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The Indian Economy is Doing Well, But Not Many Indians Are | Mostly Economics
TN Ninan (former editor of Business Standard) in TheIndiaForum: The economy is growing rapidly and many economic indicators are flashing green. But the path that India has chosen, of promoting national business champions, has its limits. Economic distress is widespread, which cannot be handled forever with welfare handouts or religion as an opiate.
World Press Freedom Day: Governments failing to protect journalism | Mostly Economics
Today that is 3rd May marks as the World Press Freedom Day. Reporters Without Borders which ranks Press Freedom across the world says freedom of press is under serious threat. From who? Governments of course: A growing number of governments and political authorities are not fulfilling their role as guarantors of the best possible environment…
Historical Disinflation Episodes: Which Falls First, Goods or Services? | Mostly Economics
Interesting article by Charles S. Gascon and Joseph Martorana of St Louis Fed. They say disinflation is first in goods followed by services: Annual inflation in the U.S. has slowed over the past year, decreasing by 2.9 percentage points from February 2023 to February 2024 and settling at 2.5%, as measured by the personal consumption…
Electoral Bonds and Electricity Supply in Bhiwandi | Mostly Economics
Tanvi Deshpande of IndiaSpend has an interesting story that weaves Indian politics, economics and society: Torrent Power supplies power to Bhiwandi near Mumbai, and powerloom owners and public representatives allege that power bills have doubled or tripled since the franchise was brought in, which has dealt a blow to the Rs 10,000-crore powerloom industry here
Summarising recent research on International Finance and Macroeconomics | Mostly Economics
Mark Aguiar and Linda Tesar summarise recent research on International Finance and Macroeconomics in NBER Reporter: Affiliates of the International Finance and Macroeconomics (IFM) Program study financial interactions among nations, including cross-border capital flows, exchange rates, responses to global financial crises, and the transmission of economic shocks. Rather than attempting to summarize the more than…
Core economy textbook: Version 2.0 | Mostly Economics
Core economy textbook is releasing a new version: The world has changed since the first edition of The Economy 1.0 in 2017, and so have the ways to explain it. CORE Econ has updated the tools students need to understand and address the challenges of today’s world, so we can continue in our mission to introduce students…
Democracy is good for the economy. Can business defend it? | Mostly Economics
Vanessa Williamson of Brookings in this paper asks businesses to preserve democracy. The businesses gain from democracy: Democracies thrive because they are better at ensuring the provision of public goods, including education, public health, and infrastructure; because they manage markets more effectively; and because they channel contestation into political compromise rather than political violence. Democratic…
The Pitfalls of Protectionism: Import Substitution vs. Export-Oriented Industrial Policy | Mostly Economics
Reda Cherif and Fuad Hasanov in this IMF paper: Industrial policies pursued in many developing countries in the 1950s-1970s largely failed while the industrial policies of the Asian Miracles succeeded. We argue that a key factor of success is industrial policy with export orientation in contrast to import substitution. Exporting encouraged competition, economies of scale,…
US Dollar versus Euro as International Reserve Currencies | Mostly Economics
Menzie D. Chinn, Jeffrey A. Frankel & Hiro Ito in this new NBER paper study the USD and Euro as reserve currencies: We begin by examining determinants of aggregate foreign exchange reserve holdings by central banks (size of issuing country’s economy and financial markets, ability of the currency to hold value, and inertia). But understanding the determination of…
Nowcasting consumer price inflation using high-frequency scanner data: evidence from Germany | Mostly Economics
ECB economists (Günter W. Beck, Kai Carstensen, Jan-Oliver Menz, Richard Schnorrenberger and Elisabeth Wieland) in this paper construct a new inflation index based on high frequency data: We study how millions of granular and weekly household scanner data combined with machine learning can help to improve the real-time nowcast of German inflation. Our nowcasting exercise…
How do Indian equity markets react to unexpected monetary policy decisions? | Mostly Economics
Mayank Gupta, Amit Pawar, Satyam Kumar, Abhinandan Borad and Subrat Kumar Seet of RBI in this paper study the question: This paper studies the impact of monetary policy announcements on the returns and volatility in the BSE Sensex by decomposing changes in Overnight Indexed Swap (OIS) rates on policy announcement days into target and path…
Tilting at Windmills: Bernanke and Blanchard’s Obsession with the Wage-Price Spiral | Mostly Economics
Prof Servaas Storm of Delft University of Technology in this INET working paper: Bernanke and Blanchard (2023) use a simple dynamic New Keynesian model of wage-price determination to explain the sharp acceleration in U.S. inflation during 2021-2023. They claim their model closely tracks the pandemic-era inflation and they confidently conclude that “… we don’t think…
