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- 284 – The world food price crisis of 2007
by David Pannell in Pannell Discussions, 2015-10-05 15:00:23 UTC
In 2007, the world prices for a number of important food commodities suddenly increased dramatically. Many reasons for the price hike were proposed at the time, but some of them turned out to have little to do with it. One factor that did play a big role was American policy that mandates use of biofuels.
Between 2006 and 2008, the price of rice increased by around 200%, and the prices of maize, wheat and soybeans all increased by over 100%.
Figure 1. Index of food prices since 1990.
It was estimated that this big jump in food prices pushed an additional 130-155 million people into poverty. [...]
- Banks and interest rates: be careful what you wish for
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-10-05 14:36:54 UTC
Many people seem to think that – as a new BIS working paper concludes – banks benefit when monetary policy tightens and interest rates rise (especially from a low level). Do they? In some instances, perhaps, but as a general principle, surely not. A casual glance at recent U.S. stock market behavior seems to support the idea that higher interest rates would be good for banks now. When the Federal Open Market Committee decided not to hike interest rates on September 17, the S&P500 dropped by 1.85% over two days, while the KBW index of bank stocks fell by 4.85%. A week later, when Fed Chair [...]
- Measuring Business Practices in Small Firms
by David McKenzie in Development Impact, 2015-10-05 13:20:00 UTC
Chris Woodruff and I have a recent working paper in which we look at the importance of business practices for small firms in developing countries, using surveys administered to over 20,000 small firms in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria, and Sri Lanka. [...]
- Why everybody knows CEOs are overpaid, but nothing happens
by David Peetz, Professor of Employment Relations, Griffith University in The Conversation, 2015-10-04 19:22:40 UTC
CEO pay is heavily influenced by comparisons. Image sourced from Shutterstock.com That CEOs are overpaid is something, as Leonard Cohen would say, “everybody knows”; including the directors and shareholders who ultimately decide their pay. Yet firms are unwilling to do anything about it, because to do so would damage internal relations, undermine status and run against the norms of the system.
Across Europe, the US and Australia, , four fifths of people believe business leaders in their countries are overpaid and/or that executive salaries should be capped .
In Britain, the head of the I [...]
- Virtual Frenzies: Bitcoin and the Block Chain
by Stephen G. Cecchetti in Huffington Post Business, 2015-10-01 18:03:16 UTC
Note to editors: This post is coauthored with authorized HuffPo blogger Kermit Schoenholtz . Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other " virtual currency schemes " (VCS) lack critical features of money, so their use is likely to remain very limited. In contrast, the technology used to record Bitcoin ownership and transactions - the block chain - has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger [...]
- Warum Sozialberufe schlechter bezahlt werden
by Ekkehart Schlicht in Funktionale Staatsfinanzen, 2015-10-01 14:10:00 UTC
Beim drohenden Kita-Streik oder seiner Abwendung wird von den Beschäftigten in den Bildungs-, Sozial- und Erziehungsberufen eine Aufwertung und Höherbezahlung angestrebt. In der Tat ist die Bezahlung im Vergleich zu anderen Tätigkeiten recht gering ( Erzieher 2228 €, Wartungs- und Servicetechniker im Maschinenbau 3282 € ). Woran liegt das? Eine Antwort wäre: Frauendiskriminierung, denn der Frauenanteil in den Care-Berufen, wie man diese kurz bezeichnen könnte, ist sehr hoch. Aber eine solche Antwort verschiebt nur die Problematik auf die Frage, warum Frauen schlechter bezahlt werde [...]
- Lecture on Rationality, Utility, Value and Decision Making
by Liam Delaney in Economics, Psychology and Policy, 2015-09-30 22:41:00 UTC
I am currently giving a set of lectures as part of a module " Behavioural Economic: Concepts and Theories " in Stirling. I am posting brief informal summaries of some of these lectures on the blog to generate discussion. Fig 1. Overview Today's lecture was on Rationality, Utility, Value and Decision-making . The lecture consisted of six sections ( Fig. 1) : (i) concepts of rationality; (ii) rational choice in conditions of certainty; (iii) rational choice in conditions in conditions of uncertainty; (iv) challenges to rational choice (v) loss aversion and the endowment effect; and (vi) implicat [...]
- Why poor countries should try to avoid the SDGs
by Philipp Krause in Development Policy Blog, 2015-09-30 20:00:28 UTC
This weekend, the United Nations officially adopted the Sustainable Development Goals (SDGs), or Global Goals , as they now seem to be called. Judging from the congratulations emanating from New York, this is great news for the international aid community, who managed to replace the Millennium Development Goals (MDGs) with a new framework to cover the next 15 years until 2030. Unfortunately, they’re also bad news for developing countries.
It’s been widely reported that the process of tortured negotiations essentially turned into what political scientists call “logrolling”: everyone vot [...]
- Much ado about nothing? The economic impact of refugee ‘invasions’
by ? in World Bank Blogs, 2015-09-30 19:07:00 UTC
To those European Union citizens who think that the ongoing “refugee invasion” into the EU is quickly becoming economically unsustainable: If the experience of Syria’s neighbors is anything to go by, you may need to think again.
- Linearization about the Current State: A Computational Method for Approximating Nonlinear Policy Functions during Simulation
by Christian Zimmermann in NEP-DGE blog, 2015-09-30 18:56:23 UTC
By Ricard Evans and Kirk Phillips
This paper presents an adjustment to commonly used approximation methods for dynamic stochastic general equilibrium (DSGE) models. Policy functions approximated around the steady state will be inaccurate away from the steady state. In some cases, this does not lead to substantial inaccuracies. In other cases, however, the model may not have a well-defined steady state, or the nature of the steady state may be at odds with its off-steady-state dynamics. We show how to simulate a DSGE model by approximating ab [...]
- Wozu braucht man Geld für die Geldpolitik?
by Gerald Braunberger in Fazit, 2015-09-30 05:42:53 UTC
Es herrscht eine tiefe Kluft zwischen der traditionellen deutschen Vorstellung, nach der die Geldmenge wichtig fÃ¼r die GÃ¼terpreisinflation ist, und dem international dominierenden Paradigma, in dem die Geldmenge Ã¼berhaupt keine Rolle fÃ¼r die Geldpolitik spielt. Wir liefern einen Ãberblick.
