Mauro Boianovsky of Universidade de Brasilia and Gerardo Serra of London School of Economics in this paper discuss Joan Robinson’s infatuation with China:

Joan Robinson’s infatuation with Mao’s China remains the most controversial episode of the Cambridge economist’s life. Drawing on the literatures on observation in science and economics, and economists’ travels, we aim at overcoming the dichotomy between Robinson as a ‘political pilgrim’ and as a ‘development economist’. Instead, we take a closer look at her observation practices, her literary choices, and her position within different political and intellectual communities. The structure of the paper is quasi-chronological: each trip to China is described in its own right, but also treated as an entry point to shed light on a

Anthony Brassil, Mike Major and Peter Rickards in this Reserve Bank of Australia paper add banking to Martin  – macroeconomic model of the central bank:
We add a simplified banking sector to the RBA’s macroeconometric model (MARTIN). How this banking sector interacts with the rest of the economy chiefly depends on the extent of loan losses. During small downturns, losses are absorbed by banks’ profits and the resulting effect on the broader economy is limited to that caused by the lower shareholder returns (which is already part of MARTIN). During large downturns, loan losses reduce banks’ capital, and banks respond by reducing their credit supply. This reduction in supply reduces housing prices, wealth and investment; thereby amplifying the downturn (which leads to further losses).

Bank of England will be releasing a pop-economics book in May-2022:
‘Can’t we just print more money?’ is a new pop-economics book, written by the Bank of England, which will be published this May in partnership with Cornerstone Press. The book addresses ten economic questions, from, ‘Why are all my clothes made in Asia?’ to ‘What actually is money?’ Along the way, it offers idiosyncratic examples of economics in action: from the City of London to Springfield Power Plant; from Babylonian gold lending 4,000 years ago, to the economic effects of the Covid pandemic.
The book, which will be published on 19 May, is part of the Bank’s work to increase public understanding about the economy and the Bank’s role in it. The Bank’s advance and future royalties will be used to buy copies of the

Aditya Mishra, Roshin Paul P and Tushar B. Das of RBI in the Jan-22 Bulletin article analyse the impact of pandemic on consumer confidence index. The authors work at Division of Household Surveys, Department of Statistics and Information Management, which looks quite interesting.
Most countries witnessed a gradual uptick in consumer confidence after the major slump encountered when the Covid-19 pandemic first hit their shores, though it is yet to return to pre-pandemic levels in most countries. This article analyses the impact of the pandemic on consumer confidence in India, as gauged by the Reserve Bank’s Consumer Confidence Survey (CCS).
Highlights:

The pandemic severely dented consumer confidence in India, with sentiments of households across strata influenced by the spread of

Barry Eichengreen, Poonam Gupta and Rishabh Choudhary in this IPPR paper assess whether and how taper will impact Indian economy:

On November 3, 2021, the Federal Open Market Committee announced that it would reduce the scale of its asset purchases by $15 billion a month starting immediately. Do emerging markets, such as India, need to prepare for a replay of the taper tantrum of 2013? We show that emerging markets, including India, have strengthened their external economic and financial positions since 2013. At the same time, fiscal deficits are much wider, and public debts are much heavier. As U.S. interest rates now begin moving up, servicing existing debts and preventing the debt-to-GDP ratio from rising still further will become more challenging. Either taxes have to be raised

Karen Croxson, Jon Frost, Leonardo Gambacorta and Tommaso Valletti in this BIS paper discuss different types of finance platforms and their impact on financial inclusion:
Three types of digital platforms are expanding in financial services: (i) fintech entrants; (ii) big tech firms; and (iii) increasingly, incumbent financial institutions with platformbased business models. These platforms can dramatically lower costs and thereby aid financial inclusion – but these same features can give rise to digital monopolies and oligopolies.
Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i)

