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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 communications: Do you understand what I say?

9 days ago

My new piece on moneycontrol:
Central bank communications have come a long way from being an ignored tool to an important one of monetary policy. RBI clearly can do better 

This entry was posted on May 9, 2022 at 4:28 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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Made in Russia? Assessing Russia’s potential for import substitution

9 days ago

Heli Simola of Bank of Finland in this paper analyses Russian choices amidst stiff sanctions. Can Russia rely on import substitution?:
Russia’s brutal military aggression on Ukraine has led to extensive economic sanctions by Western countries and the withdrawal of many foreign companies from Russian markets. The isolation of Russia from the international community has substantially restricted its access to advanced technologies and eroded the country’s economic growth potential. Our analysis suggests that Russia has fairly limited possibilities for import substitution in high-technology sectors. China, which could play a key role as an alternative source for inputs, has seen its share of Russian imports, including high-tech inputs, increase substantially in recent years. The extent to

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A tale of two global monetary policies: Federal Reserve and ECB

9 days ago

Silvia Miranda-Agrippino and Tsvetelina Nenova in this Bank of England WP:
We compare the macroeconomic and financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers are also powerful. Fed and ECB monetary policies propagate internationally through the same channels – trade and risk-taking – but the magnitude of ECB spillovers is smaller. We postulate that the relative importance of the euro and the US dollar in the international financial system can help to explain such asymmetries, and produce tentative evidence that links the

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Responsibility for Emissions: the Case of the Swiss National Bank’s Foreign Exchange Reserves and the Norwegian Oil Fund

12 days ago

Interesting Banque de France paper by Naef Alain, Klooster Jens van’t compares the two public investment companies: Norway’s sovereign fund and Switzerland’s foreign exchange reserve:

Should public investors take responsibility for the greenhouse gas emissions of the firms that they invest in? This paper answers this question through a comparative study of two very different investors: the Swiss National Bank (SNB)’s foreign exchange portfolio and the world’s largest sovereign wealth fund, the Norges Bank Investment Management (NBIM), the Norwegian sovereign wealth fund.
Although both funds target positive returns, the SNB presents itself as a market neutral investor, whereas the NBIM is one of the world’s leading public ethical investment vehicles.
Despite having a carbon

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Assassination attempt on Myanmar Central Bank Deputy Governor

12 days ago

Slightly old news (Apr-22) from Myannmar:
The deputy governor of Myanmar’s Central Bank is alive and recuperating at a military hospital in the country’s commercial capital Yangon, junta officials said Tuesday, dispelling reports that she had died after being shot last weekend.
Than Than Swe was shot by unknown assailants at her apartment complex in Yangon’s Bahan township on April 7 amid a public outcry over a new directive ordering the sale of all U.S. dollars and other foreign currency at a fixed rate to licensed banks. Initial reports by the Associated Press and domestic media suggested that the bank official had died at the hospital from injuries she sustained in the shooting, citing sources close to the deputy governor and a local official. 
On Tuesday, junta Deputy Information

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Big techs, QR code payments and financial inclusion

12 days ago

Thorsten Beck, Leonardo Gambacorta, Yiping Huang, Zhenhua Li and Han Qiu in this BIS paper point to spillovers from digital payment footprints:
Using a unique dataset of around half a million Chinese firms that use a QR code-based mobile payment system, we find that (i) the creation of a digital payment footprint allows firms to access credit provided by the same big tech company; (ii) transaction data generated via QR code generate spillover effects on access to bank credit; and (iii) there are positive effects of access to big tech credit on sales, including during the Covid-19 shock. The findings suggest that access to innovative payment methods helps micro firms build up credit history, and that using big tech credit can ease access to bank credit.

