Here are
the week’s select economics articles, mostly about central banks – monetary policy,
both conventional and unconventional. Follow ‘MoreLiver’ on Twitter or Facebook. The LTRO
and JP
Morgan posts have been updated.
Previously
on MoreLiver:
How government red tape keeps poor people out
of jobs – Modeled
Behavior
In the 1950s, around 1 out of 20 jobs required
a license. Now the number is around 1 in 3. This red tape keeps a lot of low
income people out of better jobs with better income.
Austerity Can't Be Just for Regular People – Rolling
Stone
This sounds like the beginning of what will be
a very heated debate over who has to pay for the excesses of the financial
crisis. It was previously assumed that everybody but the actual financial
services sector would have to pay
The growth of the shadow economy, charted – alphaville
/ FT
When the economy is tanking the shadow economy
benefits. That’s the theory and a new study into the rise of the grey economy
Shadow economies all around the world:
Model-based estimates
– voxeu.org
Shadow economies – sometimes called the black
market or informal economy – exist in every country. But how big are they? This
column presents some new approaches to estimating their size and uses them to
compare shadow economies across rich and poor countries over the last 60 years.
Toward an Understanding of Learning by Doing – U.Chicago (pdf)
Past research has documented that learning by
doing—productivity improvements that occur in concert with production
increases—is one source of such improvements. Yet little is known about the
specific mechanisms through which such learning occurs.
A Thumbnail Sketch of US Economy: No QE3 – Marc
to Market
Charts: Australian Economy – ASA
One might, as a result, wonder if this is a
right time for the government to tighten fiscal policy, particularly when it is
now apparently that a deleveraging is going to happen after a period of
accumulation of debt, as one can see below
Global Growth Is Slowing – Credit
Writedowns
According to the JP Morgan Global Composite PMI report, “Growth of global economic
activity eased sharply to a five month low in April.”
Macro Matters and Orthodoxy – Quantivity
Quantivity disliked undergrad macroecon, as it
was largely a waste of time: fancy theory lacking compelling evidence,
amplified by no consensus within the field à la saltwater versus freshwater.
the flaws of finance – research
puzzle
James Montier delivered the keynote speech at
this year’s annual conference of the CFA Institute. It was titled simply, “The Flaws of Finance.”
Financial crises, ethics and academics: A bit
more Mea Culpa would help – Magic,
Maths and Money
Academics
are still not accepting any responsibility for the crisis. First it was the
“evil bankers”, then the governments.
It is time to end the oligopoly in banking – John
Kay
If the only way you are allowed to operate a
bank is by being much the same as existing banks, the only competition we can
ever expect is the anaemic competition we see today.
What does interconnectedness imply for
macroeconomic and financial cooperation? – BIS (pdf)
William C
Dudley, President and Chief Executive Officer of the Federal Reserve Bank of
New York, at the Swiss National Bank-International Monetary Fund Conference,
Zurich, 8 May 2012.
Country Stress Events: Does Governance Matter? – IMF
This paper analyzes the linkages between
governance quality and country stress events. It focuses on two types of
events: fiscal and political stress events, for which two innovative stress
indicators are introduced. The results suggest that weaker governance quality
is associated with a higher incidence of both fiscal and political stress
events.
A Dynamic Factor Model of the Yield Curve as a
Predictor of the Economy – FED
We examine the predictive value of the yield
curve to forecast future economic growth as well as the beginning and end of
economic recessions at the monthly frequency…the proposed factor model of the
yield curve exhibits substantial incremental predictive value compared to
several alternative specifications.
CENTRAL BANKING
Crowding out, brought to you by the Fed – Free
exchange / The Economist
Monetary policy: Try overshooting for once,
cont. – Free
exchange / The Economist
In other words, because the Fed appears to be
overwhelmingly focused on keeping inflation at or just below 2%, efforts to
boost employment on the public side may simply crowd out private employment
growth.
How "Unconventional" Are Large-Scale
Asset Purchases? The Impact of Monetary Policy on Asset Prices – N.Y. FED
(pdf)
By looking at the cross-asset reactions, this
work concludes that, for most U.S. asset prices, the
effects of asset purchases are not statistically different from an
unanticipated cut in the fed funds target rate. Finally, the response of U.K. asset prices
(excepting FTSE 100 stocks) to the Bank of England’s gilt purchases is quantitatively similar to the reaction of U.S. asset prices to the
Fed’s asset purchases.
The Credibility Fixation – Krugman
/ NYT
My point is that when central bankers invoke “credibility”, they’re in effect saying something like this: Our most precious asset is our hypothetical ability — for which we have no evidence, but in which we nonetheless believe — to deal more easily with a hypothetical future problem. And rather than endanger this precious asset, we refuse to act on the intense problem we have right now.
My point is that when central bankers invoke “credibility”, they’re in effect saying something like this: Our most precious asset is our hypothetical ability — for which we have no evidence, but in which we nonetheless believe — to deal more easily with a hypothetical future problem. And rather than endanger this precious asset, we refuse to act on the intense problem we have right now.
The return of the surprise in central banking – BIS (pdf)
Patrick
Honohan, Governor of the Central Bank of Ireland, at the Official Monetary and
Financial Institutions Forum (OMFIF) Golden Series on World Money, London, 8 May 2012.
Central Bank reserve creation in the era of
negative money multipliers – voxeu.org
Are central banks printing vast quantities of
money? This column explains how money-multiplier economics (central banks
create reserves that allow commercial banks to create money) no longer holds.
Today, non-bank financial institutions play a pivotal role in money/liquidity
creation, but hold no reserves. Their lending depends on “private reserves”,
mainly highly liquid government securities. Creating more ‘public’ reserves by
buying such ‘private’ reserves doesn’t trigger money creation – it just
substitutes among reserve types. Open-market purchases only create money if
they swap a monetary base for assets that are no longer accepted at full value
as collateral in the market.
The era of the ‘negative money multiplier’ –
Part 1 – alphaville
/ FT
Or, why hyperinflationists are wrong. And why everything you were ever taught about the money multiplier is not applicable to the here and now.
Or, why hyperinflationists are wrong. And why everything you were ever taught about the money multiplier is not applicable to the here and now.
The era of the ‘negative money multiplier’ –
Part 2 – alphaville
/ FT
If they Singh and Stella are right, the
multiplier has no chance of returning for as long as the Fed continues to
substitute private Treasury stock for bank reserves, or for as long as shadow
banks remain risk averse with respect to the type of collateral they accept.
Does History Support NGDP Targeting Now? – The
Capital Spectator
The debate about targeting a higher rate of
growth for nominal gross domestic product (NGDP) keeps the blogosphere humming,
but the discussion doesn’t mean much if Fed Chairman Ben Bernanke doesn't
embrace the idea. Don't hold your breath.
CHINA SLOWS DOWN
Retail sales
has also missed estimates in April – ASA
China Monetary Statistics for April 2012
– ASA
Fixed asset
investment weakens, real estate investment slowdown – ASA
Industrial
Production missed estimates, power output growth collapsed – ASA
Inflation
slowed to 3.4% in April 2012 – ASA
Chinese
data: it gets worse – beyondbrics
/ FT
People’s
Bank of China cuts reserve requirement ratio by 50bps – ASA
China Cuts Reserve Requirement Ratio,
Joins Reflation Race – ZH
China Cuts Required Reserves – Marc
to Market