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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

RBI turns 85!

1 day ago

Starting on April 1 (Fool’s day!) 1935, RBI completes 85 years today.
Aunindyo Chakravarty has a piece on the anniversary in the Quint:
During the First World War, India spent more than 8 per cent of its GDP to finance Britain’s war effort. About half of that money went as direct cash contribution, a fifth went in low-interest loans and the remaining went in kind. This massive drain should have caused inflation, raised interest rates and weakened the rupee. But, the British Empire managed it through price controls, interest rate ceilings and by not letting the rupee-pound exchange rate budge, till the war was over.
This was fine as long as British officials in India were gaining as well. But, after the war ended, the Rupee was allowed to weaken and that meant the money officials of

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As Andhra Bank Fades Into the Pages of History, an Emotional Sting for Telugu States

1 day ago

Today, 6 public sector banks were amalgamated with 4 banks:
Union Bank amalgamates Andhra Bank and Corporation Bank
Indian Bank amalgamates Allahabad Bank
Canara Bank amalgamates Syndicate Bank
PNB amalgamates United Bank and OBC
Gali Nagaraja pays tribute to Andhra Bank in this Wire piece:

Andhra Bank, a premier public sector bank with deep roots in the erstwhile undivided Andhra Pradesh, is all set to vanish from public view from April 1, in a move that draws the curtains on a significant chapter of regional history.
The bank was founded by Bhogaraju Pattabhi Sitaramayya, a veteran freedom fighter and close follower of Mahatma Gandhi on November 23, 1923. Its beginnings were modest, with a single branch, and later grew by leaps and bounds over the past nine decades.
The state-run

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Why did not stock markets decline during the Spanish Flu 1918?

1 day ago

Prof Robert Shiller in this Proj Synd article says there are two pandemics at work: Covid 19 and the economic crisis. One would imagine that financial anxiety is a direct result of Covid19 led economic crisis. That is true but financial anxiety on its own can create problems:
Many people seem to assume that the financial anxiety is nothing more than a direct byproduct of the COVID-19 crisis – a perfectly logical reaction to the disease pandemic. But anxiety is not perfectly logical. The pandemic of financial anxiety, spreading through panicked reaction to price drops and changing narratives, has a life of its own.
The effects financial anxiety has on the stock market may be mediated by a phenomenon that psychologist Paul Slovic of the University of Oregon and his colleagues call the

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What if a digital virus hits our payment systems?

2 days ago

My new article on moneycontrol.
I argue that we should go slow on the digital payment push. The entire system could just break down due to a computer virus. Lessons from Covid19 should be learnt.

This entry was posted on April 1, 2020 at 10:34 am and is filed under 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.
You can leave a response, or trackback from your own site.

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RBI DG Mr. N.S. Vishwanathan retires 3 months before his tenure

2 days ago

As I wrote this post on BP Kanungo’s extension, one got this news late in the evening:
Consequent upon the demitting of office by Shri N.S. Vishwanathan, Deputy Governor, the portfolios of the Deputy Governors would be as follows with effect from April 1, 2020..
Well, this is totally not needed. I had actually written saying Mr NSV is serving a one year extension and his term was to end in July-2020. Thus, we should either find a replacement by now or give him another extension given the times.  On the contrary, Mr NSV has demitted office  three months ahead. We do not know whether he did this by himself or there was some order.
We just take all these appointments with so casually…

This entry was posted on April 1, 2020 at 10:07 am

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WMA limit for H1 2020-21 at Rs 1.2 lakh crore: highest so far

2 days ago

The virus is stretching most things under the sun.
Just before the start of the new financial year, the RBI along with government announces WMA (Ways and Means Advances) limits. Anything over the limit becomes an overdraft.  The limit for H1 2020-21 is placed at Rs 1.2 lakh crore:

It has been decided, in consultation with the Government of India, that the limits for Ways and Means Advances (WMA) for the first half of the financial year 2020-21 (April 2020 to September 2020) will be ₹ 1,20,000 crore.
The Reserve Bank may trigger fresh floatation of market loans when the Government of India utilises 75 per cent of the WMA limit.
The Reserve Bank retains the flexibility to revise the limit at any time, in consultation with the Government of India, taking into consideration the

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Beware viral enabling Acts: How the virus could lead to dictating governments..

