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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

It’s a wonderful life: A short history of building and loan associations

20 hours ago

We all remember the movie It’s a Wonderful Life which is often used to explain Bank run. In the movie Bailey Brothers Building and Loan is a building and loan association.
David A. Price and John R. Walter document hstory of these loan associations in this Nice research (came in Jan-2019):
Prior to the advent of modern home mortgage markets in the United States, markets in which mortgage-backed securities and government-sponsored enterprises now play significant roles, prospective homebuyers had to rely on other mechanisms of home finance. For about a century, cooperative organizations known as building and loan associations, a concept imported from Britain, served millions of American savers and homebuyers.

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Free Market or Socialism: Have Economists Really Anything to Say?

20 hours ago

Andrea Attar and Thomas Mariotti of INET in this piece:
A central tenet of partisans of a free-market system is that it uniquely provides economic agents with the incentives that secure an optimal economic outcome. “I believe in markets,” “People respond to incentives” are among the mantras they repeat tirelessly. Sometimes they take a darker twist, as in the former EU budget commissioner Gunther Oettinger’s ominous “Markets will teach them.”
A recent, authoritative example of this view is the October 2018 report on the “Opportunity Cost of Socialism” published by the White House Council of Economic advisors. Just before recalling Margaret Thatcher’s definition of freedom, it states: “In assessing the effects of socialist policies, it is important to recognize that they provide little

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Improving European economy: Draghi’s three Ps of mon policy, Summers’s three Ts of fiscal policy and Buti’s three Fs for structural reforms

2 days ago

Marco Buti of European Commission in this voxeu piece:
The current slowdown and lacklustre medium-term growth prospects also indicate that the fiscal, monetary and structural policy mix needs to be changed. As Mario Draghi stated in his speech in Sintra (2019), monetary policy needs to remain patient, persistent and prudent. Fiscal policy needs to fulfil the three Ts as identified first by Larry Summers (2008): timely to be effective, targeted by focusing on high multipliers expenditure and – possibly – temporary. While the jury is still out on the desirable fiscal trajectory in presence of ultra-low interest rates, there is little doubt that a long-lasting boost of public investment should be undertaken. One such example would be quality-investment to ease the environmental

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Norway appoints a Monetary Policy and Financial Stability Committee

2 days ago

I have been arguing why RBI needs to have a different forum to discuss matters pertaining to fin stability. Currently, all discussions with media and public are mooted via MPC meeting which mainly looks at price stability. Central banks such as those of England and US have built seperate forums to discuss matters on finance.
Central Bank of Norway did not have  MPC as of now. Now they have gone ahead and established a Monetary Policy and Financial Stability Committee:

The Monetary Policy and Financial Stability Committee is appointed by the King in Council. The Committee consists of the Governor, the two Deputy Governors and two external members.

The new Central Bank Act entered into force on 1 January 2020. An updated description of the committee is in preparation.
The Committee is

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The next development challenge: go indigenous and not copy Western institutions….

2 days ago

Arvind Submramanian and Josh Felman in this Proj Synd piece:
What is clear is that solutions to the new growth and development challenges in emerging markets will have to be indigenous, rather than coming from Western institutions. Building and maintaining among national policymakers the sort of open, self-confident intellectual capacity that Gandhi espoused could well be the next development challenge.
Really? Given both worked at IMF where you pushed western institution ideology over indigenous ideas, it is quite something.

This entry was posted on January 27, 2020 at 9:58 am and is filed under Economics – macro, micro etc, Economist, Growth and development. You can follow any responses to this entry through the RSS 2.0

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WMA borrowing increases to Rr 87735 cr..

