The dirty history of soap

May 22, 2020

Judith Radner, a scholar who researches material culture looks at the dirty history of soap.

Soap is an essential part of our life. In modern day, it is a part of our daily hygiene routine. We use it everyday to bathe, wash hands and so on. Now, in time of COVID-19, it has become a life-saver, helping us to mitigate the risk of infection. But what do we know about the history of soap? When and where did soap originate? How did it evolve into its modern form? How did it become a part of our daily life?


Burned by leverage? Flows and fragility in bond mutual funds

May 21, 2020

Luis Molestina Vivar, Michael Wedow and Christian Weistroffer of ECB in this WP:

Does leverage drive investor flows in bond mutual funds? Leverage can increase fund returns in good times, but it can also magnify investors’ losses and their response to bad performance. We study bond fund flows to provide new evidence for the link between mutual fund leverage and financial fragility. We find that outflows are greater in leveraged funds during stressed periods and after bad performance, compared with unleveraged funds. We provide supporting
evidence that leverage exacerbates the negative externality in investors’ redemption decisions.

In this regard, we find that fund managers in leveraged funds react more procyclically to net outflows compared with fund managers in unleveraged funds. Such procyclical security sales in leveraged funds may increase investors’ first-mover advantages and their response to bad performance. These findings suggest that leverage amplifies fragility in the bond mutual fund sector.

Applies to the crisis in India’s bond MFs as well.

In crisis, we pray: Religiosity and the Covid-19 pandemic

May 21, 2020

Jeanet Sinding Bentzen of University of Copenhagen in this paper:

In times of crisis, humans have a tendency to turn to religion for comfort and explanation. The 2020 COVID-19 pandemic is no exception. Using daily data on Google searches for 95 countries, this research demonstrates that the COVID-19 crisis has increased Google searches for prayer (relative to all Google searches) to the highest level ever recorded. More than half of the world population had prayed to end the coronavirus. The rise amounts to 50% of the previous level of prayer searches or a quarter of the fall in Google searches for flights,  which dropped dramatically due to the closure of most international air transport. Prayer searches rose at all levels of income, inequality, and insecurity, but not for the 10% least religious countries. The increase is not merely a substitute for services in the physical churches that closed down to limit the spread of the virus. Instead, the rise is due to an intensified demand for religion:

We pray to cope with adversity.


The drivers of cyber risk

May 21, 2020

Iñaki Aldasoro, Leonardo Gambacorta, Paolo Giudici and Thomas Leach of BIS in this research:

Cyber incidents are becoming more sophisticated and their costs difficult to quantify. Using a unique database of more than 100,000 cyber events across sectors, we document the characteristics of cyber incidents. Cyber costs are higher for larger firms and for incidents that impact several organisations simultaneously. The financial sector is exposed to a larger number of cyber attacks but suffers lower costs, on average, thanks to proportionately greater investment in information technology (IT) security. The use of cloud services is associated with lower costs, especially when cyber incidents are relatively small. As cloud providers become systemically important, cloud dependence is likely to increase tail risks. Crypto-related activities, which are largely unregulated, are particularly vulnerable to cyber attacks.


17 May 2020: Bank for International Settlements turns 90!

May 21, 2020

BIS turned 90 recently.

In this podcast, Piet Clement explains the origins of the BIS and the roles it has played since opening on 17 May 1930.

Taking the historical city travel guide to Rome in 1st century AD

May 21, 2020

Another super post by British Museum on historical travel to Rome . There was an earlier post on historical travel to city of Nineveh.

Read the rest of this entry »

Why Women Make Better Crisis Leaders

May 20, 2020

Raj Persaud in this Proj Synd piece says the reason for success of women leaders is not because of feminine qualities.

Infact they succeed against all odds:

Just as leaning into masculine stereotypes seems to correlate with poor pandemic responses, many observers seem to believe that woman leaders’ success may be rooted in their traditionally “feminine” qualities, such as empathy, compassion, and willingness to collaborate. Forbes called Norwegian Prime Minister Erna Solberg’s televised address to her country’s children an example of the “simple, humane innovations” that are possible under female leadership.

This reading is outdated, reductive, and simply wrong. Trump and his ilk may act tough, but ultimately their leadership is an incompetent charade of bluster, vacillation, and self-aggrandizement. High-performing female leaders, by contrast, have been resolute, assessed the evidence, heeded expert advice, and acted decisively.