Ashok Gulati, Ritika Juneja and  Ranjana Roy of ICRIER in this IPPR paper analyse Indian agriculture over 75 years and way forward:
India has experienced significant transformation in its economy since independence, especially agriculture.
From a severely food-deficit nation during mid-1960s to a self-sufficient one, and becoming the largest exporter of rice and the largest producer of milk in 2020-21 is not a small achievement.
Similar break-throughs have been achieved in poultry, fishery, fruits and vegetables, and cotton. All this was made possible with liberal infusion of modern technology, institutional innovations that made small holders part of this change, and enabling right incentives to cultivators.
This holds lessons for many developing countries in south and south-east

I am not sure whether this happened in the past.
The government auctions the bonds every week to mage its borrowing programme and RBI manages the government bond auctions. In case, the RBI sees the bids for the yield higher than its comfort level, it either scraps the auction or devolves the auction on Primary Dealers. Primary Dealers are special institutions created for managing the bond markets.
In most bond markets worldwide, 10-year serves as the benchmark and most liquid bond. There is usually demand for these bonds amidst investors.  Every year governments issue new 10 year bond which serves as the benchmark yield.
Hence, it is really odd to see devolvement in the new 10-year bond.  The RBI’s preferred yield was 6.54% and lower but section of investors demanded a higher yield.

Andrew Jordan , Ezra Karger , Derek Neal in this Chicago Fed paper discuss the impact of sentencing on crime:

We examine 70,581 felony court cases filed in Chicago, IL during the period 1990-2007. We exploit case randomization to assess the impact of judge assignment and sentencing decisions on the arrival rates of new charges. Relative to prior research, we document an important source of heterogeneity in the impact of incarceration on recidivism. Incarceration creates lasting reductions in recidivism among first offenders but not repeat offenders.
We present suggestive evidence that these reductions among first offenders primarily reflect outcomes for offenders who live in lower-crime areas of the city and are not involved in the drug trade.
During our sample period, Illinois

Alex Bryson and David Blanchflower have written a paper on using pulse as a measure of well-being.

A growing literature identifies associations between subjective and biometric indicators of wellbeing. These associations, together with the ability of subjective wellbeing (SWB) metrics to predict health and behavioral outcomes, have spawned increasing interest in SWB as an important concept in its own right. However, some social scientists continue to question the usefulness of SWB metrics. We contribute to this literature in three ways.
First, we introduce a biometric measure of wellbeing – pulse – which has been largely overlooked. Using nationally representative data on 165,000 individuals from the Health Survey for England (HSE) and Scottish Health Surveys (SHeS) we show that

Lewis McLellan in this OMFIF piece points how Internet outages in Kazakhstan rendered digital payments useless:
Civil unrest in Kazakhstan has led to widespread internet blackouts throughout the country, with the country’s largest city Almaty going five days with no internet.
Many Kazakh citizens rely on traditional digital payment methods like debit cards to buy food, but without internet connections, these were rendered useless. Local media have reported long queues for ATMs and withdrawal caps because of shortages of cash.
For central banks, the situation in Kazakhstan shows both the importance and the limitations of cash. The crisis makes it clear that it will not be enough for central banks to develop an online digital currency transaction network while treating cash as the

Shivani Taneja, Paul Mizen and Nicholas Bloom in this voxeu article compare offline and online meetings:

COVID-19 resulted in a shift towards working from home. This column discusses the findings of a survey of over 2,000 UK working adults, which suggest that online meetings are more efficient for smaller gatherings of 2 to 4 people, while in-person meetings are preferred for gatherings of 10 or more.
Online efficiency is also dependent on demographics, with women and more educated employees reporting that online meetings are relatively more efficient.
Unsurprisingly, employees who work from home more and with good internet quality also report higher relative online meeting efficiency. 

This entry was posted on January 11, 2022

International Financial Services Centres Authority and Gujrat National Law University have started offering a joint program on Financial Market Laws:
The commercial dialogue among the business entities is incomplete without financial communications. The role of law specifically the financial market (laws and regulations) are significant to regulate the financial activities of the business entities in the financial market. Since 1991, with the liberalised economic policy (Indian Budget 1991-92), the country has seen the opening up of the financial sectors and SEBI got the power to regulate the capital market. In the 30 years of liberalisation, the financial sectors activities are governed by multiple regulators.
The current practice of business and commercial law shows the expansion

My new piece in Moneycontrol where I explain RBI’s ongoing efforts to encourage retail investment in debt markets.