4 days ago

In Yesterday’s WSS, The central government’s borrowing under WMA increased from Rs 60605 cr (10 Dec 2020) to Rs 87735 cr (17 Dec 2020).
This makes it three weeks in a row in the month of January where Central Government has resorted to using WMA window. The WMA limit for the period Oct 2019 to Mar 2020 was set at Rs 35,000 cr. On 3 Jan 2020, WMA borrowing was Rs 130171 cr and then declined to 60605 cr before rising again to Rs 877735 cr.
All this confirms further that there is high distress in government finances…

This entry was posted on January 25, 2020 at 10:31 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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What explains rise of Jair Bolsonaro: Voting for Masculine stereotype?

5 days ago

Laura Barros and Manuel Santos Silva i(Univ of Gottingen) in this voxeu research:
Brazil plunged into economic crisis between 2014 and 2018, the year when far-right populist Jair Bolsonaro won the presidential election. This column, part of the Vox debate on populism, argues that Bolsonaro’s surprising victory is partially explained by the way the economic crisis interacted with prevailing gender norms. In regions where men experience larger employment losses, there is an increase in the share of votes for Bolsonaro. In contrast, in regions where women experience larger losses, his vote share is relatively lower. This may be explained by men feeling more compelled to vote for a figure that embodies masculine stereotypes as a way of compensating for a decline in economic and social

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Central bankers in climate change policy teams: Good or bad?

5 days ago

My new piece in Moneycontrol.
This one reflects on the recent appointment of Mark Carney as adviser to Prime Minster on Climate change.

This entry was posted on January 24, 2020 at 11:39 am and is filed under 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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Tomb Economics

6 days ago

Alex Tabarrok in this blogpost wonders why Mughals built so many tombs:
The Mughals of Northern India are famous for their tombs, Humayun’s tomb in Delhi, Jahangir’s Tomb in Lahore and, of course, the Taj Mahal. Why so many tombs? Culture surely has something to do with it, although conservative Muslims tend to frown on tombs and ancestor worship as interference with the communication between man and God. Incentives are another reason.
Under the Mansabdari system which governed the nobility, the Mughal Emperor didn’t give perpetual grants of land. On death, all land that had been granted to the noble reverted back to the Emperor, effectively a 100% estate tax. In other words, land titling for the Mughal nobility was not hereditary. Since land could not be handed down to the next

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Robert C. Merton and the Science of Finance

6 days ago

Zvi Bodie, Professor Emeritus, Boston University pays tribute to Prof Merton’s work:
In my view, no individual has contributed more to the beneficial relationship between finance theory and practice than Robert C. Merton. Today, he still teaches at MIT and often lectures around the world. Not only has “The Mertonian Revolution in Finance” helped shape modern finance, it has also providedus with insights, theories, and models for our collective future. The title of one of Merton’s recent lectures to an audience in China describes his central theme: “Solving Global Challenges Using Finance Science.”To that I say, amen! 
My earlier piece on Prof Merton’s new project on designing financial solutions for retirement..

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75 years of Auschwitz Liberation

6 days ago

Auschwitz detention camp is easily one of the biggest blots on humanity. AuschwitzMuseum is running a depressing Twitter handle showing pictures from the camp.
Ana Palacio, former Minister of Foreign Affairs of Spain in this Proj Synd piece says we should not forget this tragedy:

75 years after the liberation of the Nazi death camp at Auschwitz, anti-Semitism is again on the rise across the Western world. This trend – and the weak response to it – is a harbinger of democratic decay.

This entry was posted on January 23, 2020 at 12:24 pm and is filed under Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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A Decade of Decay: Supreme Court serves a self-selecting elite instead of standing up for the Constitution and people.

6 days ago

Alok Prasanna Kumar of Vidhi Centre for Legal Policy  in this must read EPW piece:
The Supreme Court of India enters a new decade with its reputation as an independent constitutional court in tatters. It has wilted under the gaze of intense public scrutiny over its actions. In the last few years, it has been called upon to check the unconstitutional excesses of a majoritarian government with a full majority in Parliament, but failed again and again. The only comparable decade is perhaps 1970 to 1979, when the Court was riven internally and succumbed to external pressure in the face of another strong executive government.
In this column, I examine the Supreme Court’s decade of decay to understand where it has all gone so wrong with the Court through two major themes that are

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What Happens When Economics Doesn’t Reflect the Real World?