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Headlines from the Heartland: Reinventing the Hindi Public Sphere

13 days ago

I came across this gem of a book titled – Headlines from the Heartland: Reinventing the Hindi Public Sphere. The book is written by eminent journalist Sevanti Ninan. 
The book takes one through evolution of Hindi newspapers in the Hindi Heartland and how they shaped the public sphere .
In the 1990s a newspaper revolution began blowing across northern and central India. In these Hindi-speaking states, when literacy levels rose, communications expanded, and purchasing power climbed, Hindi newspapers followed-picking up readers in small towns and villages. Even while these newspapers surged to the top of national readership charts, they localised furiously in the race for readers. But in this universe of local news, questions arose about what localisation was doing to regional identity

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Are major advanced economies on the verge of a wage-price spiral?

13 days ago

Frederic Boissay, Fiorella De Fiore, Deniz Igan, Albert Pierres Tejada and Daniel Rees in this BIS Bulletin article:
Inflation has returned, reaching levels not seen in decades. Whether inflation enters a persistently higher regime will depend on labour market developments, and on whether a wage-price spiral emerges.
To date, evidence for a broad acceleration in wage growth is mixed. Wage growth has picked up significantly in the United States, but remains moderate in most other advanced economies, despite tentative signs of a renewed sensitivity of wages to inflation in some segments of the labour market and a pickup in inflation expectations.
But extrapolating behaviour from low-inflation periods is problematic. If inflation remains high, households may ask for higher wages to make

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Warming Arctic to prompt new trade routes and new cold war

13 days ago

William Coningsby-Brown in this OMFIF article:
The Arctic is warming faster than anywhere else on the planet and could be free of summer sea ice by 2035. This would open up a region with vast natural resources and unrealised trade routes.
Trans-Arctic trade routes create opportunities for the control of new global shipping lanes, including the northern sea route, northwest passage and northeast passage (see map). The NSR has the most potential, shortening the traditional Suez canal route between northern Europe and China by 40%. With sea ice already retreating, the route has been tested not only in the warmer months, around September, when the sea ice is at its minimum. In the summer of 2018, Danish shipping company Maersk sent a container freighter through for the first time, while

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The Bank of Canada (and other central banks) : A matter of trust

13 days ago

RBI raised its policy repo rate by 40 bps yesterday. The policy decision was a major surprise as it came outside of regular policy meeting. RBI typically announces its monetary policy every 2 months. The last policy was in April-2022 where the RBI preferred to keep polity rates unchanged despite obvious signs of rising inflation across the world and India too.  A week later, CPI inflation reading was at 6.9% above the upper band of inflation target of 6%. WPI inflation has been running in double digits for ages now.
This bit from RBI’s resolution was also confusing:
All members, namely, Dr. Shashanka Bhide, Dr. Ashima Goyal, Prof. Jayanth R. Varma, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri Shaktikanta Das unanimously voted to remain accommodative while focusing on

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Blockchain economics and a new blockchain trilemma

14 days ago

Joseph Abadi and Markus Brunnermeier in this Philadelphia WP discuss blockchain economics and introduce a new trinity:
We develop an economic theory to study the design of blockchain record-keeping protocols. Our main result characterizes the fundamental tradeoffs that arise when record-keepers must be provided with incentives to behave honestly.
The fundamental problem in digital record-keeping is establishing consensus on an update to a ledger, e.g., a payment. Consensus must be achieved in the presence of faults—situations in which some computers are offline or fail to function appropriately. Traditional centralizedrecord-keeping systems rely on trust in a single entity to achieve consensus.
Blockchains decentralize record-keeping, dispensing with the need for trust in a single

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The Custodian of Trust: A Banker’s Memoir

14 days ago

I just finished reading former SBI Chairman Rajnish Kumar’s memoir –  The Custodian of Trust: A Banker’s Memoir. The memoir has been in the reading queue ever since its launch in Oct-2021. I only got to read it now.
The memoir reads like a breeze almost like a novel. The memoir’s format is also different. Typically, any such memoir starts with the personal journey, followed by joining the organisation and then the top. Kumar mixes things and divided the book in three parts.
Part I of the the book he discusses some key banking issues like Jet Airways & NPA problems. Kumar is quite frank and honest on some of the issues facing the banking sector. This will be a surprise as most would think as a SBI chair one would be diplomatic and not say much.
Part II lists key contributions as SBI

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Insolvent Sri Lanka should consider swapping its central bank with a currency board

14 days ago

Andy Mukherjee in this interesting article:

What was good for Sri Lanka under British colonial rule 75 years ago may be worth a try again. Or at least that’s what Mark Mobius, the former emerging markets guru at Franklin Templeton Investments, seems to be suggesting. To regain the confidence of investors, the bankrupt Indian Ocean island could consider swapping its central bank with a currency board, he says.