Kontroverse Diskussionen Ã¼ber Ã¶konomische Fragen sind wichtig, um Erkenntnisse zu gewinnen. Voraussetzung ist aber, dass die Teilnehmer in einer Sprache sprechen. In der Geldpolitik ist das womÃ¶glich nicht der Fall – vielmehr scheint es so zu sein, dass, dem bekannten Wirtschaftshistoriker Harold Ja [...]
by chris in Stumbling and Mumbling, 2015-09-29 12:19:43 UTC
Janan Ganesh interprets the rise of Corbyn as a sign of Britain's prosperity - that people "can afford to treat politics as a source of gaiety and affirmation":
A Corbyn rally is not a band of desperate workers fighting to improve their circumstances, it is a communion of comfortable people working their way up Maslow’s hierarchy of needs.
I fear this misses two points.
One is that twas ever thus. Left-wing movements have always contained - and often been led by - the well-off. Lenin, Trotsky, Mao and Castro were all nice middle-class boys. Several of the leaders of the 1945-51 Labour gove [...]
- A Pre-Protestant Ethic?
by shenderson97 in NEP-HIS blog, 2015-09-29 09:00:51 UTC
Breaking the piggy bank: What can historical and archaeological sources tell us about late‑medieval saving behaviour?
By Jaco Zuijderduijn and Roos van Oosten (both at Leiden University)
Using historical and archeological sources, we study saving behaviour in late-medieval Holland. Historical sources show that well before the Reformation – and the alleged emergence of a ‘Protestant ethic’ – many households from middling groups in society reported savings worth at least several months’ wages of a skilled worker. That these findings must be interpreted as an exponent of savi [...]
- Dalla parte delle prostitute
by Marina Della Giusta e Maria Laura Di Tommaso in La Voce, 2015-09-29 04:51:55 UTC
Ha destato scalpore la risoluzione di Amnesty International a favore della totale decriminalizzazione della prostituzione. Ma i dati mostrano che la criminalizzazione del fenomeno peggiora la situazione delle prostitute. PiÃ¹ difficile anche la lotta contro la tratta e lo sfruttamento dei minori.
La scelta controversa di Amnesty
Lâ11 agosto il consiglio internazionale di Amnesty International ha votato una risoluzione in cui si dichiara a favore di una completa decriminalizzazione della prostituzione. Lâorganizzazione Ã¨ contraria a politiche di criminalizzazione sia dellâofferta sia del [...]
- Piketty's contribution to unpacking inequality: timely and relevant
by Vishnu Padayachee, Distinguished Professor and Derek Schrier and Cecily Cameron Chair in Development Economics, School of Economics and Business Sciences, University of the Witwatersrand in The Conversation, 2015-09-29 04:45:09 UTC
A view of Alexandra township, a slum
overlooking the Sandton skyscrapers in Johannesburg. Addressing inequality has been a major challenge for South Africa. Reuters/Juda Ngwenya Not many economists with something approaching a rockstar status visit South Africa. So the visit by French political economist Thomas Piketty, author of the bestselling Capital in the Twenty-first Century , appears to be eagerly awaited by academics, especially those broadly on the left, and by many South Africans.
In 1976, Milton Friedman , then the rising rockstar economist of the anti-Keynesian right wing in the U [...]
- The study of inequality has been mainstreamed – what now for the left?
by Edward Webster, Professor Emeritus, Society, Work and Development Institute , University of the Witwatersrand in The Conversation, 2015-09-29 04:44:52 UTC
The Global South is engineering new anti-poverty strategies, leaving traditional left analysts in a quandry. Reuters/Nacho Doce It could be said that mainstream economic research is informing the left’s long-term critique of trickle-down economics.
Three extensive pieces of research illustrate how the study of inequality has been mainstreamed. Thomas Piketty, in Capital in the Twenty-First Century , confirms that market-led growth deepens inequality and good redistributive policies improve growth. Tracing changes in inequality since 1921, Kate Pickett and Richard Wilkinson show that among t [...]
- Déjà vu in emerging markets
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-28 12:31:39 UTC
For decades a number of emerging markets have been evolving into advanced economies.�They have improved their financial systems, property rights, policy frameworks, and growth models. As it turns out, however, the evolution was going the other way, too: advanced economies were becoming more like emerging markets, too.�Debt was accumulating on household, corporate and bank balance sheets. Booms in real estate and parts of the corporate sector added to financial vulnerability.�And policymakers were inattentive to the risks or lacked consensus on how to address them. When the Great Financial Cris [...]
- Why England can't lose from hosting the Rugby World Cup
by Chris Brady, Co-Director, Centre for Sports Business, University of Salford in The Conversation, 2015-09-28 05:33:34 UTC
Reuters staff Tills are ringing in pubs and hotels all over London, Cardiff, Exeter and Newcastle as rugby fans in town for the 2015 World Cup toast victory or drown their sorrows, racking up a tidy bar bill as they go. At least that’s the happy picture being painted by promoters of the tournament who are keen to highlight the economic benefits of hosting it .
Those touting the Rugby World Cup’s benefits are quick to reference a report by the accountancy firm Ernst & Young , which asserts that the tournament will generate up to £2.2 billion of output into the [...]
- Influential Publications in Ecological Economics Revisited
by email@example.com (David Stern) in Stochastic Trend, 2015-09-27 22:34:00 UTC
Back in 2004 I published with Bob Costanza , Chunbo Ma , Brendan Fisher , and Lining He a paper that looked at the most influential publications on the field of ecological economics . Then, about this time last year Gaël Plumecocq contacted me about participating in a session he was organizing at the European Society of Ecological Economics meeting in Leeds on "ecological economics understood as an epistemic community". I had the idea of revisiting our 2004 paper a decade later and seeing how the field had changed in the meantime. Eventually, Gaël also came on board our author team, contribu [...]