Trust in the European Central Bank – insights from the Consumer Expectations Survey | Mostly Economics
Ferdinand Dreher of ECB in this article looks at people's trust in the central bank On aggregate, according to the Eurobarometer, trust in the ECB held up relatively well during the pandemic and in the period of heightened inflation thereafter. Average trust across euro area countries declined significantly during the global financial crisis and the sovereign…
India’s Foreign Exchange Reserves in High Volatility Episodes – An Empirical Assessment | Mostly Economics
Saurabh Nath, Dipak R. Chaudhari, Vikram Rajput and Gaurav Tiwari in this RBI Bulletin (Apr 24) article: This article analyses the trend in India’s foreign exchange (FX) reserves during major high volatility episodes viz., Global Financial Crisis, Eurozone debt crisis/ Taper Tantrum, EME outflows/ US-China trade war and the recent Russia-Ukraine conflict / monetary policy tightening…
Dominant currency pricing in international trade of services | Mostly Economics
João Amador, Joana Garcia, Arnaud Mehl and Martin Schmitz in this ECB paper look at dominance of US Dollar in services trade: We analyze, for the first time, how firms choose the currency in which they price transactions in international trade of services and investigate, using direct evidence, whether the US dollar (USD) plays a…
The Rise and Risks of Private Credit | Mostly Economics
IMF's Global Financial Stability Report - April 2024 has a chapter on private credit: Chapter 2 assesses vulnerabilities and potential risks to financial stability in private credit, a rapidly growing asset class—traditionally focused on providing loans to mid-sized firms outside the realms of either commercial banks or public debt markets—that now rivals other major credit…
Gauging Linguistic Complexity of Regulatory Communication: A Case Study for India | Mostly Economics
Regulatory communications are complex, boring and difficult to understand. Nishita Raje, Khaijamang Mate, Sayli Londhe and Sandhya Kuruganti of RBI study the Linguistic Complexity of Regulatory Communicationin India: With increased scope and scale of regulation, there is growing awareness for adoption of simple or plain language in central bank’s regulations. This article attempts to measure…
The impact of artificial intelligence on output and inflation | Mostly Economics
Iñaki Aldasoro, Sebastian Doerr, Leonardo Gambacorta and Daniel Rees in this BIS paper estimate impact of AI on output and employment: This paper studies the effects of artificial intelligence (AI) on sectoral and aggregate employment, output and inflation in both the short and long run. We construct an index of industry exposure to AI to calibrate a macroeconomic multi-sector…
Unlocking the power of ideas: The power of ideas across history | Mostly Economics
ECB President Christine Lagarde in this speech poinst to the power of ideas and how ideas shape history. By inspiring action, ideas can help us grow. This might be personal growth – a student’s learning, say, allowing them to make the right decisions throughout their future career. But it holds at the societal level too:…
A Teacher Writes to Students Series (19): Dangerous Illusions | Mostly Economics
A Teacher Writes to Students Series (19): Dangerous Illusions By Annavajhula J C Bose, PhD Department of Economics, SRCC, DU Fake solutions are suggested for very real problems. Beware. Plutocrats are the new global super-rich of the world. They are not even the 1 percent. They are the 0.1 percent wealthy and powerful people. They…
Ulrike Malmendier: On law versus economics, the long-term effects of inflation, and the remembrance of crises past | Mostly Economics
Nice interview of Prof Ulrike Malmendier of University of California. She explains how past experiences influene present current economics decisions: Turning to your research, one of the things you've found is that people's likelihood of buying a home rather than renting is influenced by their experiences with inflation. Please explain. Malmendier: I'll step back for the bigger…
Fiscal Policy in the Great Election Year | Mostly Economics
IMF Fiscal Monitor April 2024 reviews fiscal policy in the great election year. Even as the global economic outlook is stabilizing, fiscal policy continues to struggle with legacies of high debt and deficits, while facing new challenges. Public finances risks are acute this year as over 80 economies and economic areas are holding elections, amid…
The Origins of Fed’s 2 Percent Inflation Target | Mostly Economics
Matthew Wells of Richmond Fed looks at origins of Fed's 2 percent target: Eight times a year, the Federal Open Market Committee (FOMC) meets to conduct monetary policy, and, regardless of what actions it takes, this seemingly straightforward line has appeared in each of its post-meeting statements since September 2020. By now, many Fed watchers…
Monetary policy and behavioural economics | Mostly Economics
Anna Breman and Björn Lagerwall of Riksbank explore how behavioral economics can help improve monetary policy: This Economic Commentary aims to provide some ideas on how empirical research from behavioural economics could help explain economic developments in recent years, particularly in relation to the large increase in inflation. We also discuss why it may be…
History of Tipping : From Scourge of Democracy to American Ritual | Mostly Economics