Mobius has a point. A central bank with discretionary power over domestic interest rates wields enormous power, but not all can exercise it responsibly. If powerful politicians — like Sri Lanka’s President Gotabaya Rajapaksa and his brothers — are going to wreck fiscal management with disastrous tax cuts and ruin agriculture with a ban on fertilizers, and if the monetary

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The wild west of crypto finance: New subprime crisis in making?

20 days ago

Fabio Panetta of ECB in this speech compares crypto mania with the wild west and gold rush:
170 years ago Americans pushed westward across the frontier to seek their fortune in the gold rush. Greed and lawlessness turned this promised land into the Wild West, where the few exploited the dream of the many.
Fast-forward a century and a half and, amid the global financial crisis, growing distrust of banks, coupled with technological innovation, gave rise to a new dream – a digital gold rush beyond state control.
Satoshi Nakamoto – or rather the software developers using that pseudonym – created the source code of what they thought could be decentralised digital cash. Their 2008 white paper[1] shows a great fascination with technology, notably cryptography, but not necessarily an in-depth

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Economic inequality and public trust in the European Central Bank

20 days ago

Stephanie Bergbauer, Alessandro Giovannini and Nils Hernborg in the ECB research bulletin discuss linkages between rising ineuality and central bank trust:
This article explores the relationship between economic inequalities and public trust in the ECB and other European institutions. Drawing on data from the ECB’s new Consumer Expectations Survey and the Standard Eurobarometer, it analyses the relationship between different forms of economic inequality, perceptions of inequality and public trust in the ECB and other EU institutions in the euro area over the period 1999-2020 and in the context of the COVID-19 crisis. 
Findings:

Income and wealth inequality have risen in many advanced economies over recent decades and the pandemic may further increase existing economic

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Comparing Participation in Formal Financial Services across Two Nationally Representative Surveys: CPHS vs. AIDIS

21 days ago

Dvara Foundation researchers (Niyati Agarwal, Rakshith S. Ponnathpur & Sahana Seetharaman) compare the findings of the two surveys:
To summarise the findings, we find numbers on bank account ownership as well as incidence of indebtedness to be comparable across both the surveys. However, CPHS reports significantly higher participation in other formal financial assets like post-office savings, pension/PF accounts, and life and health insurance, compared to AIDIS. Whether this is due to any inherent limitation of the CPHS sampling strategy as critiqued by Jean Dreze and Anmol Somanchi merits further investigation.
We hope this comparison enables survey designers and researchers to deliberate on what can make both CPHS and AIDIS richer sources of information on Indian households than

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Economists want to see changes to their peer review system. Let’s do something about it.

22 days ago

Gary Charness, Anna Dreber, Daniel Evans, Adam Gill and Severine Toussaert have surveyed 1400 economists on peer review research system. They summarise findings in this voxeu research:

Peer review is central to the evaluation of research, but surprisingly little is known about its inner workings. This column presents the results of a survey of over 1,400 economists asking about their experiences with the system. The findings suggest that there are opportunities for improvement in the allocation and production of referee reports, as well as in the length of the process. The authors consider an assortment of proposals to address these issues, some of which command broad support from our respondents.

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Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador

23 days ago

Fernando E. Alvarez, David Argente & Diana Van Patten study the bitcoin experiment in El Salvador:
This paper studies the potential of a cryptocurrency to become a medium of exchange. We use evidence from a natural experiment: In September 2021, El Salvador became the first country in the world to make bitcoin legal tender, and all economic agents were required to accept bitcoin for all payments.
The Salvadorean government also launched an app, “Chivo Wallet,” which allowed users to digitally trade both bitcoin and dollars, and gave major incentives to download it.
We conduct a representative national face-to-face survey to obtain information on bitcoin’s usage and effects.
Leveraging this data, we document how, despite the government’s “big push” and a large fraction of people

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IMF statement on Sri Lanka and Pakistan

23 days ago

IMF released statements on Sri Lanka and Pakistan economies.  The policymakers from these two economies have met IMF for financial support and aid.
Most of the South Asian economies are facing a crisis. My article in moneycontrol on what South Asian economies can learn from South East Asian counterparts which faced a major crisis 25 years ago.