2 days ago

Prof Jan-Werner Mueller of Princeton University in this piece:
Emergencies have two effects: in democratic states, they concentrate power in the executive. Leaders claiming new powers can usually count on citizens’ support. Even US President Donald Trump, whose performance has been disastrous from the start, is benefiting from a rally-around-the-flag dynamic.
The other effect is more obviously pernicious: in countries already threatened with what some social scientists are now calling “autocratization” (the reverse of democratization), leaders are using the COVID-19 crisis to do away with the remaining obstacles to their permanent rule.
Russian President Vladimir Putin is in the process of making himself president for life. Israeli Prime Minister Binyamin Netanyahu is weakening the

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Shri B. P. Kanungo re-appointed as RBI Deputy Governor

2 days ago

I had argued earlier to give a fixed, long-term and non-renewable contract for RBI Governors and DGs.
The government recently reappointed current RBI DG BP Kanungo whose three year term was to end on 2-April 2020.

The Central Government has re-appointed Shri B. P. Kanungo as Deputy Governor, Reserve Bank of India for a further period of one year with effect from April 3, 2020, or until further orders, whichever is earlier, upon completion of his existing term on April 2, 2020.
I can still understand the reappointment given such depressing times and need for continuity. But the highlighted bit is just not needed. Why use such lega; language during these times. On one hand the extension is merely for an year and on other you are telling the candidate that your tenure could be cut short

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The Monetary Helicopters Are Coming: Friedman’s or MMT’s?

3 days ago

Well, well, well. Just as I had recently written that whether we like it or not, most central banks would be be following Modern Monetary Theory.
Willem Buiter in Proj Synd piece writes:

With the COVID-19 pandemic intensifying, the United States has just adopted a $2 trillion economic-rescue package (equal to 9.2% of 2019 GDP). The legislation follows unprecedented actions by the US Federal Reserve, which will engage in open-ended quantitative easing, and has introduced new mechanisms to backstop businesses and keep credit flowing.
Much of the US response will come in the form of “helicopter money,” an application of Modern Monetary Theory (MMT) in which the central bank finances fiscal stimulus by purchasing government debt issued to finance tax cuts or public spending increases.

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2008 crisis was a endogenous shock whereas Covid19 is an exogenous one`

4 days ago

Jon Danielsson, Robert Macrae, Dimitri Vayanos, Jean-Pierre Zigrand in this piece point to differences between the two shocks:
Comparison between the coronavirus crisis and the global systemic crisis of 2008 is inevitable, but seen through the lens of exogenous and endogenous risk they are quite different. 
2008 was a global systemic financial crisis fuelled by the endogenous interactions of market participants. The forces of the crisis fed on deep weaknesses in the financial system that had built up out of sight.
COVID-19 is an exogenous shock to the economy, and the question is whether there are sufficient latent weaknesses for it to prey on. We think this unlikely. Instead, the locus of the problem lies outside the financial industry, in a real economy in which shops, services and

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The road to funding in Australian Dollars..

4 days ago

The idea of original sin has again come to the fore. The original sin means most of the emerging nations cannot issue their bonds in their own currencies. This is because of several factors like lack of macro fundas, lack of deep markets and so on. This leads to problems as most countries then issue bonds in foreign currencies and when you have a Covid19 kind of crisis and currency depreciates, the liabilities suddenly balloon leading to defaults.
Here is an interesting research by Elliott James and Christian Vallence on Australia’s journey to issuing most of its overseas bonds in AU Dollar:
A key feature of Australia’s financial system is that nearly all liabilities are denominated in, or hedged into, Australian dollars. A pre-condition for this state of affairs is that investors are

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RBI’s “whatever is necessary” moment arrives…

7 days ago

What a tough time Mr Shaktikanta Das is having! He has been dealing with so many crises ever since his appointment in Dec-2018. But the latest one of dealing with Covid19 crisis will surpass all challenges.
There was criticism that RBI has not cut policy rates where other central banks have thrown whatever possible at the crisis. As per RBI Act, only the MPC can take the interest rate decision. The Act specifies the following:
45ZI. Meetings of Monetary Policy Committee.(1) The Bank shall organise at least four meetings of the Monetary Policy Committee in ayear.(2) The meeting schedule of the Monetary Policy Committee for a year shall be published by the Bank at least one week before the first meeting in that year.(3) The meeting schedule may be changed only––(a) by way of a decision

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Europe is at last channeling Alexander Hamilton..