How did tipping become an American ritual? Tim Sablik looks at this interesting history of tipping in Richmond Fed 's EconFocus: Historians aren't entirely sure when tipping began, but it may go as far back as the ancient Roman Empire. In his 1998 book Tipping: An American Social History of Gratuities, historian Kerry Segrave placed its…
Finternet: the financial system for the future | Mostly Economics
Agustín Carstens and Nandan Nilekani in this BIS paper lay out a new vision for the financial system: This paper lays out a vision for the Finternet: multiple financial ecosystems interconnected with each other, much like the internet, designed to empower individuals and businesses by placing them at the centre of their financial lives. It…
Can I Speak to Your Supervisor? The Importance of Bank Supervision | Mostly Economics
Beverly Hirtle and Anna Kovner says supervision is distint from regulation. Eco research focuses on regulation but not much on supervision: In the economic literature on banking and in discussions of the banking industry, the terms “supervision” and “regulation” are often used interchangeably, but in fact these are distinct activities. “Regulation” is the process of…
Where do Banks end and NBFIs begin? | Mostly Economics
Viral V. Acharya, Nicola Cetorelli & Bruce Tuckman in this NBER paper discuss how banks and NBFIs are different: In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with…
Changing Global Linkages: A New Cold War? | Mostly Economics
Increased mentions of wars/ cold war/world war in papers and speeches. Gita Gopinath, Pierre-Olivier Gourinchas, Andrea F Presbitero and Petia Topalova in this IMF paper points looks at trade and fiannce flows post Russia and Ukraine war: Global linkages are changing amidst elevated geopolitical tensions and a surge in policies directed at increasing supply chain…
RBI having no comments on electoral bonds | Mostly Economics
India's financial regulators have not said anything on the Electoral Bonds saga. The EBs led to many questions on the linkages between businesses and politics. Some of the businesses which donated funds were listed companies but apparently the disclosures were either weak or missing. One is wondering what SEBI has to say on thr matter.…
The end of the gold standard and the beginning of the recovery from the Great Depression | Mostly Economics
Jason Lennard and Meredith Paker in this voxeu research reflect on the 80th anniversary of the BW conference: 2024 marks the 80th anniversary of the Bretton Woods conference, which led to a major shift from the operation of the gold standard in the interwar years. This column explores how Britain’s 1931 departure from the gold…
Evolution of financial markets in India: Charting the Future | Mostly Economics
Shaktikanta Das, Governor, Reserve Bank of India in this speech: It is my pleasure to be here at the FIMMDA-PDAI annual conference. This year (2024-25) is particularly special for the Reserve Bank. The RBI has entered its 90th year on April 1, 2024. I, therefore, thought it appropriate to dwell upon the journey of the…
Economic multilateralism 80 years after Bretton Woods | Mostly Economics
Maurice Obstfeld of PIIE reflects on 8o years of Bretton Woods: The global economic institutions that grew from the Bretton Woods conference of 1944 aimed to create a cooperative policy environment conducive to recovery, development, continuing prosperity, social stability, and democracy. Prominent in the minds of the architects were the macroeconomic and trade policy coordination…
Economists working with the government: What has changed? | Mostly Economics
There was a time one looked up to the economists working with the Government of India. In other countries especially the West, the economists working in the University Departments are held in esteem. In India, it was the economists working with the government are held in esteem. Becoming an economist with the government was a…
Understanding Money Using Historical Evidence | Mostly Economics
Adam Brzezinski , Nuno Palma and François Velde in this Chicago Fed paper look at lessons from monetary history: Debates about the nature and economic role of money are mostly informed by evidence from the 20th century, but money has existed for millennia. We argue that there are many lessons to be learned from monetary history that…
RBI’s new website | Mostly Economics
RBI has put up a new website. Looks more interactive but is also more complex to navigate (will take time to get used to it). The old website will remain active for sometime till people get used to the new version. There is also a new mobile app of the central bank.
Evolution of US banking in the 21st century: Evidence and regulatory implications | Mostly Economics
Samuel G. Hanson, Victoria Ivashina, Laura Nicolae, Jeremy C. Stein, Adi Sunderam, and Daniel K. Tarullo in this Brookings paper reviews US Banking in 21st century. The paper shows that large banks are seeing rise in deposits in terms of liabilities and rise in investments on the assets side: As revealed by the failures of three regional banks in the…
Marginal Returns to Public Universities | Mostly Economics
Jack Mountjoy of Universoty of Chicago in this NBER paper studies returns of public universities in Texas on marginally admitted students: This paper studies the causal impacts of public universities on the outcomes of their marginally admitted students. I use administrative admission records spanning all 35 public universities in Texas, which collectively enroll 10 percent…