This entry was posted on April 25, 2022 at 1:56 pm and is filed under Academic research & research papers, Economics – macro, micro etc. You can follow any responses to this entry through the RSS 2.0 feed.
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25 years of South East Asian crisis: Is South Asia following suit?

25 days ago

Until 1997, the South East Asian economies were called tigers for their high growth  and potential. However fortunes soon turned as a massive economic crisis rocked the region in July-1997.
25 years later, another Asian region – South Asia – is facing an economic crisis.
My piece in moneycontrol on the lessons South Asian economies can learn from SE Asian crisis.

This entry was posted on April 23, 2022 at 11:18 am 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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World order may fragment following Ukraine conflict and new cold war

26 days ago

Lord Meghnad Desai in this OMFIF article says possibility of a nuclear weapons in Ukraine war is rising:

Countries are pretending that they will hold Russian President Vladimir Putin responsible for war crimes, but when and how? Unless Russia is defeated and surrenders with Putin still alive, there is no way he can be tried. Before such a defeat, he can unleash nuclear weapons and no doubt will. Nato will watch in its pristine purity as a non-combatant but that will not save Ukraine nor defeat Russia. US President Joe Biden may huff and puff, but he is unwilling to blow Putin’s house down.
So, we are likely to see the Russia-Ukraine war end with nuclear weapons being used. This would spread radiation across Europe. No one is openly talking about this possibility. Following the

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As Russia-Ukraine war rages on, remembering Andha Yug by Dharamvir Bharti

26 days ago

It is so sad and tragic to see pictures/videos of Russia-Ukraine war killing hapless people and spreading misery.
The war images made me remember the landmark play – Andha Yug – by Dharamvir Bharti. The play is based on the aftermath of the Mahabharata War.  Despite different geographies and contexts, the main lesson that wars should be avoided at all costs is not lost. Yet humans find and invent reasons to fight wars.
One can even watch the play on youtube.

This entry was posted on April 22, 2022 at 2:07 pm and is filed under Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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Increased work from home poses risk for commercial real estate and financial stability

26 days ago

Gustav Alfelt, Niclas Olsén Ingefeldt and Martin Regnér in this Riksbank (Sweden Central Bank) research point how increased work for home will lead to decline in demand for commercial real estate. The decline in demand will in turn pose risks towards financial stability as banks give large loans to this sector:

Companies in the commercial real estate sector have large loans and in recent years their loans have grown rapidly. All in all, this makes real estate companies vulnerable to disruptions that may affect their ability to pay off their loans. It also means that problems in the real estate sector could rapidly spread to the financial system.
In terms of value, offices comprise the largest part of the real estate sector. If the demand for office space were to decline, real

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If Banks use Artificial Intelligence/Machine Learning, will it impact their capital levels?

27 days ago

Hyacinthe Buisson, Henri Fraisse and Matthias Laporte in this Banque de France blogpost discuss how usage of AI will impact Bank capital levels:
The increasing use of artificial intelligence (AI) or machine learning (ML) techniques could allow banks to develop new credit risk models. These techniques could lead to substantial reductions in capital requirements. However, the opaque nature of these algorithms and the governance challenges they raise might make their adoption less attractive.
……

Mastering ML techniques – which is part of the curriculum of freshly graduated statisticians or data scientists – makes it possible to re-estimate these models, since the skills and economic incentives are there. Yet, while the industry maintains that it uses ML models for lending, banks seem

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Two casualties of war: truth and debt