7 days ago

Jacob Funk Kirkegaard of PIIE in this piece says Europe has finally found its Hamilton. Hamilton had rescued US in 1790 and Europe is doing the same. Just that Lagarde as a central bank head has to play the role:

Europe’s collective and  forceful intervention to rescue Italy and other euro area countries at economic risk from the coronavirus (COVID-19) plague has been unprecedented in more ways than one. The €750 billion ($810 billion) to address the pandemic was itself unparalleled, comparable to current estimates of the US rescue.[1] But with its de facto open-ended Pandemic Emergency Purchase Program (PEPP), the European Central Bank (ECB) has brought the continent closer to political and financial unity than was previously imaginable, rescuing a dream that has receded in the last

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Will the pandemic crisis lead to multidisciplinary economics?

7 days ago

Mohammed El Erian in Proj Sync piece:
Given how extensive government interventions are likely to be this time around, it is critical that policymakers also recognize the limits of their interventions. No tax rebate, low-interest loan, or cheap mortgage refinancing will convince people to resume normal economic activity if they still fear for their own health. Besides, as long as the public-health emphasis is on social distancing as a means of quashing community transmission, governments won’t want people venturing out anyway.
All the issues raised above are ripe for more economic research. In pursuing these avenues of inquiry, many researchers in advanced economies will find themselves inevitably rubbing up against development economics – from crisis management and market failures to

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Will there be a uniform currency in a cashless economy?

8 days ago

Walter Engert and Ben S. C. Fung of Bank of Canada in this short paper
Is cash necessary for a uniform currency? Consider the following transaction: a person could exchange a bank deposit for cash at face value and then deposit that cash at face value in another bank, thereby forcing a deposit transfer at face value via cash.1 In this way, cash could be used to establish a fixed one-to-one exchange rate between different bank deposit monies. In the absence of cash, obviously, it would not be possible to conduct this kind of transaction. So, without cash, would our uniform currency break down? In this note, we consider whether a uniform Canadian currency would continue in a cashless economy.
The next section provides some historical background, briefly recounting the experience of

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The perils of compounding come to fore during the Covid19 crisis

9 days ago

Economists live the concept of compounding especially for growth and finance matters. If your economy grows by 5% for 5 years, the overall growth is not 25% but 31.25% as one also has to multiply the incremental growth.
Prof Gernot Wagner who teaches climate economics at New York University says compounding runs both ways. Just like we look at its positives we should be weary of its negatives as well:

With both climate change and COVID-19, the real problem is not absolute numbers (whether greenhouse-gas emissions or infections), but rather the rate of change. It is bad enough that average global temperatures have risen by 1°C (almost 2°F) above pre-industrial levels. But warming of 2°, 3°, or many more degrees would be profoundly worse.
In pandemics, too, even a very small difference

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South African Reserve Bank warns the public that it is not withdrawing banknotes and coin

9 days ago

Trust human beings to do anything. When humanity is facing one of its worst crisis, we still see some people tying to find a way to cheat people.
See this case in South Africa:
The South African Reserve Bank (SARB) has been made aware of fake news that involve a scam claiming that it is “recalling” money from the public. It is believed that criminal elements are visiting the homes of members of the public telling them to hand over banknotes in their possession because the banknotes have been contaminated with the Corona virus. These criminal elements carry fake SARB identification and provide false receipts in lieu of the banknotes “collected” which they purport can be collected from any of the banks.
The SARB has neither withdrawn any banknotes or coins nor issued any instruction to

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A Greater Depression?

9 days ago

Dr Doom Nouriel Roubini in the Proj Synd piece:

With the COVID-19 pandemic still spiraling out of control, the best economic outcome that anyone can hope for is a recession deeper than that following the 2008 financial crisis. But given the flailing policy response so far, the chances of a far worse outcome are increasing by the day.
…..
Unless the pandemic is stopped, economies and markets around the world will continue their free fall. But even if the pandemic is more or less contained, overall growth still might not return by the end of 2020. After all, by then, another virus season is very likely to start with new mutations; therapeutic interventions that many are counting on may turn out to be less effective than hoped. So, economies will contract again and markets will crash

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Could MMT rescue us from the Covid19 crisis?