7 days ago

Prof Anwar Shaikh in this INET video talks about the shortcomings of neoclassical economics. More importantly, he discusses the alternative frameworks as discussed in his book Capitalism: Competition, Conflict, Crises.

This entry was posted on January 22, 2020 at 3:13 pm and is filed under 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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Central bank group to assess potential cases for central bank digital currencies

7 days ago

I wrote this piece on how central banks after ignoring and threatening digital currencies have warmed upto the idea of central bank digital currencies. It reminds me of this famous hindi movie song.
Yesterday 6 central banks signed an agreement to study digital currencies:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experience as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
The group will assess CBDC use cases; economic, functional and technical design choices, including cross border interoperability; and the sharing of knowledge on emerging

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Seigniorage through periodic recoinage: When the validity of money was restricted in time

7 days ago

Roger Svensson and Andreas Westermark have this superb piece on monetary history. Call it demonetisation of coins:

For almost 200 years, old coins were frequently declared invalid in large part of medieval Europe and had to be exchanged for new ones for an exchange fee. This column shows that frequent recoinage generates incomes for the minting authority when the tax level is low enough and the punishment for using invalid coins is high enough, and when there is a limited coin volume in circulation and also an exchange monopoly. The system is equivalent to the 20th-century idea known as the Gesell tax. 

This entry was posted on January 22, 2020 at 2:12 pm and is filed under Central Banks / Monetary Policy, Economics – macro,

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Inclusive American Economic History: Containing Slaves, Freedmen, Jim Crow Laws, and the Great Migration

7 days ago

Fascinating paper by Trevon Logan and Peter Temin:
In this paper, we combine white and black economic histories of the United States from its formation to the present.
The Constitutional compromises between slave and free states set the stage for rapid economic growth as cotton from Southern slave states provided the raw material for the emerging cotton industry in the North. The cooperation between states also set up tensions that intensified over time as the addition of new states reiterated the Constitutional compromise over and over again with increasing acrimony.
This tension led to the Civil War that brought with it the 13th Amendment freeing slaves. But Reconstruction after the war proved to be only a temporary reprieve for African Americans. Despite all the carnage and death

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RBI releases Board Minutes

8 days ago

After a long wait and requests, RBI has begun to release its Board Minutes:
The Reserve Bank of India (RBI) has been, over the years, taking steps to enhance transparency with regard to its functioning. The minutes of the meetings of the RBI’s Central Board of Directors (Central Board) have evinced considerable public interest and some of these have been shared with persons who sought them under the Right to Information Act 2005 (RTI Act). As a measure of further enhancing public awareness about the functioning of the RBI, it has been decided to place the minutes of the meetings of the Central Board on the RBI’s website in terms of provisions of Section 4 of the RTI Act, after appropriately severing information that is permitted to be severed as per the Act. Accordingly, the minutes

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The Green Swan: Central banking and financial stability in the age of climate change

8 days ago

Kudos to BIS for bringing a report with such an innovative title. Taleb made his point about financial risks via his boo titled Black Swan and BIS is doing the same highlighting climate risks with the title Green swan!
The report is written by 4 scholars – Patrick Bolton, Morgan Després, Luiz Awazu Pereira da Silva, Frédéric Samama and Romain Svartzman:

Climate change poses new challenges to central banks, regulators and supervisors. This book reviews ways of addressing these new risks within central banks’ financial stability mandate. However, integrating climate-related risk analysis into financial stability monitoring is particularly challenging because of the radical uncertainty associated with a physical, social and economic phenomenon that is constantly changing and involves

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Despite its limited success, RBI needs to persevere with Operation Twist

9 days ago

Aparna Iyer of Mint reviews RBI’s Operation Twist:

The yield on the 10-year AAA-rated corporate bond has fallen by about 10 basis points, taking its cue from the sovereign bond market. Surely, the larger objective to bring down long-term costs for the industry seems to have been achieved to some extent.
So, can Operation Twist be termed as a success?
Yes and no. Borrowing costs have come down, but private companies hardly borrow from the 10-year and above maturity. More than 60% of the borrowings by private firms are typically up to the tenure of five years. Therefore, the central bank may have missed its mark here.
(Graphic: Santosh Sharma/Mint)“Corporates and non-bank finance companies borrow mostly in the 3-year and 5-year tenure. But, here, yields haven’t really come down and,

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Vijai Super — the scooter that became popular way before Hamara Bajaj

9 days ago

Bajaj Auto finally bit the scooter bullet and relaunched Chetak Scooter in a new avatar last week.
Unnati Sharma in thus interesting piece writes on history of Vijai Super, the scooter that was popular before Chetak:

Illustration by Soham Sen | ThePrint
“The best deals on wheels” — ask any vintage automobile enthusiast and they will not deny this claim in advertisements of Vijai Super/Deluxe Scooter. When the Indian men’s cricket team won the World Cup for the first time in 1983, the government gifted each member of the winning team a Vijai Super Scooter.
For Indians growing up in the 1970s and ’80s, Vijai Super was a prized possession. Years before Bajaj became near-ubiquitous, Vijai gave Indians the joy of scooter riding. It was the first time, for many middle-class families, that

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Trying a hand at podcasting

9 days ago

My first attempt at podcasting with a dear friend Vivek Narayan who is a Doctor based in US.
Never realised that the medium could be so much fun. Thanks Vivek for all the editing!
More to follow.

This entry was posted on January 20, 2020 at 9:41 am and is filed under Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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More on Govt’s usage of WMA..

11 days ago

Following my earlier posts on WMA: one, two, three.
The above analysis basically used weekly data. We now have some daily data on WMA as well drawn from the quarterly Public Debt Management Report released by Finance Ministry and RBI’s Annual Report
Earlier the PDM reports basically said whether WMA was used in the quarter or not. Since 2018 (or so), the reports also tells us how many days in the quarter WMA was used. This is how it looks:

Year
Quarter
No of days WMA was used
CMB issued
2018
Apr-Jun
28
65000
2018
Jul-Sep
59
20000
2018
Oct-Dec
NA (most likely 50)
45000
2019
Jan-Mar
36
60000
2019
Apr-Jun
19
0
2019
Jul-Sep
43
50000
Somehow the reports of Oct-Dec quarter are not available. But we know from weekly WSS that WMA was used twice in Oct-2018 month.  The data for Q3 and Q4 are

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History of RBI’s Ways and Means Advances to Central Government: Old Wine in New Bottle?

12 days ago

Good friend Niranjan pointed to me how WMA was started as a way to bridge the “short-term gap” between Government’s receipts and expenses. This piece tracks the short history of WMA

WMA was started from Apr-1997. Why 1997? Well, in 1997 the Government and RBI signed an agreement to get rid of automatic monetisation of government deficits. Before 1994, if the Government had a deficit, it just issued ad-hoc T-Bills which were held by RBI.
In the 1996-97 Budget Speech, then FM P Chidambaram announced:
Hon’ble Members are aware that in September 1994 an agreement was signed between the Central Government and the RBI to phase out the system ofad-hoc treasury bills by 1997-98. The experience last year and in the current year so far has shown the difficulty of staying below the within-year

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Cambodia is criminalizing democracy by suppressing opposition

12 days ago

Sam Rainsy, acting president of the Cambodia National Rescue Party has a hard hitting piece on state of affairs in Cambodia:

There can be no democracy without a credible opposition, and in today’s Cambodia, there can be no credible opposition without the Cambodia National Rescue Party. It is thus vital that the international community not allow Prime Minister Hun Sen to use fabricated treason charges to suppress the CNRP.

Damn! So many such news all around the world…

This entry was posted on January 17, 2020 at 7:53 pm and is filed under Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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RBI update: WMA declines from 130171 cr to 60605 cr..