This entry was posted on January 11, 2022 at 12:07 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc, Financial Markets/ Finance, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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Nainital Bank was established in 1922 by Pandit Govind Ballabh Pant.
In 1973, the RBI asked Bank of Baroda to manage the Nainital bank.  Bank of Baroda currently owns 98.57% of the bank.
Times of India reported on the 100th foundation day and the bank also organised a cricket tournament on the occasion.
One hopes the bank atleast releases a coffeetable book and uploads it on the website to figure the interesting history of this lone bank based in the Himalayas.

This entry was posted on January 10, 2022 at 7:33 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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This blog had pointed how Joachim Nagel has been appointed as the new President of Bundesbank after the sudden resignation of Jens Weidmann.
Nagel takes over the helm at Bundesbank today on 10 Jan 2022.  David Marsh and Edoardo Reviglio in this OMFIF article writes on the twin challenges for Nagel – rising inflation and Europe.
First inflation at 3.1% is higher than 2 year average of 2.6%:

The priority of new German Bundesbank presidents over the past 65 years has been either fighting rising inflation or shoring up Germany’s habitually sensitive currency alliances with other European countries. Joachim Nagel, taking over on 10 January, faces both challenges simultaneously.
After nearly three decades of relative calm on the prices front since the 1990s build-up to Europe’s single

Philip J. Glandon, Kenneth Kuttner, Sandeep Mazumder & Caleb Stroup in this NBER paper summarises macro research over the last 40 years:
How is macroeconomic research conducted and what is it trying to accomplish? We explore these questions using information gleaned from 1,894 articles published in ten leading journals.
We find that over the past 40 years there has been a growing emphasis on increasingly sophisticated quantitative theory, such as DSGE modeling, and papers employing these methods now account for the majority of articles in macro journals.
The shift towards quantitative theory is mirrored by a decline in the use of econometric methods to test economic hypotheses.
Econometric techniques borrowed from applied microeconomics have to a large extent displaced time series

Politico asks 18 top historians to imagine how this year will be written about a century from now.
How will history remember 2021? POLITICO Magazine asked 18 historians to envision the entry for this year in a hypothetical future history book. Many, not surprisingly, highlighted the erosion of democratic norms in the United States, most notably through the ongoing attempt to question and overturn legitimate election results. A number of submissions focused on the downstream effects of the pandemic, like labor market shifts and disruption to education. We heard about racial inequality: continued systemic racism against Black Americans, an uptick in violence against Asian Americans and an overall feeling that the country was polarized along racial lines. Other contributors believed 2021

Davide Romelli of Trinity College Dublin has written a paper on the political economy of central bank independence.
LSE Business Review blog summarises the paper:
We then use a political economy framework to identify five sources of reforms: (i) status quo bias, (ii) external inducements, (iii) crises and shocks, (iv) ideology and political factors and (v) economic conditions. The results show that the lagged level of central bank independence or status quo, as well as regional pressures are important in the reform process, as countries with lower levels of independence or those that are further from their regional average are more likely to adopt reforms that increase their level of independence. An external pressure to reform also comes from international institutions, as countries

Sushant Singh of Centre for Policy Research in this TheIndiaForum essay:
If you want to see how the country is being run, just look at the BCCI. It treats the country’s highest court with disdain, flouts all rules and norms, controls and uses money power to the hilt, and bullies the weak (domestic and women cricketers) and the disadvantaged (scorekeepers and groundsmen). The media is managed through control of access to the most lucrative sport in the country.