- Optimally Sticky Prices
by Christian Zimmermann in NEP-DGE blog, 2015-09-25 15:05:46 UTC
By William Zame and Jean-Paul L’Huillier
We propose a microfoundation for sticky prices. We consider a an environment in which a monopolistic firm has better information than its consumers about the nominal aggregate state. We show that, when many consumers are uninformed (and for some ranges of parameters), it is optimal for the firm to offer contracts/prices that do not depend on the state of the world; i.e. optimal contracts/prices are sticky. We establish this result first in a general mechanism design framework that allows for non-linear p [...]
- Paradoxes of control
by ? in Stumbling and Mumbling, 2015-09-24 12:49:00 UTC
"Why do the British dislike the free market?" asks John Rentoul, pointing to public support for nationalization and opposition (pdf) to privatization: he might have added support for rent and price (pdf) controls too. �
For me, this raises three parad [...]
- Competencias educativas en España: novedades
by Lucas Gortazar in Politikon, 2015-09-24 08:30:18 UTC
En estos días de campaña y encendido debate pre-electoral, parece estar fuera de agenda hablar de problemas estructurales de nuestra economía y de políticas públicas. Lo intentaremos en esta entrada para hablar de educación y de trabajo, al hilo de un extenso informe publicado el martes por la OCDE, Una Estrategia de Competencias para España , que si bien aporta muchos datos ya conocidos, es realmente novedoso por su elaboración -fruto de una inusual colaboración entre ministerios y agentes sociales- y por el marco conceptual sobre el que se construye. A nadie se le escapa que entre l [...]
- The West is on fire – and the US taxpayer is subsidizing it
by John Rennie Short, Professor, School of Public Policy, University of Maryland, Baltimore County in The Conversation, 2015-09-23 09:36:34 UTC
Raging – and costly. US National Parks Service , CC BY-SA The western US is burning.
This year’s damaging experience is just the latest in a recent series of devastating wildfire seasons, a trend that will only likely increase over the coming years.
Over the last few decades, and especially since 2000, the wildfire season is getting longer, with more fires, bigger fires and more damaging fires . Even before the end of this year’s season, 600,000 acres have burned in California, and almost a million acres each in Oregon and Washington. More than five million acres were destroyed in the [...]
- Over consumption. A horse race of Bayesian DSGE models
by Christian Zimmermann in NEP-DGE blog, 2015-09-22 19:47:11 UTC
By Amedeo Argentiero, Maurizio Bovi and Roy Cerqueti
Standard dynamic stochastic general equilibrium (DSGE) models are populated by fully-informed-optimising Muth-rational agents. This kind of agent is at odds with well-known psychological biases, not to mention real life people. In particular, there are strong theoretical and empirical reasons to believe that consumers are overly optimistic. Also, the size of over optimism is likely to show cyclical features. In this paper we simulate two DSGE models, one standard with Muth-rational consumer [...]
- Non bastano i congedi per avere più mamme al lavoro *
by Vitalba Azzollini in La Voce, 2015-09-22 01:02:17 UTC
Le difficoltÃ di bilanciamento fra lavoro e vita familiare continuano a penalizzare lâoccupazione femminile. Il governo ha fatto bene a emanare un decreto per favorirne la conciliazione. Ma non ha attuato le misure che avrebbero avuto gli effetti piÃ¹ rilevanti. Serve un intervento organico.
Le scelte delle donne
La promozione del lavoro femminile, ricondotta di norma a istanze di eguaglianza, Ã¨ auspicabile anche per motivi diÂ efficienza . Se la diversity Â giova alla produttivitÃ aziendale, i paesi in cui il differenziale di genere Â Ã¨ inferiore registrano risultati economici migliori [...]
- The Wicked Witch of the West Wing Brings on an SWP Acid Flashback Moment
by The Professor in Streetwise Professor, 2015-09-21 20:23:24 UTC
I hadÂ an acid flashback momentÂ when I read this :
Biotechnology stocks took a sharp dive Monday afterÂ Hillary Clinton Â said she wouldÂ propose a plan to counteract âprice gougingâ by drug makers.
Ms. Clinton, who is seeking the Democratic nomination for president, was responding to New York Times article published Sunday that told of a price increase for a drug used toÂ treat a life-threatening parasitic infection. The cost of the drug was recently increase fromÂ $13.50 a tablet to $750, Â the story said .
Why? Because Hillary wreaked havoc on pharmaceutical stock prices 23 years ago, [...]
- Monday assorted links
by Tyler Cowen in Marginal Revolution, 2015-09-21 16:26:22 UTC
1. Don Boudreaux responds to Dani Rodrik on free trade .Â And Arnold Kling responds .Â And Dan Klein reviews Charles C.W. Cooke’s The Conservatarian Manifesto .
2. A quick way to access what betting markets are telling us about the candidates .
3. The NBA is moving toward wearable tech — are you next?
4. More data on Chinese services, including telecom .
5. Should we adjust for this data, or learn from it?Â The temporal evolution of citation counts, across fields .
6. Generalized results about interest rates and banks profits, check out the Chicago Fed link here , Genay and Podjasek, it is [...]
- 283 – Whose environmental values matter?
by David Pannell in Pannell Discussions, 2015-09-21 15:00:53 UTC
One of my pet issues is how to decide which the environment projects should receive public funding. One of the factors influencing this decision is (or should be) the importance or value of the environmental outcomes that would be delivered. But whose judgements about importance or values should be taken into account?
There are at least three groups whose values might be influential:
The general public.
Environmental experts, such as ecologists, are crucial to decisions about environmental investments. We need their advice about threats to environmental as [...]
- Was Stalin’s Economic Policy the Root of Nazi Germany’s Defeat?
by emanuelefelice in NEP-HIS blog, 2015-09-21 13:38:02 UTC
Was Stalin Necessary for Russiaâs Economic Development?
By Anton Cheremukhin (Dallas Fed), Mikhail Golosov (Princeton), Sergei Guriev (SciencesPo), Aleh Tsyvinski (Yale)
Abstract: This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product market [...]
- The outcome bias
by chris in Stumbling and Mumbling, 2015-09-21 13:20:20 UTC
Diego Costa has something in common with George Osborne. I don't just mean the obvious . I mean that both could be beneficiaries of a common cognitive error - the outcome bias.