11 days ago

My new piece in MC.
I must admit am no expert on MMT. This was just an attempt to understand what MMT folks are saying on the crisis and whether their ideas deserve a hearing this time around.

This entry was posted on March 23, 2020 at 2:39 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc, Financial Markets/ Finance. You can follow any responses to this entry through the RSS 2.0 feed.
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Pandemics and social capital: From the Spanish flu of 1918-19 to COVID-19

11 days ago

Research on covid19 is flowing thick and fast. This piece on voxeu says the impact on social capital/trust is going to last much longer than imagined. (by Arnstein Aassve, Guido Alfani, Francesco Gandolfi, Marco Le Moglie)

Long-term effects of a pandemic go well beyond the demographic losses. This column uses a representative survey of the US population in the aftermath of the Spanish flu to evaluate the permanent consequences of the pandemic on individual behaviour. It finds that social disruption during the period led to long-term deterioration in social trust, which had important economic consequences. The findings highlight the importance of a strong response to the COVID-19 pandemic. 

This entry was posted on March 23,

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Covid19: What would Roosevelt do? What would Keynes say?

11 days ago

Prof Pavlina R. Tchernev of Bard College in this Proj Synd piece wonders what would FDR do if faced with the Covid19 crisis?

The US government should pull out all the stops in mitigating the economic fallout from COVID-19, not just by disbursing cash to all households, but also by implementing a federal job guarantee and many other long-overdue policies. After all, for a self-financing government, money is no object.

Prof Robert Skiledesky asks What will Keynes say:

One hopes that governments will not have to choose between higher prices and increased taxes to finance efforts to combat the COVID-19 pandemic. But it’s not too early for policymakers to start thinking about how to pay for this particular war.

Mind is buzzing with all kinds of possibilities…

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Essay Competition: Going viral – how coronavirus affects the world economy?

12 days ago

Meghnad Desai Academy of Economics is organising a competition for graduating students on the topic: Going viral – how coronavirus affects the world economy?
Pass on the word to interested students. Last date for submission is 31 March 2020.

This entry was posted on March 21, 2020 at 6:13 pm and is filed under Economics – macro, micro etc. You can follow any responses to this entry through the RSS 2.0 feed.
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Taking selfies with brands..

13 days ago

Interesting paper by Reto Hofstetter, Gabriela Kunath, and Leslie K. John:
Increasingly, consumers are taking self-photos and marketers, eager to capitalize on this trend, have been asking consumers to take self-photos with brands (i.e., brand selfies). We suggest that consumer compliance with such requests sparks a self-inferential process that leads the consumer to feel connected to the brand (e.g., “If I took the brand selfie, I must feel connected to this brand”), increasing brand preference. Eight studies support this account. In a dataset of 283,140 user reviews from Yelp, study 1 documented a positive association between a reviewer’s propensity to take a brand selfie and the star rating he gives the restaurant. Seven experiments point to causality.
Participants randomized to

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Comparing Covid19 to GFC 2008 is not approporiate..

13 days ago

Stephen Roach in this Proj Synd piece:

During the GFC, unprecedented actions by the Fed were both appropriate and decisive in addressing the primary source of the shock: a devastating blow to the financial system. In the COVID-19 crisis, the Fed cannot play the same role, because it is addressing a secondary shock: the financial repercussions of the primary shock to the real economy.
Instead, the Fed’s response must be seen as necessary, but not sufficient, to address the COVID-19 crisis. It is a delicate role, to say the least.
The Fed’s policymaking at moments of crisis must always be managed judiciously. As the crisis intensified, it was certainly in a tough place. However, its rare Sunday announcement of emergency actions on March 15, just two days before a regularly scheduled

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Popular governments may be a sign of future financial crises