Following the mantra “go hard and go early,” Ardern imposed a strict lockdown four days before New Zealand’s first COVID-19 death. Taiwanese President Tsai Ing-wen introduced more than a hundred public-health measures in January – when the World Health Organization was still casting doubt on the possibility of human-to-human transmission.

If traditionally “feminine” traits don’t explain female leaders’ strong performance in times of crisis, what does? The answer may be related to the path women take to power, which is generally more demanding than that faced by men. In particular, it may be linked to the “glass cliff” phenomenon, whereby women are more likely than men to be appointed to leadership positions that are “risky and precarious.”

Research into the glass cliff began with the finding that, before appointing men to their boards, companies in the Financial Times Stock Exchange 100 Index typically experienced stable share prices. Before appointing a woman, however, those same companies often experienced five months of poor share-price performance. Another study found that companies listed on the UK stock exchange tended to increase gender diversity on their boards after experiencing big losses.

A similar tendency can be seen in politics. Margaret Thatcher became leader of a Conservative Party in crisis, and prime minister after a “winter of discontent.” Archival analysis of the 2005 UK general election found that female Conservative Party candidates tended to contest seats that would be significantly more difficult to win (judged according to their rival’s performance in the previous election).

Ardern also got her break by being thrust onto a glass cliff: she became the leader of New Zealand’s Labour Party in 2017 after poor polling forced her predecessor to resign. A mere two months later, she became the country’s youngest prime minister in 150 years.

According to the researchers, the glass cliff may appear because organizations are more willing to challenge the status quo when the status quo isn’t working. The visible difference of having a woman in charge could also reassure stakeholders that change is happening. As for the women, they may be more likely to accept leadership positions in times of crisis because they have fewer opportunities to reach the top. They can’t simply wait for an easier post to open up.

SEBI’s Department of Economic and Policy Analysis Internship Programme 2020-21

May 20, 2020

SEBI’s Department of Economic and Policy Analysis has an interesting year long internship opportunity for PhD (Finance) students. Interested aplicants should have completed atleast  years of Phd Work.

Last date of receiving application is June 10, 2020. Pass on the word to interested students.

Determinants of Loan Loss Provisions: The Case of Indian Banks

May 20, 2020

Rekha Misra, Radheshyam Verma and Samudra Biswas in May 2020 Monthly Bulletin look at how India’s banks make loan provisions:

The paper attempted to examine the impact of both discretionary and non-discretionary factors on loan loss provisioning by Indian banks during 2005-2017. Most of the non-discretionary factors were found to be quite significant in explaining the changes in provisioning while amongst the discretionary factors only income smoothing via loan loss provisioning existed in Indian banks.

Our findings suggest that India’s loan loss provisioning is pro-cyclical which can amplify the business cycles. Moreover, it was found that provisioning by PSBs was more pro-cyclical as compared to PVBs. In this context, the implementation of Indian Accounting Standards (Ind-AS), which requires banks to make provisions for expected credit losses from the time a loan is originated rather than awaiting ‘trigger events’ signalling imminent losses, is expected to help address this issue. Recognising and providing for actual and potential loan losses at an earlier stage in the credit cycle could potentially reduce pro-cyclicality and foster financial stability as Ind-AS requires a dynamic approach to provisioning based on expected credit losses, instead of the current system which is based on days-past-due.

For further research it would be interesting to explore which kind of provisioning practices are more pro-cyclical, i.e., specific or general provisioning as that would give an intuition in terms of the direction that dynamic provisioning should focus on. Additionally, it would be interesting to see whether corporate governance via earnings management is a significant determinant of loan loss provisioning.


Historical city travel guide: Nineveh, 7th century BC

May 19, 2020

British museum curator Gareth Brereton takes us through the Assyrian capital city of Nineveh:

The city of Nineveh has recently undergone extensive development to become the new capital of the mighty Assyrian empire. It is now a vast metropolis surrounded by massive walls some 12 kilometres in length that encompass an area of 750 hectares (7.5km2) in size. While official statistics on the population of Nineveh are not available, it reportedly takes three days to cross the city.

This cosmopolitan city is located on the eastern bank of the River Tigris at the intersection of the road which connects the highlands of the north with the prosperous lands of Babylonia and Chaldea in the south.

