Bryan Noeth and Rajdeep Sengupta write this nice short primer on shadow banking.
They explain nicely the liabilities and assets of the shadow banks and how they are similar and different from traditional commercial banks.
They sum the note saying though shadow banks are partly responsible for the crisis, they are still useful for the variety they bring to the financial system.
This is a wow paper from Laurence Ball of John Hopkins Univ.
He says that Bernanke’s views over what central bank can do have changed considerably since Bernanke questioned BoJ policies in 2000 in this much read paper.
Ball says Bernanke was far more aggressive and forthcoming in his initial thoughts but has mellowed down since he joined Fed. What is even more interesting is that his list of policy tools under Zero policy rates has declined since 2000s.
Nicole Gelinas, Fellow at the Manhattan Institute writes a nice article on the topic..
This issue of state vs markets has been the hottest econ topic and there are huge difference of opinions. After every crisis, there is even more of such stuff.
Gelinas says what many others have been saying.
It is amazing to note what different things people specialise in. Richard F Kuisel specialises in Franco-American relations and gives a nice interview here.
Blogging was absent as I was away on a mini-break. To resume now…
Shekhar Aiyar, Charles W Calomiris and Tomasz Wieladek write this interesting paper on the topic.
Say a central bank/prudential regulator imposes some macroprudential policies like raising capital ratios. leverage ratios etc. Do these measures help? As these measures are basically imposed on the regulated banking system one should expect lending to decline. What if the other non-regulated entities (shadow banking system) undo the measures by increasing lending…
In UK, fin reg applies to domestic banks and subsidiaries of foreign banks. However, finreg does not apply to branches of foreign banks. So the authors study a capital rule imposed on domestic banks and assess the impact of the new capital rule:
Ajay Shah on his blog (along withThomas Laubach) lists papers/books one should be reading to understand macro..
Economics is a rich and fascinating subject. But all too often, the teaching process forces young people in the field to look at the tail of the elephant, to think about macroeconomics as the game of solving dynamic models. There is actually much more going on. (On a related note, you might like to see Books that should be read before starting a Ph.D. in economics on this blog, 18 May 2011).
In this blog post, we walk through the evolution of the key ideas in historical order, and offer suggestions to interesting readings, which will help you see the fuller picture. Many of them are on your reading list, but some are not.
A nice list. Thigh there should be some more papers summarising history of the macro thought..
One central theme which has emerged recently is rising inequality across the world. The haves and getting richer and have-nots not as much. The result is rising inequality. This has been happening for a while but it took this crisis to point to this disturbing trend. And of course the crisis has made things even worse with most people getting effected at middle and lower income quintiles.
Now to the title of the post. Michael Greenstone and Adam Looney of Brookings write this superb note on how the crisis has led to a further decline in marriage rates in US:
Jonathan Gruber of MIT picks his five books to read on public finance. Gruber advised the Romney administration on the Massachusetts healthcare reform of 2005 and the Obama administration on the Affordable Care Act of 2010.
What does one mean by public economics?
Larry Summers recently said:
English’s emergence as the global language, along with the rapid progress in machine translation and the fragmentation of languages spoken around the world, make it less clear that the substantial investment necessary to speak a foreign tongue is universally worthwhile. While there is no gainsaying the insights that come from mastering a language, it will over time become less essential in doing business in Asia, treating patients in Africa or helping resolve conflicts in the Middle East.
Victor Ginsburgh of Université Libre de Bruxelles reacts to this comment. He says the world is far more diverse than Summers thinks:
Andrew Lo reflects on the state of economics and suggests what could be done to improve teaching in economics. He says the problem has been this economists fascination with Physics where things can be controlled in lab experiments and hence some superb research comes with accuracy etc.
Earlier economists were highly impressed with Physics and tried to model economics accordingly. Peter Boettke even said economics suffered big time because of Paul Samuelson:
Tracking Core inflation in India has become the buzzword but very few know how to really calculate it. In developed world, core and headline inflation are given by the stats agency. Here we only get headline number and need to compute core inflation from the overall number.
Quite a few people have asked me on this calculation and hence writing this post. Though I had written an earlier post on the topic, I think it was not clear.
Though there can be many measures for core inflation, RBI has preferred non-food manufacturing products inflation as the core inflation. This paper evaluated various measures which could be used as core and finds this non-food manufacturing products inflation gives best results. I am not going into benefits and disadvantages of core inflation as have written enough on it.
This post is about calculation. Some background first.
This is a superb out of the box thinking article on Europe.
Bruno Frey says policymakers keep harping on the fact that Euro is so crucial to Europe’s survival. Even most of us think so.
He disagrees.
As promised, here is part -II of guide on RBI’s WSS. This includes tables on banks operations and money supply. It explains critical concepts and calculations like SLR, CRR, Adjusted SLR etc.
This is to be read with Part-I.
Happy following WSS (it is really complicated, so be patient)
I so wish economists stop using words like death of a theory. We have had so many deaths in the economic research history. There have been papers claiming Death of Beta, Death of money as a target for inflation, Death of Keynesian economics etc. And each time they come back making it look like a bollywood movie/ hindi soap opera where leading characters keep coming back after deaths!!
I was really surprised by this paper from James Bullard, head of St Louis Fed (exec summary here, ppt here). He says the crisis proves there is no use for fiscal policy as a stabilization tool and hence there is death of this theory. I was even more surprised to see someone calling death of fiscal policy for stabilization purposes as we have seen some real action in this crisis.
He says this crisis led to resurgence of fiscal policy but the results were disappointing:
Daniel Thornton of ST Louis Fed watches every Fed move and does not really like what Fed has done in the crisis.
In his recent research he says till now QE did not lead to any inflation etc. Reason most QE financing was basically via bank reserves. These reserves instead of getting lent etc sat on Fed’s balance sheet. And as a result no real impact on inflation or economic activity.
However, recently times have changed. It seems one measure of money supply – M1 (Currency+Demand Deposits) – is rising. This is because there is a rise in demand deposits (in US they call them checkable deposits):
It is always good to hear policymakers talk about psychology and behavioral economics.
RBI Dep Gov. HR Khan gives this nice speech on the topic. He covers how certain asopects of behavior lead to market movements, market anomalies etc. The summary is:
Andrew Rose of UCB’s answer is no.
In this paper he looks at both multilateral and bilateral financial integration with US and sees no impact:
A nice article at K@W. It truly is an amazing case study on how an yesteryear icon slides into bankruptcy.
And this company was not really behind the times etc. It invented the digital camera etc but did not pursue the technology. It was interested in preserving its film business which led to the downfall.
Andrei Shleifer of Harvard draws his list of lessons learnt from transition:
An interesting paper from M. Sahoo, Renuka Sane, Susan Thomas.
They say there are two basic differences between normal and micro-finance. These differences are credit recovery and the credit risk of the Microfinance institution (MFI), when credit access is enabled through the structure of the joint liability group (JLG).
First, the issues wrt credit recovery. In normal credit things are clear, borrower has the obligations and the service provider (the lender) has the rights. So regulation looks at two issues – of consumer protection and debt collection. In microfinance because of JLG, things get complicated:
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