On 20 October 2020, UN Statistical Division started to celebrate World Statistics Day every 5 years.
Thus, 20 Oct 2020 becomes the third such day.
Isabel Schnabel of the ECB writes a blogpost on the occasion. She says we take good quality stats as granted. However, it requires tremendous effort and governance to produce good quality data. ECB is central to this data process in Euroarea countries:
My new piece in moneycontrol on constant rejigging of RBI DG portfolios.
Since July 23, 2019, when Viral Acharya left the RBI, the central bank has reshuffled the DG portfolio four times with three of these reshuffles in 2020 alone. What is interesting is how these portfolios were allotted in these four reshuffles.
The Post Graduate students can apply for RBI internship:
Who can apply?
Students pursuing a) post-graduate courses b) Integrated five year courses in Management / Statistics / Law / Commerce / Economics / Econometrics / Banking / Finance or three year full time professional Bachelor’s degree in Law from reputed Institutions / Colleges located in India can apply for summer placement during their penultimate year / semester.
How to apply
Eligible students should apply for summer placement through the online web-based application form through their respective institutes to the “Control Offices of Reserve Bank of India”, from 15th September to 31st October of the previous year for internship starting from April of next year
Selection
The Bank will select a maximum of 125 students for summer placement every year. In the month of November / December each year, the interview for the short listed candidates will be held at the offices indicated above. The short listed outstation candidates will be required to bear the travel costs of journey to the office of RBI and back for this purpose. Names of selected students will be communicated to the institutes in the month of December / January.
Selected outstation candidates will be reimbursed AC II Tier/1st Class return fare by rail from the place of his/her institute to the place of summer placement for undertaking the project.
Pass on the word..
As I was hearing Amit Varma’s fab webinar, a participant asked about auction theory and IPL.
I remembered writing a piece for Mint way back when IPL just started. Replugging the piece titled as Go Dutch for Dhoni..
SonyLiv is playing the Harshad Mehta scam story.
Dhirendra Kumar of ValueResearch in this piece reflects on how times have changed and how they remain the same:
….talking to a few young people over the last few days, I have come away with a sense of disquiet about the impression being carried away by those who know nothing about the modern world of equity investing in India, especially if you access equity investing through equity mutual funds. I found that those who have no idea about what things are like nowadays are carrying away the impression that the basics of equity trading, of why and how prices move and how money can be made is still the same. They understand that we have computers and networks and flatscreens now instead of people yelling at each other on crowded trading floors. However, they come away with the impression that what people actually do is still the same.
Nothing could be further from the truth. Maybe. Now that I have declared that things are completely different, I’m not so sure. The technology has moved forward a century, the rules and regulations are immeasurably stricter, transparency is up by many orders of magnitude. All this has changed behaviour a great deal. However, the unfortunate part is that motivations are mostly the same. A lot of people still think that the purpose of the stock market, as far as they are concerned, is that it’s a place to get rich quickly. And the way to get rich quickly must be to get to know about some secret trick that must be known to those who have already made money.
This part has not changed, and looks like it will not change for a long time, regardless of how Harshad mehta’s story ended.
Ajay Tyagi, Chairperson of SEBI gave a speech today.
He discussed reforms generally means radical changes and for fixing the system. However reforms could also mean incremental changes and preventive measures. SEBI’s approach to reforms over the years has been consultative and works through the committee system.
He also reviews SEBI’s reforms during the pandemic while avoiding “self-praise”.
Finally, he stresses on the role of other stakeholders such as Industry associations, Board of Directors and Shareholders.
Victor Degorce and Eric Monnet in this voxeu research:
Research on Great Depression continues to give lessons for today..
Andrew Chen, Markus Ibert and Francisco Vazquez-Grande in this Federal Reserve research analyse the disconnect between Stock markets and real economy:
Between March and September 2020, broad equity price indexes around the world experienced a historic rally. Although this rally followed a significant decline in stock prices, it appears difficult to explain due to continuing concerns about the global pandemic and national economies running far below their potentials.