A veritable paradise on earth, the fertile lands surrounding Nineveh are perfect for growing the huge volumes of staple crops such as wheat and barley needed to feed the population of this colossal city. Benefitting from plentiful rainfall, the city is also situated where the River Khosr meets the River Tigris, which guarantees an abundant supply of water. A monumental aqueduct brings water over a vast distance to feed the city’s network of canals. Upstream from the city you will find orchards planted with vines, fruit trees and olive groves.

When to visit

The summer months in Assyria are ferociously hot and are best avoided. Winters are often very wet and the city is transformed into a quagmire. The best times to visit are autumn and spring, when the city has warm days with cool mornings and evenings. 

Getting there

By river

Travelling from the north, the city can be easily reached via the River Tigris using the quppu ferry service, a local round-boat woven from bundles of reeds and waterproofed with bitumen. If travelling by river from the south expect a longer journey as you sail against the flow of the river. Most quppus dock in the city quay.


Thanks to the Assyria royal road network, travelling to the city on donkey or mule is quick and convenient. Major routes include the north-south road from the foothills of the Taurus Mountains down to Babylonia, and the east-west road from the Zagros Mountains to the Levantine coast. Accommodation and food stalls are plentiful along the major routes.



The need to issue long-dated gilts

May 19, 2020

Charles Goodhart and Duncan Needham in this voxeu piece:

A charter city finally in Honduras?

May 19, 2020

Few years ago, Paul Romer had argued the need to build charter cities. He even got permission to build one in Honduras but was later denied.

Tyler Cowen informs that Honduras has once again given a green signal to the project:

Prospera, Honduras just launched on the island of Roatan. It is a ZEDE (Zona de Empleo y Desarollo Economico), the legacy of Paul Romer’s time in Honduras promoting charter cities. It has substantial autonomy, different taxes, different courts, different labor law, and more. It is one of the most innovative jurisdictions in the world.

First, a bit of history. The ZEDE legislation was passed in 2013. It allows for the creation of a special jurisdiction with an almost unprecedented amount of autonomy. The only recent comparison is the Dubai International Financial Center, which, as the name suggests, focuses exclusively on finance. The ZEDE legislation allows for different labor law, environmental law, business registration, dispute resolution, and more. It is more analogous to Hong Kong, or at least the Hong Kong ideal, of one country, two systems.

In 2013 and 2014 rumors swirled about ZEDE projects, including a port in the Gulf of Fonseca, but nothing materialized. I even moved to Honduras in 2014, at the time the murder capital of the world, to be closer to the action. As late as 2017, the Honduran government was saying projects were about to begin.

The ZEDE legislation is the successor to the RED (Regiones Especiales de Desarrollo) legislation, which Romer helped introduce to build charter cities. Romer had a falling out with the Honduran government in 2012. Shortly after his departure, the RED legislation was declared unconstitutional. The ZEDE legislation was passed to address the constitutional shortcomings of the RED legislation, though it also benefitted from seeing the Supreme Court judges who ruled against the RED legislation fired. To be fair, the government claims they were fired for a ruling on a police brutality case, which I am wont to believe. If there was sufficient government support behind ZEDEs to fire Supreme Court justices, it would not have taken seven years for the first ZEDE to be launched.

I worked with much of the Prospera team under the previous incarnation, NeWAY Capital (I’m not sure of the formal relationship between the two). I left around the time they pivoted to Honduras, 2.5 years ago. I was skeptical, as Honduras was the place projects went to die. Years had gone by without projects gaining meaningful traction and I expected them to run out of funding before launching. I’m happy to have been proven wrong.

Congratulations to Erick Brimen and the team. It is a lot of work to create a new jurisdiction, especially one as innovative as Prospera. The Charter Cities Institute has two team members spending approximately two thirds of their time on developing a “Governance Handbook,” a guide to the governance of a new jurisdiction. It will likely take about 9 months to complete, and that is just for the handbook, not implementation…

Residency costs $1300 annually, unless you’re Honduran, in which case it costs $260. Becoming a resident also requires signing an “Agreement of Coexistence,” a legally binding contract between Prospera and the resident. Prospera, therefore, cannot change the terms without exposing itself to legal liability. Most governments have sovereign immunity, this goes a step beyond removing that, with a contract that clearly defines the rights and obligations on both sides.

