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Amol Agrawal

Amol Agrawal

I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

Articles by Amol Agrawal

Prof JR Varma explains his dissent in Oct-20 policy

2 days ago

RBI released the minutes of its Oct-20 policy. As this was the first policy under three new external members, the minutes were important. We knew Prof Varma has dissented on the accommodative stance. But what led to the dissent is explained in the minutes:
40. I have agonized a great deal about dissenting (in part) with a resolution on a narrow technicality when I am in agreement with the spirit of the resolution: am I making a mountain out of a molehill and creating unnecessary confusion? After prolonged deliberation, I have come to the conclusion that a dissent may be painful, but it is more consistent with the obligation of MPC members to express their views independently and candidly. Even when a disagreement is more philosophical than operative, it should not always be relegated

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Goldman Sachs pays many a fine…

2 days ago

Goldman Sachs has agreed that it played a key role in the 1MDB scandal in Malaysia.
In a globally coordinated resolution, GS to pay a record fine of USD 2.9 billion:
The Goldman Sachs Group Inc. (Goldman Sachs or the Company), a global financial institution headquartered in New York, New York, and Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia), its Malaysian subsidiary, have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions in fees.  Goldman Sachs

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IMF is short for It’s Mostly Fiscal..

2 days ago

Interesting piece by Christian Kopf (Head Fixed income at Union Investment):
When the International Monetary Fund was created in 1944, its main purpose was to manage imbalances in trade flows between member states. Its role has changed considerably since the liberalisation of capital flows and the subsequent collapse of the fixed exchange rate system. Over the past 50 years, the IMF has dedicated much of its attention to helping over-indebted countries put their finances in order. It has done so through emergency loans tied to fiscal policy conditions. Hence the long-running joke that the acronym ‘IMF’ is really short for ‘It’s mostly fiscal’. Fiscal policy is taking a central role in the management of the Covid-19 crisis in industrialised nations, albeit not in the way the IMF had

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Making It Big : Why Developing Countries Need More Large Firms

2 days ago

New World Bank report:
Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development.
It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their

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Digital Payment Transactions – Streamlining India’s QR Code infrastructure

2 days ago

RBI had formed a committee on Analysis of QR (Quick Response) Code which submitted its report in July.
Taking the reccos forward, RBI has decided to streamline the QR infra in India:
2. After examining the recommendations and the feedback received, the following has been decided:

The two interoperable QR codes in existence – UPI QR and Bharat QR – shall continue as at present.
Payment System Operators (PSOs) that use proprietary QR codes shall shift to one or more interoperable QR codes; the process of migration shall be completed by March 31, 2022.
No new proprietary QR codes shall henceforth be launched by any PSO for any payment transaction.
RBI shall continue a consultative process to standardise and improve interoperable QR codes, to enable beneficial features identified by the

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Unemployment Rate Benchmarks

2 days ago

Richard K. Crump, Christopher J. Nekarda, and Nicolas Petrosky-Nadeau in this Federal Reserve paper:
This paper discusses various concepts of unemployment rate benchmarks that are frequently used by policymakers for assessing the current state of the economy as it relates to the pursuit of both price stability and maximum employment. In particular, we propose two broad categories of unemployment rate benchmarks: (1) a longer-run unemployment rate expected to prevail after adjusting to business cycle shocks and (2) a stable-price unemployment rate tied to inflationary pressures. We describes how various existing measures used as benchmark rates fit within this taxonomy with the goal of facilitating the use of a common set of terms for assessments of the current state of the economy and

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Don’t take it for granted: the value of high-quality data and statistics for the ECB’s policymaking

2 days ago

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:

Data and statistics are indispensable inputs for decision-making by governments and public institutions. As a prime example of a data-driven institution, the ECB relies every day on data and statistics for analysing the economic development of the euro area, and the Governing Council takes monetary policy decisions after carefully examining a broad range of economic and financial

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Random portfolio rejigging of RBI deputy governors needs to stop

3 days ago

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.

This entry was posted on October 22, 2020 at 3:08 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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Summer internship at RBI (Last date: 31 Oct 2020)

3 days ago

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 applyEligible 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
SelectionThe Bank will select a maximum of 125 students for summer

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Plugging old piece: Auction and IPL cricket

4 days ago

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..

This entry was posted on October 21, 2020 at 5:09 pm and is filed under Economics – macro, micro etc, Cricket, Financial Markets/ Finance. You can follow any responses to this entry through the RSS 2.0 feed.
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Harshad Mehta’s equity markets vs ours

4 days ago

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

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Rebooting economy through financial market reforms

4 days ago

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.

This entry was posted on October 21, 2020 at 3:36 pm and is filed under Indian Economy/Financial Markets, Speech / Interviews. You can follow any responses to this entry through the RSS 2.0 feed.
You can

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The Great Depression, banking crises, and Keynes’ paradox of thrift

4 days ago

Victor Degorce and Eric Monnet in this voxeu research:

The surge in savings following the 2008-2009 Global Crisis and the recent pandemic have rekindled the interest of economists and policymakers in the paradox of thrift, formulated by Keynes in the 1930s. Subsequent research on the Great Depression of the 1930s, however, has not addressed the link between precautionary savings and growth. Using data on deposits in savings institutions of 22 countries, this column studies the fate of savings during the Great Depression and shows that Keynes’ intuition was right. Banking crises had an impact on economic growth not only through the direct lending channel, but also indirectly through an increase in precautionary savings. This bears important lessons for today.
….
How should governments

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The Stock Market–Real Economy “Disconnect”: A Closer Look

4 days ago

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

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100 years of Aligarh Muslim University

5 days ago

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.