Some observers are praising Costa for engineering Gabriel's sending off. "There is barely a team on the planet who would not benefit from Costa's streetfighting approach" says Oliver Kay in the Times. "He deliberately and skilfully got an opponent sent off" says Barney Ronay in the Guardian. "This was wasn’t a mugging. It was a heist, and an expert one." And Arry Redknapp adds that "you would like to have him in your [...]
- Virtual Frenzies: Bitcoin and the Block Chain
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-21 13:11:12 UTC
Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other “ virtual currency schemes ” (VCS) lack critical features of money, so their use is likely to remain very limited. In contrast, the technology used to record Bitcoin ownership and transactions – the block chain – has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger of transactions that is encrypted and distributed over a network of computers. Even as [...]
- The many faces of the federal funds rate
by ? in FRED blog, 2015-09-21 13:00:16 UTC
Itâs no surprise FRED has federal funds rate data. But these data aren’t as simple as you may think. They have changed form over time as the Federal Open Market Committee has changed the way it sets the funds rate: From 1982 through 2008, the target rate is a discrete number. For example, it is 9.5% on Oct. 1, 1982, 3% on Oct. 1, 1992, and 1.75% on Oct. 1, 2002. At the end of 2008 (i.e., since the financial crisis), the FOMC began setting a target range of 0.00 to 0.25%. And, to further complicate matters, the data prior to 1994 come from the working paper â A New Federal Funds Rate Targe [...]
- Financialisation makes income distribution more unequal
by Blog Admin in British Politics and Policy at LSE, 2015-09-21 06:00:29 UTC
Financialisation and increasing income inequality have been two of the most important developments in the last three decades. But what is the connection between the two phenomena? Does financialisation contribute to the increase in income inequality? Karsten KÃ¶hler , Alexander Guschanski and Engelbert Stockhammer provide evidence for a negative effect of financialisation on functional income distribution in OECD countries.
The last four decades have been characterised by drastic changes in the distribution of income between wages and profits. On average (in our sample of 14 OECD countries) th [...]
- What South African can learn from Piketty about addressing inequality
by Imraan Valodia, Dean of Commerce, Law and Management, University of the Witwatersrand in The Conversation, 2015-09-21 03:54:58 UTC
French economist and author Thomas Piketty. His book on inequality has lessons for developing economies such as South Africa. EPA/Bart Maat Thomas Piketty’s visit to South Africa provides an opportunity to think creatively about what is driving inequality in the country and what appropriate measures might be to address the problem. South Africa has unacceptably high levels of inequality , and is routinely described as among the most unequal in the world.
Piketty will be delivering the 13th Nelson Mandela Annual lecture in early October. His magisterial and masterful study of inequality is p [...]
- Do major cities create unhappy Australians?
by Winton Bates in Freedom and Flourishing, 2015-09-19 21:30:00 UTC
Sydney's eastern suburbs “ Major cities create unhappy Australians ” . That headline jumped out at me when I was doing an internet search recently. The source was The Melbourne Newsroom – a media unit at the University of Melbourne. The news release tells us that Australians who live in rural locations or towns of less than 1,000 residents “have significantly higher life satisfaction than those living in major cities”. (Major cities have more than 100,000 residents.) The news release is linked to a recent publication based on the highly regarded HILDA survey undertaken by Melbourne U [...]
- Constant versus Balanced Growth
by dvollrath in The Growth Economics Blog, 2015-09-18 16:27:21 UTC
Every theory of economic growth that I can think of is written to deliver “balanced growth” in the long run. Balanced growth means not only that the growth rate is constant as time goes off to infinity, but also that control variables (the savings rates, the fraction of labor allocated to R&D, the fraction of spending on education) are constant as well as time goes off to infinity.
Growth theories work hard to achieve this balanced growth,Â often making assumptions about functional forms to ensure that the model delivers balanced growth. Why?
The reasoning is that this is what we see in the da [...]
- Secular Labor Reallocation and Business Cycles
by Christian Zimmermann in NEP-DGE blog, 2015-09-18 14:13:55 UTC
By Gabriel Chodorow-Reich and Johannes Wieland
We study the effect of mean-preserving idiosyncratic industry shocks on business cycle outcomes. We develop an empirical methodology using a local area’s exposure to industry reallocation based on the area’s initial industry composition and employment trends in the rest of the country over a full employment cycle. Using confidential employment data by local area and industry over the period 1980-2014, we find sharp evidence of reallocation contributing to worse employment outcomes during nation [...]
- EMU Troubles: The Narrow Way Out
by Francesco Saraceno in Sparse Thoughts of a Gloomy European Economist, 2015-09-18 09:43:00 UTC
I was asked to write a piece on whether we should continue to study the EMU (my answer is yes. In case you wonder, this is called vested interest). One section of it can be a stand-alone blog post: Here it is, with just a few edits:
While in the late 1980s the consensus among economists and policy makers was that the EMU was not an optimal currency area ( De Grauwe, 2006 ), the choice was made to proceed with the single currency for two essentially opposed reasons: The first, stemming from the Berlin-Brussels Consensus , saw monetary integration, together with the establishment of institutions [...]
- Banki zawiniły, ubezpieczenia cierpią
by kbien in Obserwator Finansowy, 2015-09-18 01:03:42 UTC
PaÅstwo peÅniÅo w przeszÅoÅci i nadal peÅni wiele rÃ³l w sektorze ubezpieczeniowym. Przejawia siÄ to m.in. w stosowaniu przymusu ubezpieczeniowego, tworzeniu obowiÄ
zkowych wehikuÅÃ³w ubezpieczeniowych (zwÅaszcza w zakresie ubezpieczeÅ katastroficznych czy jÄ
drowych) czy teÅ¼ dotowaniu pewnych dziaÅaÅ ubezpieczeniowych (np. Rolnictwo).Trzy z tych funkcji maja podstawowe znaczenie. NaleÅ¼Ä
do nich funkcja wÅaÅcicielska, funkcja gwarancyjna oraz funkcja regulacyjna i nadzorcza.