However, stock prices are forward looking and reflect expectations about profits and discount rates even as far as decades ahead. In this note, we construct assets that are more comparable to near and medium term economic conditions using data on domestic and international dividend futures and the cross section of U.S. stock returns. We find that the disconnect is driven by gains in the market value of long-term (beyond five years) dividends. In contrast, the value of corporate dividends for the next five years remains far below pre-pandemic levels.2 We provide additional evidence supporting this theme using a cross section of U.S. stocks sorted on price-dividend ratios and equity duration, as well as evidence from dividend futures for a cross section of international equity indexes.
Taken together, our evidence suggests that financial markets remained connected to near and medium-term economic conditions during the 2020 summer rally. Specifically, dividend futures prices remained depressed even at five-year horizons both domestically and internationally, and the recovery in stock prices between the middle of March and September has largely been driven by an increase in the prices of far-dated dividend claims as well as high duration stocks.
Hmm..
AMU completes 100 years in 2020.
Prof Pankaj Chandra of Ahmedabad Univ in the centenary lecture looks at 100 years of Univ education in India.
Taiji Inui, Wataru Takahashi and Mamoru Ishida in this voxeu piece:
Next up at Ahmedabad University is none other than Amit Varma of SeenandUnseen podcast. He is going to speak on using economics to rewire cricket strategy and IPL. Those interested can register here.
Cricket is a fascinating, frustrating, and complex game. Over its history, the game has witnessed many changes. New forms of playing have emerged, but we are stuck in old ways of thinking about it.
The Test format, the 50-over format, and the 20-over format of cricket need completely different strategies. Each resource and constraint the team has – time, wickets, dot balls, run rate, partnerships – takes on a unique significance depending on the format. Teams need to manage resources and constraints in line with the format. There is no one-size-fits-all strategy.
The economics of cricket, the strategies needed, and the business of cricket will be the focus of this webinar – particularly topical in these IPL times. This webinar will change the way you watch IPL.
Our speaker, Amit Varma, is a deep thinker of cricket strategy. A former managing editor of Cricinfo, Amit will talk about how he uses the tools of economics to arrive at a new strategic understanding of the game.
Prof Sashi Sivramkrishna in this MC article deconstructs banking.
In order to deconstruct banking, we begin with the term deposit. Do banks take ‘deposits’? No. The word deposit taken from the Roman law depositum implies bailment. In other words, a deposit would mean that the bailor (depositor) transfers physical possession of the property (money) for a period of time and for a specific purpose to the bailee (bank), but retains ownership.
…..
The other side of the bank’s operations — ‘lending’ — is also significant. To lend something implies two essential conditions: that it already exists and that something is actually transferred from someone to someone else or some other entity. In an extraordinary empirical study of actual transactions recorded by a bank when he actually took a loan, Richard Werner found that the bank did not ‘lend’ money. The bank created money ‘ex nihilo’ or out of nothing.
…..
Some heterodox economists such as Werner, therefore, argue that stricter control over direction of credit as well as a decentralised banking sector that is more responsive to the needs of small and medium industries may be required to increase real capital investment and employment opportunities.
The success of economies like Germany, Japan, Taiwan, South Korea and more recently, China, can be understood only with an appreciation of the essence of banking, namely, its dominance over the creation of money in a modern economy and the need to exercise appropriate control over it.
More in the piece…
Barry Eichengreen in this Proj Syndicate article:
Scottish advocates of leaving the United Kingdom need a plan for a new currency and an independent central bank, as well as a blueprint for the country’s subsequent transition to the euro. These would go a long way toward reassuring Scots who yearn for independence but worry about what follows sterling.
Paola Giuliano and Andrea Matranga in this NBER WP:
The use of historical data has become a standard tool in economics, serving three main purposes: to examine the influence of the past on current economic outcomes; to use unique natural experiments to test modern economic theories; and to use modern economic theories to refine our understanding of important historical events. In this chapter, we provide a comprehensive analysis of the types of historical data most commonly used in economic research and discuss a variety of issues that they raise, such as the constant change in national and administrative borders; the reshuffling of ethnic groups due to migration, colonialism, natural disasters, and many other forces. We also point out which methodological advances allow economists to overcome or minimize these problems.
