment seems like a real enlightenment to most observers, the 18th century Irish Enlightenment (Swift, Berkeley, Burke, toss in James Barry too) does not.  In my admittedly unorthodox view, I think the Irish Enlightenment simply had different concerns but was no less of an enlightenment.  Much of the Scottish Enlightenment was concerned with the following:

1. Increasing market size and division of labor

2. Martial virtue and security against foreign enemies

3. Sympathy

That all makes broad sense when you realize that Britain was indeed building the world’s largest economic market, and furthermore had to worry about its enemies on the Continent.  Regular social interactions were becoming normal enough that one could ask basic questions about sympathy, and assume that some degree of sympathy was present.

None of those conditions held true for Ireland.  Market size was small, and external market relations typically were controlled by the British.  As for military issues, Britain could dominate you in any case, so martial virtue was of secondary import, at least until later civil wars.  And sympathy was not to be assumed at all, for reasons of religious, political, and class prejudice.

My “standing on one foot” version of the Irish Enlightenment would be a concern with:

1. Is toleration at all possible?  Toleration needed before sympathy!

2. Can we expect there to be progress at all?  James Barry argues for the universality of progress, but Swift doubts whether moral progress is likely.  Burke wishes to take progress in baby steps.  Berkeley is skeptical altogether.  If you are ruled by the Brits, the richest society to date, but they are still bastards to you, maybe you will be more skeptical about moral progress.

3. A sense of terror from difference, as mirrored both in Burke’s aesthetics of the sublime and the voyages in Swift’s Gulliver’s Travels.  Everyone is running around deeply afraid of “the other,” and this concern surfaces also in Burke’s fears for the French aristocrats.  The enthusiasms of the French revolutionaries reminded Burke all too much of the earlier Irish civil wars and rebellions and massacres, even though in both cases he knew the privileges of the nobles were not deserved.  Swift is consistently asking whether one culture can understand the other at all.


Overall, the Irish Enlightenment wasn’t nearly as optimistic as its Scottish counterpart.  But it was far more mindful of the perspective of the victim, presaging more modern developments.  And later in the 19th century, the Irish Enlightenment turned its attention to themes of depopulation and excessively high land rents, both extremely relevant to current times as well…

The Irish Enlightenment is, dare I say, underrated?


A review of undergraduate economics curriculum in India:

June 22, 2022

Rethinking Economics India has released its review of UG economics curriculum in India.


The report shows that the undergraduate curriculum of Economics is falling short of students’ needs or expectations. Both microeconomics and macroeconomics are grounded in neoclassical interpretations of economic theory, barring a few exceptions. A dearth of readings and authors from India and countries of the Global South, as well as female authors, is largely prevalent combined with a lack of more recently published texts. Economic methodologies are predominantly based in quantitative components with less focus on application based approaches and lack qualitative elements.

While every one of the drawbacks of the extant curriculum structure potentially represents an opportunity that could promote curriculum
change for the better, we must keep in mind that universities as decision makers are constrained. The ‘rules of the game’, that is, the regulatory governance framework may act as a significant constraint to the autonomy of individual departments to structure or restructure their curricula. Questions pertaining to the governance of universities in India are outside the scope of this report. However, they do constitute an area of future research.

Very useful review..

Nobel endevours with Nobel laureates

June 15, 2022

Superb set of questions to Nobel laureates and enriching answers from including two from economics David Card and Angus Deaton (HT: Ashish Kulkarni of Everydayecon blog).  There are lessons in humility too.

This one by Angus Deaton is gold:

Q: Nobel Prize-winning physicist Richard Feynman once said ‘If you think you understand quantum mechanics, you don’t understand quantum mechanics.’ As people who’ve never professed to understand quantum mechanics, The Fence find this statement quite presumptuous, but decided we’d ask some of the world’s biggest boffins how much they do or don’t know about their jobs, life and everything else besides.

profangus deaton (economics, 2015)

For me, macroeconomics is like quantum mechanics. Though it is not just me. It changes shape all of the time, and I have done economics long enough to see what is true – and what is not true – change places over and over again. Slightly differently, there is an idea in statistics, used also in economics, called ‘regression to the mean’. Ask any economist or statistician if they understand it, and they will all say yes, of course. But the great statistician David Freedman used to say of testifying in court that whoever has to explain ‘regression to the mean’ to the judge has thereby lost the case. As an example, suppose poorer countries always grow faster than richer countries. So their income must get closer together over time? No, not necessarily. That is an example of ‘regression to the mean’  sowing confusion.



Why India needs a Fiscal Council?