Przed ostatnim kryzysem finansowym wydawaÅo siÄ, Å¼e fun [...]
- Collateral constraints and rental markets
by Christian Zimmermann in NEP-DGE blog, 2015-09-16 18:35:57 UTC
By Hippolyte D’Albis and Eleni Iliopulos
We study a benchmark model with collateral constraints and heterogeneous discounting. Contrarily to a rich literature on borrowing limits, we allow for rental markets. By incorporating this missing market, we show that impatient agents choose to rent rather than to own the collateral in the neighborhood of the deterministic steady state. Consequently, impatient agents are not indebted and borrowing constraints play no role in local dynamics.
This short paper makes a very simple point that meri [...]
- Inevitable "errors"
by chris in Stumbling and Mumbling, 2015-09-16 13:54:24 UTC
One of the problems with the English language is that words such as "mistake" and "error" connote shortfalls from a feasible ideal when in fact, in some important cases, errors are inevitable and unavoidable.
I'm prompted to say this by Yian Mui's piece which points out that "the Fed has continually underestimated how much support the economy needs" in the last seven years. A similar thing is true in the UK. For example, the Bank of England forecast two years ago that inflation would now be around 2% but in fact even the core rate is just 1%.
These "errors", though, are not corrigible. Macroec [...]
- Independence and the distribution of resources within Spain will once again take centre stage in Catalonia’s elections
by Blog Admin in EUROPP European Politics and Policy, 2015-09-16 13:30:59 UTC
Catalonia will hold parliamentary elections on 27 September, with a number of Catalan politicians presenting the elections as an effective vote on the territory’s independence from Spain. Mireia Borrell Porta writes that two issues in particular are at the heart of the debate over independence: fiscal redistribution within Spain and Catalan identity. She notes that while the Spanish government has rejected the idea that the elections are a de facto vote on independence, the result will go some way to indicating the views of Catalan voters on the issue.
Catalans will go to the polls on 27 Sep [...]
- It's a small world (after all)
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-14 12:20:48 UTC
Originally built for the 1964 New York World’s Fair, the “ It’s a small world ” exhibition re-opened at Disneyland two years later in 1966. At the time, the international monetary system was characterized by fixed exchange rates and widespread capital controls. A half century later, global finance has been transformed so that exchange rates are now mostly flexible and cross-border capital mobility is generally high. As they say in Disneyland, it’s a small world after all. These sweeping changes have been associated with an explosion in cross-border transactions. And, as national bord [...]
- Economists Have Failed to Educate the Public About How Markets Operate
by Matthew Kahn in Environmental and Urban Economics, 2015-09-13 19:19:00 UTC
Professor Timothy Snyder of Yale must be a very smart guy. �He is tenured at Yale and my wife greatly respects his book Bloodlands. � � Google Scholar suggests that has been his big work. We own this book and my wife advised me not to read this WW2 book about Stalin and Hitler because it would depress me. �In today's NY Times, Professor Snyder has published a scary piece in which he predicts that in a climate change suffering world that China will steal Africa's land (in its �quest to feed its people) and that this action will cause millions to suffer in Africa. �As a historian, he appears to [...]
- Can We Adapt to a Worst Case Scenario? Or Will Don Trump Continue to live in NYC in the Year 2400?
by Matthew Kahn in Environmental and Urban Economics, 2015-09-11 22:51:00 UTC
The NY Times often features Justin Gillis. �Mr. Gillis is very worried about our future if we fail to cap our greenhouse gas emissions. In a piece just published , I will report a few of his choice quotes. QUOTE #1: "Burning all the world’s deposits of coal, oil and natural gas would raise the temperature enough to melt the entire ice sheet covering Antarctica, driving the level of the sea up by more than 160 feet, scientists reported Friday. In a major surprise to the scientists, they found that half the melting could occur in as little as a thousand years, causing the ocean to rise by some [...]
- A Model of the Twin Ds: Optimal Default and Devaluation
by Christian Zimmermann in NEP-DGE blog, 2015-09-11 14:44:53 UTC
By Vivian Yue, Stephanie Schmitt-Grohe, Martin Uribe and Seunghoon Na
This paper characterizes jointly optimal default and exchange-rate policy in a small open economy with limited enforcement of debt contracts and downward nominal wage rigidity. Under optimal policy, default occurs during contractions and is accompanied by large devaluations. The latter inflate away real wages thereby avoiding massive unemployment. Thus, the Twin Ds phenomenon emerges endogenously as the optimal outcome. By contrast, under fixed exchange rates, optimal defaul [...]
- Problems in Forecasting Inflation
by Mark Thoma in Economist's View, 2015-09-11 00:15:00 UTC
More on the Fed. How much faith should we have in the Fed's forecasts of inflation? This is from Cecchetti & Schoenholtz:
The FOMC is coming : Having dropped to 5.1%, the unemployment rate has reached the longer-run employment goal of the Federal Reserve’s Open Market Committee (FOMC). So, starting to raise interest rates would seem to be in the cards. And, many observers expect policymakers to act soon, possibly very soon.
The key sticking point, and it is a big one, is that inflation – as measured by the personal consumption expenditure price index (PCE) favored by the FOMC – has been [...]
- Research Is as Good as Its Reproducibility
by Anton Tarasenko in Economics and Development, 2015-09-10 17:35:09 UTC
Complex systems happen to have probabilistic, rather than deterministic, properties, and this fact made social sciences look deficient nextÂ to theÂ real hard sciences (as if hard sciences predicted weather or earthquakes better than economics predicts financial crises).
What’s the difference?Â When today’s results differ from yesterday’s results, it’s not because authors get science wrong. In most cases, these authorsÂ just study slightly different contexts and may obtain seemingly contradictory results. Still, to benefit from generalization, it’s easier to take “slightly different” as “the [...]