Silu Muduli and Harendra Behara in this new RBI working paper:
This paper examines the role of bank capital in monetary policy transmission in India during the post-global financial crisis period. Empirical results show that banks with higher capital to risk-weighted assets ratio (CRAR) raise funds at a lower cost. Additionally, banks with higher CRAR transmit monetary policy
impulses smoothly, while stressed assets in the banking sector hinder transmission. Recapitalization to raise CRAR can improve transmission; however, CRAR above a certain threshold level may not help as the sensitivity of loan growth to monetary policy rate reduces for banks with CRAR above the threshold. Therefore, it can be concluded that monetary policy can influence credit supply of banks depending on their capital position.
My new article in Moneycontrol on the ongoing crisis in few of the Old Private Sector Banks.
The article starts with a slice of history on how these banks came about and then moves on the current crisis. Most of these banks have a fascinating history.
In all crisis there is some hope. The hope this time around is shareholder activism.
All these years, ECB policymakers have told us us how their policy is different from Federal Reserve. Fed has a dual mandate of inflation and unemployment (actually triple but the third objective of “moderate long-term interest rates” is often forgotten). ECB on the other hand has prided itself on single mandate of price stability.
This is changing as Federal Reserve is seen as doing more for US economy compared to ECB. This criticism has become even stronger with Federal Reserve adopting Flexible Inflation targeting.
François Villeroy de Galhau, Governor of Banque De France in this speech says both Fed and ECB have more similar policy than they look:
Andrew Hauser, ED at Bank of England in this speech:
after many years of rhetoric from market practitioners, the temperature has changed noticeably. Hot air is turning into cold hard fact:
– Climate oriented equity indices have outperformed the broader market by 2-5% in 2020, as
economic activity has shifted away from travel and other fossil fuel-intensive sectors, and towards
online commerce and technology (Chart 1);
– Green bonds also outperformed their conventional counterparts over that same period (Chart 2), and
made up a fifth of total European investment grade issuance in September alone. And companies
such as VW and Daimler secured material reductions in financing costs (or ‘greeniums’) when
issuing their first green bonds, linked to the development of low-emission technologies;
– Governments have been increasingly persuaded of the powerful direct and indirect effects of issuing
their own ‘sovereign green bonds’ too, with a raft of countries coming to market for the first time this
year: Germany’s innovative dual-bond issuance was five times oversubscribed and commanded a
clear greenium; and the European Commission announced that it will fund 30% of its €750bn ‘Next
Generation’ budget in the same way;1
– More and more investment money is massing on the sidelines. Funds with above-average
sustainability ratings have seen big inflows this year, and now hold $4.6 trillion in assets globally. In
response, fund managers are overhauling their investment strategies to put sustainability centre
stage.To take just one example, more than 500 global investors, accounting for over $47 trillion of
assets, have committed to support the Climate Action 100+ initiative, aimed at ensuring the world’s
largest corporate greenhouse gas emitters take action on climate change.
Interesting…
Gentle reminder for the Conversation tomorrow with Mr B. Sambamurthy. Interested folks can register here.
Anantha Nageswaran in this blogpost:
What economic transformation entails is replicating what the Indian Premier League (IPL) and the me-too mini leagues it has spawned at the state level have done for Indian cricket. Indian cricket team is now facing the good problem of accommodating many talents that the IPL is throwing up.
What did Lalit Modi do? He did not do this for boosting Indian cricket. But, the lesson there is hidden for us to uncover and absorb into public policy.
IPL was the eco-system origin and it spawned many mini state level leagues. Once the eco-system was thus established and it took the first 3-5 years for it to be established, the results began flowing. We have a bunch of talent – all in their late teens or early twenties – that is waiting to take over from the current Indian test cricket or ODI team.
So, all that the government should focus on doing is in creating the ecosystem, through good primary and secondary education. The government’s role thus becomes one of being an enabler, seeding the ground and nurturing it. It also withdraws from areas where it does not have to be present. Then, with luck/divine blessing (that is needed to ensure that we also get a propitious external environment), the results will start to come.
The IPL and the Indian cricket talent is a good example of what sound public policy on economic transformation should be about. It has transformed Indian cricket from third-world to first-world status. It is ‘economic development’ equivalent in cricket.
Who would be Lalit Modi of Indian economy?
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