After signing the Agreement of Coexistence, all residents are required to buy general liability insurance which will ensure themselves against both civil and criminal liability. General liability insurance, as well as criminal liability insurance, has been proposed by economist Robin Hanson, among others


What AIDS taught us about fighting pandemics: Don’t live in denial..

May 19, 2020

William A. Haseltine, infectious disease expert, in this Proj Synd piece:

After HIV/AIDS, SARS, MERS, and other recent epidemics, periods of heightened awareness and important scientific research have given way to complacency and reduced funding. If the response to COVID-19 follows a similar path, we will have only ourselves to blame when – not if – an even more lethal biological threat emerges.

AS I argued earlier, Hubris, Luck and Ignorance explains much of our lack of preparedness for each crisis.

ECB announces new measures to increase share of female staff members

May 18, 2020

I had earlier written on how and why central banks have to take measure to increase women staff in their organisations.

ECB’snew targets to increase women employment at the central bank:

The European Central Bank (ECB) today announced a new programme to further improve the gender balance of its staff at all levels. The strategy defines target percentages focusing on the annual share of women being appointed to new and open positions as well as targets for the overall share of female staff at various salary levels. The strategy covers the period until 2026, so as to fall within the mandate of President Christine Lagarde.

“We want gender balance to be the norm now rather than a revolution to fight later,” said President Lagarde. “Let us not forget that gender is one of the many dimensions of diversity that we must all value. We should mirror the society we serve.”


The new programme follows the ECB’s first set of gender targets, which aimed to double the share of women in management positions over the period from 2013 to 2019. The ECB exceeded one of its targets by achieveing a figure of 30% female senior managers at the end of 2019, compared to a target of 28%. The share of women in all management positions rose from 17% to 30%, which was still below the target figure of 35%.


The Impact of Interwar Protection: Evidence from India

May 18, 2020

Vellore Arthi, Markus Lampe, Ashwin R Nair and Kevin Hjortshøj O’Rourke in this NBER paper:

Research on the quantitative impact of interwar protection on trade flows remains scarce, and much of it has concluded that the impact was surprisingly small. In this paper we ask: Did Indian interwar protection hurt UK manufacturers, by raising tariffs on manufactured imports? Or did it favour UK interests, by discriminating against “foreign” (i.e. non- British) producers?

We answer this question by quantifying the impact of trade policy on the value and composition of Indian imports, using novel disaggregated data on both trade policies and imports for 114 commodity categories coming from 42 countries.

Indian trade elasticities were generally larger than those in the United Kingdom at the same time.

We find that even though Indian protection lowered total imports, it substantially boosted imports from the UK. Trade policy had a big impact on trade flows.


Measuring excess mortality: England is the European outlier in the Covid-19 pandemic

May 18, 2020

Janine Aron and John Muellbauer in this voxeu research:

Using prospect theory to explain 22 stock market anomalies

May 18, 2020

Nicholas Barberis, Lawrence Jin and Baolian Wang in this new NBER paper:

We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 22 prominent stock market anomalies. The model incorporates all the elements of prospect theory, takes account of investors’ prior gains and losses, and makes quantitative predictions about an asset’s average return based on empirical estimates of its volatility, skewness, and past capital gain. We find that the model is helpful for thinking about a majority of the 22 anomalies.


Designing fiscal policy support by segregating districts into vulnerability and resilience metrics

May 18, 2020

Good Friend, Prof Vipul Mathur of IIM Calcutta has been busy trying to find ways to make our pandemic policy data driven.

In an earlier paper he divided India’s districts based on economic contact intensity to argue which districts should remain in lockdown and which should be opened. We soon saw how everyone including policymakers were talking about red, orange and green zones.

In a second paper, he has divided households of districts into vulnerable and resilient categories. The fiscal support should go to the regions which are more vulnerable and less resilient.

In this work I try to understand the micro-implications of the COVID shock at the level of households. Using CMIE database, I create a metric of vulnerability and resilience of households, by analyzing the (wage) income, (consumption) expenditure, (liquid) assets and (short-term) liabilities of the households. Vulnerability can be interpreted as the extent of financial exposure to an adverse shock and Resilience is the capacity of the household to weather such an adverse shock.