- The Bush tax cuts are back, just with more exclamation points
by Matt O'Brien in Wonkblog, 2015-09-10 11:24:38 UTC
(AP Photo/Lynne Sladky) If you liked the Bush tax cuts, good news. They're back, just with more exclamation points. That's what Jeb—or, as his campaign calls him, Jeb!—is running on as the centerpiece of his plan to get the economy growing near the 4 percent pace that it didn't quite manage during either the Reagan or Clinton booms. To that end, Jeb Bush wants to cut the top individual tax rate from 39.6 to 28 percent, cut the corporate tax rate from 35 to 20 percent, cut the capital gains tax rate from 23.8 to 20 percent, get rid of the estate and alternative minimum taxes, strictly lim [...]
- Disinflation and Inequality in a DSGE monetary model: A Welfare Analysis
by Christian Zimmermann in NEP-DGE blog, 2015-09-09 19:49:18 UTC
By Maria Ferrara and Patrizio Tirelli
We investigate the redistributive effects of a disinflation experiment in an otherwise standard medium-scale DSGE model augmented for Limited Asset Market Participation, implying that a fraction of households do not hold any wealth. We highlight two key mechanisms driving consumption and income distribution: i) the cash in advance constraint on firms working capital needs; ii) the response of profit margins to disinflation, which is crucially dependent on the two most used pricing assumptions in the New-K [...]
- Forecasting and Adapting to Climate Change Fire Risk
by Matthew Kahn in Environmental and Urban Economics, 2015-09-09 13:18:00 UTC
This year I am a faculty member at both USC and UCLA. �I am quite impressed with both sets of colleagues. �Some of my UCLA colleagues just rel eased a new environmental science paper predicting future fire risk in Southern California and making bold claims about how our future capital stock will be affected. �Here is a quote that will amuse people who embrace (and understand) the Lucas Critique. "Co-author Alex Hall, a UCLA professor of atmospheric and oceanic sciences and expert on climate modeling, generated the future-climate projections for the research. Feeding those projections into fire [...]
- Decentralizing education resources: school grants in Senegal
by maximorossi in NEP-LTV blog, 2015-09-09 12:28:05 UTC
By: Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL) ; Oswald Koussihouèdé (Institute for Fiscal Studies) ; Nathalie Lahire (Institute for Fiscal Studies) ; Costas Meghir (Institute for Fiscal Studies and Yale University) ; Corina Mommaerts (Institute for Fiscal Studies)
The impact of school resources on the quality of education in developing countries may depend crucially on whether resources are targeted efficiently. In this paper we use a randomized experiment to analyze the impact of a school grants program in Senegal, which decentralized a portion of the country’s educ [...]
- (Mis-)Predicted Subjective Well-Being Following Life Events
by maximorossi in NEP-LTV blog, 2015-09-09 12:26:29 UTC
By: Odermatt, Reto (University of Basel) ; Stutzer, Alois (University of Basel)
The correct prediction of how alternative states of the world affect our lives is a cornerstone of economics. We study how accurate people are in predicting their future well-being when facing major life events. Based on individual panel data, we compare people’s forecast of their life satisfaction in five years’ time to their actual realisations later on. This is done after the individuals experience widowhood, marriage, unemployment or disability. We find systematic prediction errors that are at least partly [...]
- Introducing a Statutory Minimum Wage in Middle and Low Income Countries
by maximorossi in NEP-LTV blog, 2015-09-09 12:25:26 UTC
By: David Margolis (CES – Centre d’économie de la Sorbonne – UP1 – Université Panthéon-Sorbonne – CNRS, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics, IZA – Institute for the Study of Labor, IZA – Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) – Bonn Universität – University of Bonn)
The motivation for introducing statutory minimum wages in many developing countries is often threefold: poverty-reduction, social justice and growth. How well the policy succeeds in attaining these goals will depend on the national contex [...]
- Whither Labor-Intensive Industrialization?
by joymanlee in NEP-HIS blog, 2015-09-09 00:40:05 UTC
How Did Japan Catch-up On The West? A Sectoral Analysis Of Anglo-Japanese Productivity Differences, 1885-2000
By Stephen Broadberry (London School of Economics), Kyoji Fukao (Hitotsubashi University), and Nick Zammit (University of Warwick)
Abstract: Although Japanese economic growth after the Meiji Restoration is often characterised as a gradual process of trend acceleration, comparison with the United States suggests that catching-up only really started after 1950, due to the unusually dynamic performance of the US economy before 1950. A comparison with the United Kingdom, still the world pr [...]
- Using Behavioral Economics to Reduce the Count of Undiagnosed Type II Diabetics
by Matthew Kahn in Environmental and Urban Economics, 2015-09-08 21:52:00 UTC
Many behavioral economists seek to improve our quality of life and are especially interested in helping the less fortunate. � This article claims that up to 33% of diabetics don't know that they are diabetic. � Such individuals are imposing costs on themselves and on society by not changing their diet and exercise patterns to reduce their blood sugar levels. �Could behavioral economics and its (choice architecture) help to reduce the count of such individuals and thus help them to help themselves? � �In work I completed in the 1990s, I argued that the lost consumer surplus to being diagnosed a [...]
- What happens when you give $50,000 to an aspiring Nigerian entrepreneur?
by David McKenzie in Development Impact, 2015-09-08 13:37:00 UTC
Most firms in developing countries have no paid workers, and hardly any reach the size of 10 workers or more. For example, Hsieh and Olken (2014, p.93) report that in India and Indonesia “the fraction of firms with less than 10 workers is almost visually indistinguishable from 100 percent”, and in Nigeria, survey data indicate that 99.6 percent of firms have fewer than 10 workers. Are there constrained entrepreneurs in developing countries with the ability to grow a firm beyond this 10-worker threshold? [...]
- Baby booms and busts: how population growth spurts affect the economy
by Diane J Macunovich, Professor of Economics at University of Redlands in The Conversation, 2015-09-08 10:11:42 UTC
Does a boom in babies give the economy a boost or cause a bust? Baby money via www.shutterstock.com A baby boom is generally considered to be a sustained increase and then decrease in the birth rate. The United States, the UK and other industrialized economies have experienced only one such baby boom since 1900 – the one that occurred after World War II.
In addition, many currently developing economies such as India, Pakistan and Thailand have experienced a baby boom since 1950 as a result of a sustained decline in infant and child mortality rates as a result of improved medicine and sanita [...]