27 days ago

Mojmír Hampl, member of the Czech Fiscal Council and a former Deputy Governor of the Czech National Bank, in this OMFIF article:
As the ancient Greek playwright Aeschylus observed, the first casualty of war is truth. Leaving aside for now the most dreadful casualties – human life, health and dignity – the second casualty of any war is public finance.
This is particularly the case for western countries, whose average public debt-to-gross domestic product ratio had already reached levels comparable with the end of the second world war during the Covid-19 crisis. These levels are a way above the World Bank’s famous ‘tipping point’ (public debt-to-GDP above 77%) where public debt endangers economic growth.
So now we have a war on our hands, and countries are more financially stretched

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Central bank of Ukraine commits to return to inflation targeting with floating exchange rate when conditions normalise

27 days ago

The National bank of Ukraine (its central bank) in this press release commits to go back to inflation targeting + floating exchange rates as things normalise:
On 15 April, the NBU Council adopted its Monetary Policy Guidelines for the Duration of Martial Law (hereinafter the Monetary Policy Guidelines), which will apply until the economy and financial system are back to normal. The document has been published today on the NBU’s official website.
Under the Monetary Policy Guidelines:

The NBU has committed to resume the pursuit of its inflation targeting regime with a floating exchange rate as the Ukrainian economy and financial system return to their normal mode of operation.

To maintain financial stability in Ukraine, the NBU was forced to fix the exchange rate and impose a number

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The importance of technology in banking during a crisis

28 days ago

Nicola Pierri and Yannick Timmer in this Federal Reserve paper show that more tech oriented banks do better in a crisis:
What are the implications of information technology (IT) in banking for financial stability? Data on US banks’ IT equipment and the background of their executives reveals that higher pre-crisis IT adoption led to fewer non-performing loans and more lending during the global financial crisis. Empirical evidence indicates a direct role of IT adoption in strengthening bank resilience; this includes instrumental variable estimates exploiting the historical location of technical schools. Loan-level analysis shows that high-IT banks originated mortgages with better performance, indicating better borrower screening. No evidence points to offloading of low-quality loans,

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Economic spillovers from the war in Ukraine: The proximity penalty

28 days ago

Jonathan Federle, André Meier, Gernot Müller and Victor Sehn in this voxeu research show that countries which were nearer to Ukraine were impacted more:

The economic impact of global disasters differs vastly across space. The stock market reaction to the Russian invasion of Ukraine illustrates this clearly. This column compares the cumulative equity returns in 66 countries during a four-week window centred around 24 February 2022. The authors find a large ‘proximity penalty’ worth about 2.6 percentage points for every 1,000 kilometres a country is closer to Ukraine. Trade-related spillovers account for about two-thirds of this penalty. 

This entry was posted on April 20, 2022 at 3:49 pm and is filed under Academic research &

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Freedom For Sale: How We Made Money and Lost Our Liberty

28 days ago

John Kampfner, Editor of the New Statesman magazine from 2005-2008, wrote a book in 2010 titled:  Freedom For Sale: How We Made Money and Lost Our Liberty. Other editions also titled differently as: Freedom for Sale: Why the World Is Trading Democracy for Security.
I just came across the book and it makes for a riveting read. Book abstract:
Democratic liberalism v. authoritarianism — the ideological divide that defined the twentieth century. But when the cold war ended, “the end of history”; was proclaimed. Soon the fire of freedom would burn worldwide, the experts said. And where markets were freed, human rights would inevitably follow.
Or not. In the last twenty years, nations including India, Russia, China and the United Arab Emirates have disproved the idea that capitalism and

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Central bank digital currencies, community currencies, and the reinvention of money

April 12, 2022

Susana Martín Belmonte, Christian Gelleri and James Stodder in this voxeu article:

Some countries have issued their own central bank digital currencies, and many European economists favour such a currency too. This column shows that when properly designed, central bank digital currencies can help stabilise the financial and monetary system. Furthermore, a complementary currency backed by a central bank digital currency can not only compensate for the demise of commercial bank money, but it can also democratise money creation. The authors also show that complementary currencies can have higher multiplier effects on local expenditure, allow central banks to control circulation velocity, and help countries in currency crises.

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