June 8, 2022

Lekha Chakraborty of NIPFP and Emmanuel Thomas of JNU in this blogpost reiterate a long standing demand of economists: Need for a Fiscal Council in India:

…an earlier than expected fiscal normalisation process by drastically curbing public debt can affect growth recovery. So strengthening the credibility of fiscal policy is significant to ensure fiscal marksmanship. ‘Communication’ of the medium-term fiscal framework by providing the roadmap to reduce the public debt is important to gain investors’ confidence. Fiscal transparency and accountability need to be ensured to create room for market confidence in a high public debt regime. Constituting a Fiscal Council in India is therefore crucial at this juncture to analyse the fiscal risks and to formulate post-pandemic fiscal strategies to ensure fiscal credibility in times of geopolitical uncertainties. 

‘People should be more aware’: the business dynasties who benefited from Nazis

May 18, 2022

A new book has been released which looks at some companies which benefited from Nazi connections.

TheGuardian profiles the book and the author:

Colonial and Confederate statues toppled. Looted objects returned by contrite museums. Tainted family names such as Sackler expunged from buildings. A worldwide reckoning with the past crimes of great powers is under way. But is there a glaring omission?

A new book, Nazi Billionaires, investigates how Germany’s richest business dynasties made fortunes by aiding and abetting Adolf Hitler’s Third Reich. It also examines how, eight decades later, they still escape close scrutiny and a nation that has done so much to confront its catastrophic past still suffers a very particular blind spot.

“What struck me was this is a country that’s so cognisant of its history in many ways but seemingly the most economically powerful actors do not engage with that,” says author David de Jong, a 35-year-old Dutchman. “That was the reason why I wrote the book. It’s an argument in favour of historical transparency.”

The former reporter for Bloomberg News examines German companies that own beer brewers and wine producers as well as famous US brands such as Krispy Kreme and Pret A Manger. But he casts an especially harsh light on car makers led by household names such as BMW and Porsche, which powered the postwar economic miracle and contribute about a 10th of the nation’s gross domestic product.


How Economics Found Science …and Lost its Subject Matter

May 18, 2022

Nicholas Gruen in this INET article questions the often quoted trade off between efficiency and equality by economics:

My point has simply been to show one theoretical framing of the relationship between efficiency and equality that proceeds from careful, critical observation of and abstraction from reality. If this is well-judged, our understanding of reality improves as do our prospects of improving it. The textbook approach couldn’t be more different. Turns out that it is metaphysical fairy-floss. The “efficiency-equality” trade-off exists as a particular case of the general one that if you wish to achieve one thing, doing something else could get in your way. That applies whether the things in question are apples, oranges, efficiency, spelling prowess, bananas, Nobel Prizes, stop signs, or fortune cookies. Oh — I nearly forgot — and equality. Who knew?

Disciplines like economics can be worse than useless without proper attention to what Mary Midgely called their ‘philosophical plumbing’ — the way their organizing ideas are brought into relation to get us closer to reality — like the philosophical plumbing I’ve offered in this essay. Without it, the ideas and techniques economists use are unmoored from any wider accountability for actually helping us understand the world. Yet that kind of close-grained reflectiveness about the way ideas are used in situ is completely absent, both from learned journal literature and from the core economics curriculum. (Indeed, in my experience, it barely makes its way into the “philosophy/methodology of economics” literature and pedagogy preoccupied as they have been with various more ponderous set pieces — for instance, Popper’s falsificationism and Milton Friedman’s call to judge theory by the quality of its predictions rather than the realism of its assumptions).

Finally, note how frequently the kind of thinking I’ve been critiquing in this essay perpetrates the fallacy of the excluded middle — and how much damage this has done to the fabric of economic and political debate, and therefore to our economy and polity. Thus, Friedrich Hayek compellingly demonstrated the impracticability of managing a complex economy entirely from the center. But he took this demonstration of the impracticality of one extreme to justify a lurch towards the other and the general principle that less government was in principle preferable to more. This piece of motivated impatience in going from arguments to practical conclusions — so typical of intellectuals — was a spectacular non-sequitur from which many economists have still not freed themselves and from which the world has still not recovered.


As Russia-Ukraine war rages on, remembering Andha Yug by Dharamvir Bharti

April 22, 2022

It is so sad and tragic to see pictures/videos of Russia-Ukraine war killing hapless people and spreading misery.

The war images made me remember the landmark play – Andha Yug – by Dharamvir Bharti. The play is based on the aftermath of the Mahabharata War.  Despite different geographies and contexts, the main lesson that wars should be avoided at all costs is not lost. Yet humans find and invent reasons to fight wars.

One can even watch the play on youtube.

100 years of BBC (British Broadcasting Corporation)

April 11, 2022

The year 2022 marks 100 years of the British icon.  BBC has put up a digital archive to commemorate the occasion.


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