This entry was posted on October 20, 2020 at 2:16 pm and is filed under Discussion, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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A proposal for an Asian digital common currency

5 days ago

Taiji Inui, Wataru Takahashi and Mamoru Ishida  in this voxeu piece:

Central bank digital currencies are currently being considered by many central banks around the world. This column advocates the introduction of an Asian digital common currency as a multilateral synthetic currency comparable to the euro. It argues that the benefits it would bring – such as a deepening cooperation within multilateral frameworks and the protection of the rights of small and medium-sized countries – are greater than the disadvantages of inefficiencies in multilateral frameworks. 
Some bit of history:
East Asia has a history of common currencies. One example is the wide circulation of Chinese coins throughout East Asia during the Middle Ages. At that time, trade in the sea flourished around China.

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Conversation with Amit Varma: Using The Discipline Of Economics To Rewire Cricketing Strategy and IPL

5 days ago

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

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In order to deconstruct banking, we begin with the term deposit. Do banks take ‘deposits’? No

6 days ago

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

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Scotland after Sterling..

6 days ago

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.

All kinds of exits happening and waiting to happen…

This entry was posted on October 19, 2020 at 12:40 pm and is filed under Central Banks / Monetary Policy, Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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Historical Data: Where to Find Them, How to Use Them

6 days ago

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

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Bank Capital and Monetary Policy Transmission in India

6 days ago

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 policyimpulses 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

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Banking troubles in India’s old private sector banks (with a slice of history)

8 days ago

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.

This entry was posted on October 17, 2020 at 10:18 am and is filed under Academic research & research papers, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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ECB and Federal Reserve monetary policy is more similar than they look…

9 days ago

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:

Let me now turn to the ECB’s strategic review, on which work has restarted. It is more extensive than the FOMC’s as it will cover,

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From hot air to cold hard facts: how financial markets are finally getting a grip on how to price climate risk and return

9 days ago

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, aseconomic activity has shifted away from travel and other fossil fuel-intensive sectors, and towardsonline commerce and technology (Chart 1);
– Green bonds also outperformed their conventional counterparts over that same period (Chart 2), andmade up a fifth of total European investment grade issuance in September alone. And companiessuch as VW and Daimler secured material reductions in financing costs (or ‘greeniums’) whenissuing their first green bonds, linked to the development of low-emission technologies;

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Gentle Reminder: Conversation on “The Long Road To A Cashless Society: Will Central Bank Digital Currency Finally Get Us There?”

9 days ago

Gentle reminder for the Conversation tomorrow with Mr B. Sambamurthy. Interested folks can register here.

This entry was posted on October 16, 2020 at 2:43 pm and is filed under Discussion, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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The lessons of IPL for economic transformation

9 days ago

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

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Money and legislation need to be adapted to digitalisation

9 days ago

Riksbank Governor Stefan Ingves in this article argues that legislation needs to change to ensure both Physical and Digital Kroner continue as currencies:
Money and how we make payments are changing. Not so very long ago, cash was totally dominant, Now we have money in accounts and we make payments in the form of transfers between accounts. This development has many benefits. But if we do not adapt our money and legislation, it will also entail risks and potential losses. Moreover, current legislation and perhaps also parts of our way of thinking with regard to money and payments are still adapted to a time when everything was on paper.
In the Economic Commentary “Future money and payments”, Stefan Ingves presents his views on what needs to be done to ensure the Riksbank can continue

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RBI announces OMO auction schedule for State Development Loans

9 days ago

Following up with its decision to do OMOs in SDLs, RBI has announced the auction schedule as well. 15 State SDLs to be under OMO:
As announced in the Statement on Developmental and Regulatory Policies dated October 09, 2020, the Reserve Bank will conduct Open Market Operations (OMOs) in State Developments Loans (SDLs). It has been decided to conduct a purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of ₹10,000 crores on October 22, 2020, keeping in view that this is the first ever OMO purchase of SDLs. Depending on market response, the size of the auctions may be enhanced in the subsequent auctions.
2. Accordingly, RBI will purchase the SDLs given in Annex-1 through a multi-security auction using the multiple price method. There is no security-wise

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Banking across borders: Are Chinese banks different?

10 days ago

Eugenio Cerutti, Catherine Koch and Swapan-Kumar Pradhan in this new BIS WP:
We explore the global footprint of Chinese banks and compare it with that of other bank nationalities. Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs). Their global reach resembles that of banks from advanced economies (AEs). We take a nationality approach as international banks, and Chinese banks in particular, grant a substantial share of their cross-border loans from affiliates located abroad. But differences remain.
Using a gravity model with a novel measure of distance capturing the role of foreign affiliates across all bank nationalities, we find that larger distances deter crossborder bank lending to EMDEs more than

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A digital euro for the digital era

10 days ago

ECB has published a report on Digital Euro.
Fabio Panetta of ECB in forward to the report:
We already have an array of choices when it comes to retail payments: central bank money in the form of cash, commercial bank money – for example, digital bank deposits – and non-bank digital money (such as payment cards). What we do not have is a digital currency that is issued by the central bank and that we can use for all our daily transactions, including in e-commerce.
A digital euro would fill this gap: it would be an electronic form of central bank money accessible to all citizens and firms – in other words, a digital equivalent of euro banknotes. It would provide costless access to a simple, risk-free and trusted digital means of payment, accepted throughout the euro area. In the digital

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