The analysis suggests that around 14.4% of the households are the most robust with low-mid vulnerability and mid-high resilience. On the other hand, about 48.4% of the households are the most fragile, falling in high-mid vulnerability region with low-mid resilience. About 37.2% households fall in between the two extremes and have a mixed exposure with muddled resilience. I also consider two hypothetical scenarios, where I consider an aggregate shock to employment and prices to determine the impact at the margin. The analysis suggest that upon a 10% and 25% shock, approximately 23 and 75 million individuals may be find themselves at the margin of financial distress, respectively.

Policy Implication: Fiscal transfers are a scarce resource. This study attempts to inform the policy on fiscal transfers by proposing a way to fine-tune both the quantum and the sequence of such transfers by identifying and segregating the households in the two dimensional array of vulnerability and resilience. First, it charters out a possible sequencing path for fiscal transfers. For instance, in the order of sequence, the fiscal support will be most productive for households which rank the highest on vulnerability and lowest on resilience. Second, depending upon the vulnerability and resilience of a household, the optimal quantum of fiscal support needed will vary across households. To be most effective, the amount of household level fiscal transfers could be made conditional on the extent of exposure and capacity of a household to the economic shock

He has written an article on Moneycontrol explaining the paper.

Archaeology shows how ancient African societies managed pandemics

May 15, 2020

So many articles telling us how careless we have been towards remembering and more importantly being careful towards pandemics.

Shadreck Chirikure,Professor in Archaeology, University of Cape Town gives perspective from archaeology:

Every so often, a pandemic emerges that dramatically alters human society. The Black Death (1347 – 1351) was one; the Spanish flu of 1918 was another. Now there’s COVID-19.

Archaeologists have long studied diseases in past populations. To do so, they consider a wide array of evidence: settlement layout, burials, funerary remains, and human skeletons.

For example, because of archaeologists we know that the damaging impact of epidemics prompted the abandonment of settlements at Akrokrowa in Ghana during the early 14th century AD. About 76 infant burial sites at an abandoned settlement that now forms part of the Mapungubwe World Heritage site in the Limpopo Valley of South Africa suggest a pandemic hit the people living there after 1000 AD.

Archaeological and historical insights also expose some of the strategies that societies adopted to deal with pandemics. These included burning settlements as a disinfectant and shifting settlements to new locations. Social distancing was practised by dispersing settlements. Archaeologists’ findings at Mwenezi in southern Zimbabwe also show that it was a taboo to touch or interfere with remains of the dead, lest diseases be transmitted in this way. In the late 1960s, some members of an archaeological dig excavating 13th century house floors in Phalaborwa, South Africa, refused to keep working after encountering burials they believed were sacred. They also worried that the burials were related to a disease outbreak.

Social distancing and isolation have become watchwords during the COVID-19 pandemic. From archaeology, we know that the same practices formed a critical part of managing pandemics in historical African societies. In what is Zimbabwe today, the Shona people in the 17th and 18th centuries isolated those suffering from infectious diseases – such as leprosy – in temporary residential structures. This meant that very few people could come into contact with the sick. In some cases, corpses were burnt to avoid spreading the contagion.


Slovenia Becomes 1st European Country To Call An End To COVID-19 Epidemic

May 15, 2020

Some positive news from Europe:

Slovenia opened its borders on Friday after declaring an end to its coronavirus epidemic, despite new infections still being reported.

“Today Slovenia has the best epidemic situation in Europe, which enables us to call off the general epidemic,” Prime Minister Janez Jansa said, two months after the epidemic was declared.

The mountainous nation of two million people, which borders Italy, had reported some 1,500 coronavirus cases and 103 deaths as of Thursday.

But with the rate of new infections trailing off, the government ordered borders open for all EU citizens, while non-EU citizens will have to stay in quarantine.“Since the danger of spreading the SARS-CoV-2 virus remains, some general and special measures will remain in force,” it said in a statement, using a technical term for the COVID-19 disease.

Public gatherings remain banned while social distancing rules and mask wearing remain mandatory in public spaces.

Earlier this week, the government said some shopping centres and hotels would be allowed to reopen next week. It also announced football and all other team competitions could resume from May 23. 

Despite Slovenia apparently declaring an end to the epidemic, experts clarified that the disease was still present in the country.

“No other European state has so far declared the epidemic was over so we should be cautious in Slovenia too,” infectious diseases expert Mateja Logar told public television on Thursday. “The virus remains present,” Logar added.

There should be utmost caution and no celebration…

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