12 days ago

Following from my last article, WMA for the week ended 10-Jan-2020 declined to Rs 60605 cr. It was at a record 130171 cr on the week ended 3-Jan-2020.
WMA on asset side is usually linked with reverse repo (included in Deposits – Others) on liabilities side. This is because as WMA increases, liquidity in the system increases leading to rise in reverse repo. And the opposite happens in case of reversal.
Thus, as WMA has declined on the Assets side, Reverse Repo on the Liabilities side has declined by 93197 cr.  For tracking all the changes exactly, we need a detailed balance sheet which we do not get in WSS.

This entry was posted on January 17, 2020 at 7:29 pm and is filed under Indian Economy/Financial Markets. You can follow

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The puzzle of inflation going up despite low demand in India

12 days ago

Prof Himanshu of JNU in this Mint piece:
Why is inflation rising? Most commentators have highlighted the rise in onion prices, which did contribute to vegetable inflation. However, data also shows a sharp rise in inflation in almost all vegetables along with cereals (mainly wheat and coarse cereals), pulses and personal care items. Clearly, the inflation story is not just an onion story, and is far more widespread and serious. However, attributing this to seasonal factors would be missing the forest for the trees. Untimely rains, drought in some regions and crop losses due to local factors did contribute to supply shocks, but this is not enough to explain the sharp rise in overall inflation, or even food inflation, given the small weight of these crops in the consumption basket.

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The evolution of monetary policy frameworks in the post-crisis environment

12 days ago

Anna Samarina and Nikos Apokoritis in this voxeu piece:

Monetary policy frameworks have evolved since the global crisis. The column investigates the changes for 14 advanced economy central banks. Banks are defining lower, more narrow inflation targets. Transparency and commitment have been enhanced, and the monetary policy toolkit has been expanded.
…..
Several conclusions can be drawn about the evolution of monetary policy frameworks after the crisis. First, no central bank has formally abandoned its existing framework so far. However, the design of monetary policy strategy has been high on the central bank agenda in recent years. The Fed is about to conclude a review of its framework and the review of the ECB’s monetary policy strategy has been implicitly announced. The revision

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Efficacy of Credit Ratings in Assessing Asset Quality: An Analysis of Large Borrowers

13 days ago

RBI Bulletin Jan-2020 has an article by Sukhbir Singh and Pallavi Chavan:
Using data on credit ratings from the Central Repository of Information on Large Credits (CRILC) mapped with Prowess, this article examines the efficacy of ratings in facilitating a sound and timely assessment of the asset quality of large borrowers. About one-fourth of the sampled Non-Performing Asset (NPA) exposure from CRILC was found to be in investment grade a quarter before slipping into the NPA category. The percentage of NPA exposure with an investment grade rating just before turning nonperforming varied across Credit Rating Agencies (CRAs) with three out of the six CRAs covered in the study showing a relatively high concentration of such exposure.
CRAs have a tough clean up job at hand!

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Is America Going Fascist?

13 days ago

WHo would have thought this question would be asked and needs to be answered.
Daron Acemoglu in this piece warns against this typecasting as it polarises the society further:

Given US President Donald Trump’s propensity for racist, divisive rhetoric, it is easy to see why so many of his opponents would describe him as a modern-day Benito Mussolini or Adolf Hitler. But by implying that all Trump supporters are irredeemable extremists, such rhetoric merely plays into his hands.
….
The most promising strategies for resisting and defeating Trump are nothing like those required to fight twentieth-century fascist movements. Once Mussolini and Hitler took power, there simply was no way to stop them by working within the system. By contrast, the most effective way to combat Trump is through

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Government under fiscal pressure: WMA trends suggest so

14 days ago

My new piece in moneycontrol:
The frequency with which RBI is advancing loans to the Centre is a reminder that public finances need to be set right at the earliest

This entry was posted on January 15, 2020 at 4:25 pm 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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