- This one ends badly
by The Arthurian in The New Arthurian Economics, 2015-09-07 08:00:00 UTC
We ended up last time looking at debt relative to debt. Maybe you don't like that so much, because in this world things are always shown "relative to GDP".
Hmm. Debt was growing a lot faster than GDP for more than half a century. So debt numbers are way bigger than GDP numbers. So, what you use for context might depend on what you want to see.
If you want to make the Federal debt look small, you could compare it to a big number like total debt. If you want to make it look big, you compare it to a small number like GDP.
Of course, you might just want to find out about the Federal debt (or [...]
- Warto inwestować w wiedzę o polityce pieniężnej
by kbien in Obserwator Finansowy, 2015-09-07 01:00:09 UTC
Respondenci lepiej rozumiejący cele Europejskiego Banku Centralnego na ogół wyrażają bardziej realistyczne oczekiwania inflacyjne. Banki centralne próbujące się zwracać do ogółu obywateli muszą brać pod uwagę różnice w wiedzy o polityce pieniężnej pomiędzy gospodarstwami domowymi i to, że nie wszędzie budzi ona podobne zainteresowanie.
Banki centralne coraz częściej wykorzystują komunikację jako integralną część polityki pieniężnej. Początkowo komunikaty kierowano przede wszystkim do rynków finansowych, ale w ostatnich latach coraz większą wagę przykłada si [...]
- The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play
by Tyler Durden in Zero Hedge, 2015-09-06 23:59:46 UTC
The most important piece of news announced today was also, as usually happens, the most underreported: it had nothing to do with US jobs, with the Fed's hiking intentions, with China, or even the ongoing "1998-style" carnage in emerging markets. Instead, it was the admission by ECB governing council member Ewald Nowotny that what we said about the ECB hitting a supply brick wall, was right. Specifically, earlier today Bloomberg quoted the Austrian central banker that the ECB asset-backed securities purchasing program "hasn’t been as successful as we’d hoped. " Why? "It’s simply because [...]
- Open Letter to Senator Rand Paul
by Stephen G. Cecchetti in Huffington Post Business, 2015-09-06 14:54:41 UTC
Note to editors: This post is coauthored with authorized HuffPo blogger Kermit Schoenholtz . We read with interest your August 21 Bloomberg View that calls for "a thoughtful congressional discussion of the pros and cons of a more thorough audit" of the Federal Reserve. While we share your desire for effective congressional oversight of the Federal Reserve, we strongly disagree on the best way to do it. In our democracy, Congress must hold the Fed accountable for achieving its economic and financial stability mandate. Congress has wisely delegated circumscribed authority over monetary polic [...]
- The FOMC is coming
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-06 12:04:06 UTC
Having dropped to 5.1%, the unemployment rate has reached the longer-run employment goal of the Federal Reserve’s Open Market Committee (FOMC). So, starting to raise interest rates would seem to be in the cards. And, many observers expect policymakers to act soon, possibly very soon. The key sticking point, and it is a big one, is that inflation – as measured by the personal consumption expenditure price index (PCE) favored by the FOMC – has been consistently below their stated 2% medium-term objective since early 2012. Tightening monetary policy for the first time since 2006 requires co [...]
- Which Measure of Inflation Should a Central Bank Target?
by firstname.lastname@example.org (Carola) in Quantitative Ease, 2015-09-06 12:04:00 UTC
"Various monetary proposals can be viewed as inflation targeting with a nonstandard price index: The gold standard uses only the price of gold, and a fixed exchange rate uses only the price of a foreign currency." That's from a 2003 paper by Greg Mankiw and Ricardo Reis called " What Measure of Inflation Should a Central Bank Target? " At the time, the Federal Reserve had not explicitly announced its inflation target, though an emphasis on core inflation, which excludes volatile food and energy prices (the blue line in the figure below),� arose under Alan Greenspan's chairmanship . In 2011, th [...]
- Interest Groups and the Competition Between Green and Dirty Technologies
by Matthew Kahn in Environmental and Urban Economics, 2015-09-05 15:17:00 UTC
While "enlightened" entrepreneurs such as Bloomberg, Musk and Steyer celebrate the nascent green economy, there are other entrepreneurs growing rich from fracking activity. � Today there is a race between "green technologies" that have a smaller climate change impact than fossil fuel technologies. �Economists such as Acemoglu et. al. �have studied how "sustainable" development could result depending on the relationship between these two technologies and government policies intended to tilt the playing field towards green tech. In my past work, I have documented the fact that educated progressi [...]
- Race against the machine
by Inaki Villanueva in Applied economist, 2015-09-05 12:38:00 UTC
The global labour markets are constantly changing and the key demanded skills change with those. In the latest years we have seen a rising concern about the role of computers in the labour market. We have obviously seen these before (e.g. Luddites ) but many say this time might be different. Machine learning and computer learning is replacing human cognitive tasks of rapidly increasing complexity. These pattern has been analysed by many, among those;� Frey and Osborne in 2013 �, Wolff in 2005 , and Benzell et al. A new academic paper published in early August by David Deming tries to identify [...]
- Patenty – kwestia przydatności
by kbien in Obserwator Finansowy, 2015-09-05 01:05:30 UTC
Zorganizowana w Londynie w 1851 r. Wielka Wystawa Åwiatowa (The Great Exhibition) miaÅa dowieÅÄ wynalazczego geniuszu wiktoriaÅskiej Wielkiej Brytanii. WywoÅano wtedy zaciekÅÄ
debatÄ o wÅasnoÅci intelektualnej. Po jednej stronie byÅy osoby publiczne przeraÅ¼one tym, Å¼e zaprasza siÄ caÅy Åwiat, aby mu pokazaÄ najlepsze pomysÅy kraju, tylko po to, aby wiÄkszoÅÄ goÅci natychmiast wrÃ³ciÅa do ojczyzn i je powieliÅa. Zaniepokojeni domagali siÄ taÅszego i prostszego systemu patentowego oraz silniejszej ochrony praw przyznanych na podstawie patentu.
dania jednak ostro [...]