13 days ago

A post on LSE blog. Summarises this paper which says popular governments can be a sign of future financial crisis mainly in emerging economies:
One well-documented predictor of financial crises are credit booms and capital flow bonanzas. Indeed, many banking and current account crises (sudden stops) have been preceded by unusual expansion of domestic and/or external credit (see for example Reinhart and Reinhart 2008, Forbes and Warncock 2012, Schularick and Taylor 2012, Mendoza and Terrones 2012). To the best of our knowledge, however, not much research has focused on early warning indicators outside the realm of economic variables.
In this post, which is based on our research in Herrera et al. (2020), we discuss the role of political bonanzas (large increases of government

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The Transportation‐​Communication Revolution: 50 Years of Dramatic Change in Economic Development

15 days ago

Paper in Cato Winter 2020 Journal:
The Industrial Revolution transformed subsistence living into sustained growth, but only for about 15 percent of the world’s population. Throughout the rest of the world, change was minimal. In 1950, the real per capita income for developing countries outside of Africa was slightly less than $4 per day, approximately the same as that of the high‐​income, developed countries at the onset of the Industrial Revolution. But income levels in the developing world have increased dramatically during the past half century, particularly for the 70 percent of the world’s population living in less geographically disadvantaged developing countries.
The huge reductions in transportation and communication costs over the past half century provided the foundation for

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Yes Bank crisis: Why is a Financial Redressal Agency missing when it is needed most?

15 days ago

My new piece in moneycontrol.
The piece reflects on how AT1 bonds reached retail investors and they have nowhere to go to file their complaints. The FSLRC had argued for a Financial Redressal Agency and there was a Task Force which advocated starting FRA by late 2016/early 2017. However, the plan was shelved only for retial investors to face the heat in Yes Bank case.
I also connect the piece to Elizabeth Warren..:-)

This entry was posted on March 19, 2020 at 11:22 am and is filed under Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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Change in Yes Bank shareholding pattern

15 days ago

I have been wondering how Yes Bank shareholder pattern will look like. In Dec-2019, the shareholding pattern was like this. Yday, the Yes Bank released a new shareholding pattern
This is how it is:

No. of shareholders
No. of fully paid up equity shares held In Rs crore)
% ownership

Dec-19
Mar-20
Dec-19
Mar-20
Dec-19
Mar-20
(A) Promoter & Promoter Group
3
3
21.2
21.0
8.33
1.67
(B) Public
1663707
1790312
233.8
1234.0
91.67
98.33
ICICI Bank

 0.012
100.0
0.005
7.97
SBI

605.0
0.00
48.21
Axis Bank

60.0
0.00
4.78
Federal Bank

30.0
0.00
2.39
IDFC First Bank

25.0
0.00
1.99
Bandhan Bank

30.0
0.00
2.39
(C1) Shares underlying DRs

(C2) Shares held by Employee Trust

(C) Non Promoter-Non Public

Grand Total
1663710
1790315
255.0
1255.0
100
100

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Central banks’ “whatever it takes” moment: Will it help?

16 days ago

Central banks are again trying to throw the sink at the financial markets. They are searching for  a comment similar to Mario Draghi’s “Whatever it takes” which helped save Euro (atleast that is what we are told).
Some comments on the central bank actions:
  Willem Buiter on the recent Federal Reserve action:

The US Federal Reserve’s surprise weekend announcement of a large interest-rate cut, renewed quantitative easing, and other expansionary measures is a welcome response to the COVID-19 pandemic. But as markets were quick to note, monetary policy cannot save us from this crisis.

Ananth Nageswaran on his blog says monetary solution is the problem:

The handling of Covid-19 and the debt epidemic are studies in contrast. The attempt with the former has been to isolate, contain and

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Post Yes Bank: Increasing concern for small private banks

16 days ago

This news in Mint on how deposits have declined in one of the small private sector banks in the last one week.
The moratorium on Yes Bank is going to be lifted today at 6 PM. On opening Yes Bank website, pop comes this message:

We will find out soon how good is this new foundation. One of the leading business TV journalists appeals to Yes bank depositors and not panic. Moody’s has also upgraded the bank by a notch which should provide some relief.
Indian banking gets murkier. Private bankers who once laughed at miseries of public sector bankers would be getting a taste of their own medicine now.

This entry was posted on March 18, 2020 at 9:18 am and is filed under Discussion, Indian Economy/Financial Markets. You can follow

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