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2015-09-04 19:13:00 UTC
Paul Romer is worried that the field of macroeconomics is too tribal - somehow our behavior is impeding scientific progress. Romer starts his post with two statements: 1.The model in Lucas (1972), Expectations and the Neutrality of Money, made a path breaking contribution to economic theory. It is comparable in importance to the Solow model and the Dixit-Stiglitz formulation of monopolistic competition. 2. The model in Prescott and Kydland (1982), “Time to Build and Aggregate Fluctuations”, has no scientific validity. As Romer points out, the first statement concerns a modeling contributio [...]
- "Hi, I'm President Obama and I'm here in Alaska to help fix the climate."
by Ronald Bailey in Hit & Run blog, 2015-09-04 17:30:00 UTC
President Barack Obama toured Alaska this week to highlight his concerns about man-made global warming. "Arctic temperatures are rising about twice as fast as the global average," he declared in Anchorage. On that much, he's right. Satellite temperature measurements of the lower troposphere show that the global atmosphere has been warming at a rate of about +0.12 degrees Celsius per decade since 1980. The Arctic, meanwhile, has been warming at rate of about +0.32 degrees Celsius per decade.
When it came to how best to address those rising temperatures, the president was less persuasive. [...]
- 5-Year Deflation Probability Moves Off Zero
by macroblog in Macroblog, 2015-09-04 16:34:05 UTC
Since 2010, our Bank has regularly posted 5-year deflation probabilities derived from prices of Treasury Inflation-Protected Securities (TIPS) on our Deflation Probabilities web page . Each deflation probability, which measures the likelihood of a decline in the Consumer Price Index over a fixed five-year window, is estimated by comparing the price of a recently issued 5-year TIPS with a 10-year TIPS issued about five years earlier. Because the 5-year TIPS has more "deflation protection" than the 10-year TIPS, the implied deflation probability rises when the 5-year TIPS becomes more valuable [...]
- China's Rail Firms Jump the U.S "Buy America Act" Wall
by Matthew Kahn in Environmental and Urban Economics, 2015-09-04 15:02:00 UTC
China, Japan and South Korea have gained valuable experience producing high quality public transit buses, subways and railroad equipment. �One reason that these nations acquired this knowledge is a large home market for selling such capital. �In the name of domestic protection, the U.S has erected a non-tariff trade barrier called the Buy America Act. � � In a �2015 Journal of Urban Economics paper , �Shan, Jerry and I argued that this act raises the price of U.S public transit buses as our cities purchase fuel inefficient, outdated technology from small inefficient domestic companies who face [...]
- Les agents économiques répondent-ils vraiment aux incitations ?
by Thomas Renault in Contrepoints, 2015-09-04 05:55:43 UTC
Par Thomas Renault.
L’ane de Buridan entre deux opinions LACMA credits Ashley Van Haeften (CC BY 2.0)
Eh voilÃ , c’est la rentrÃ©e ! J’ai endossÃ© hier aprÃ¨s-midi mon costume de super-hÃ©ros (enfin une veste quoi !) afin d’enseigner l’Ã©conomie Ã une armÃ©e de nouveaux Ã©tudiants assoiffÃ©s, de connaissance… bien sÃ»r. Et comme chaque annÃ©e, aprÃ¨s une introduction classique Â« blablabla l’Ã©conomie c’est cool Â» , le cours commence sur les 10 principes de l’Ãconomie, chapitreÂ issu de l’ouvrage EconomicsÂ de Mankiw et Taylor.
Et lÃ arrive le quatriÃ¨me principe : Â« les agents Ã©con [...]
- Ciò che serve in Europa per convergere e crescere assieme*
by Marco Buti e Alessandro Turrini in La Voce, 2015-09-03 22:53:18 UTC
Si accrescono i timori che l’appartenenza all’Unione monetaria non coincida necessariamente con un processo di convergenza nei redditi pro-capite. Quali sono le condizioni per riavviare il motore di questo obiettivo comunitario?
Tre criteri di convergenza
L’euro summit del 24 ottobre 2014 ha fissato l’obiettivo di sviluppare “concreti meccanismi per un piu forte coordinamento delle politiche economiche, per la convergenza e per la solidarietÃ¡”. Il termine convergenza economica presenta perÃ² diversi significati.
Alla base del trattato di Maastricht câera la convergenza nominale (definita i [...]
- Richard V. Reeves — The dangerous separation of the American upper middle class
by email@example.com (Mike Norman) in Mike Norman Economics, 2015-09-03 21:24:00 UTC
The American upper middle class is separating, slowly but surely, from the rest of society. This separation is most obvious in terms of income—where the top fifth have been prospering while the majority lags behind. But the separation is not just economic. Gaps are growing on a whole range of dimensions, including family structure, education, lifestyle, and geography. Indeed, these dimensions of advantage appear to be clustering more tightly together, each thereby amplifying the effect of the other. In a new series of Social Mobility Memos, we will examine the state of the American upper mid [...]
- 'The Dangerous Separation of the American Upper Middle Class'
by Mark Thoma in Economist's View, 2015-09-03 13:55:05 UTC
Richard Reeves at Brookings:
The dangerous separation of the American upper middle class : The American upper middle class is separating, slowly but surely, from the rest of society. This separation is most obvious in terms of income—where the top fifth have been prospering while the majority lags behind. But the separation is not just economic. Gaps are growing on a whole range of dimensions, including family structure, education, lifestyle, and geography. Indeed, these dimensions of advantage appear to be clustering more tightly together, each thereby amplifying the effect of the other.
- The Long-Term Effects of Protestantism
by Robin in Cherokee Gothic, 2015-09-03 13:46:43 UTC
I just came across a couple of interesting new working papers on the historical effects of Protestantism. Â The first builds on Robert Woodberry’s work on the effect of the printing press in Sub-Saharan Africa. In “ The LongTerm Effects of the Printing Press in SubSaharan Africa ,”Â Julia CageÂ andÂ Valeria Rueda findÂ “that, within regions located close to missions, proximity to a printing press significantly increases newspaper readership today” and that there is “a strong association between proximity to a printing press and contemporary economic development.”
Rossella Calvi and Federico M [...]