This entry was posted on January 7, 2022 at 5:19 pm and is filed under Cricket, Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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Turkey central bank is in the news for all the interesting reasons. This time it is changing accounting norms to record USD 10 billion profit in one day, ending the year in profits:
An unusual overnight change of nearly $10 billion in the Turkish central bank’s balances at the end of 2021 has prompted some economists to speculate it may be preparing to transfer funds to the national Treasury later in the year.
Accounts published by the central bank show an adjustment of about 124 billion lira ($9.37 billion) in the valuation account, a component of the central bank’s balance sheet, between Dec. 30 and Dec. 31. The account ended the year at 54 billion lira.
Another account called “other items”, which includes the bank’s profits, was meanwhile adjusted by around 130 billion lira ($9.78

Daniel E. Sichel in this NBER paper analyses the price of nails since 1695. He uses it as a way to explain economic change over 3 cent

This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. Why nails? They are a basic manufactured product whose form and quality have changed relatively little over the last three centuries, yet the process for producing them has changed dramatically. Accordingly, nails provide a useful prism through which to examine a wide range of economic and technological developments that touch on multiple areas of both micro- and macroeconomics. Several conclusions emerge.
First, from the late 1700s to the mid 20th century real nail prices fell by a factor of about 10 relative to overall consumer prices. These

Emi Nakamura & Jón Steinsson summarise the ongoing research on monetary economics in NBER Reporter:
For much of the last decade, policymakers in advanced economies have grappled with challenges resulting from the Great Recession of 2007–09 and sovereign debt problems in Europe. During this time, inflation was persistently below targets set by central banks in the United States, Europe, and Japan. As a consequence, a major focus of research and practice was how to further stimulate these economies through unconventional monetary policy and raise their rates of inflation toward target levels.
More recently, the global economic downturn and subsequent rebound associated with COVID-19 have shifted the focus of both research and practice. In 2021, advanced economies — and especially the

David Price of Richmond Fed interviews Prof Ed Galesar of Harvard Univ:
Harvard University’s Edward Glaeser, considered by many to be the foremost economist of cities and of the forces influencing their development, is known for defending the role of cities as places where businesses and residents can exploit the benefits of social and economic interactions.
As a teenager, he lived on the Upper East Side of New York during the Bonfire of the Vanities era. His eventual specialization in urban economics was influenced, he says, by his growing up in the city during its times of crisis and recovery. “My childhood was shaped by the arc of New York City during the ’70s and ’80s, first as a period of startling decline as crime rates exploded and the city teetered on the brink of bankruptcy,

Jean Barthélemy, Eric Mengus & Guillaume Plantin in this Banque de France working paper:

This paper studies a model in which the price level is the outcome of dynamic strategic interactions between a fiscal authority, a monetary authority, and investors in government bonds and reserves. The ” unpleasant monetarist arithmetic ” whereby aggressive fiscal expansion forces the monetary authority to chicken out and inflate away public liabilities may be contained by market forces: Monetary dominance prevails if such fiscal expansion is met with a higher real interest rate on public liabilities, due for example to the crowding out of private investment opportunities. The model delivers empirical implications regarding the joint dynamics of public liabilities and price level, and policy

2022 marks the 25th anniversary of NSE’s flagship NIFTY50 index and 20th anniversary of derivatives trading in India.
There is an event today marking celebrations of the two anniversaries.

This entry was posted on January 5, 2022 at 3:43 pm and is filed under Economics – macro, micro etc, Financial Markets/ Finance, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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John Mullin of Richmond Fed profiles Genghis Khan
There is a broad consensus among scholars that Pax Mongolica transformed world history. The period of relative stability, which spanned roughly 1250-1350, allowed for an unprecedented exchange of goods and ideas. In Power and Plenty: Trade, War, and the World Economy in the Second Millennium, O’Rourke and his co-author Ronald Findlay of Columbia University go so far as to argue that “globalization … began with the unification of the central Eurasian landmass by the Mongol conquests.”
Many Chinese innovations had made their way from China to the Middle East and Europe prior to Pax Mongolica, silk and porcelain among them. The Byzantines had obtained silkworm eggs and begun their own silk production as early as the sixth century, and

This is the first post of the New Year 2022. Let me start with what else but economic history.
The year 2022 marks 25th anniversary of the agreement between the government and the RBI to end the practice of automatic debt monetisation.
The 1991 reforms started multiple strands of sub-reforms in different sectors and domains. one such domain was fiscal reforms.  Within fiscal reforms, the key was ending the practice of automatic debt monetisation. Each time the government ran deficits, it issued ad hoc t-bills to RBI and got funds, resulting in monetisation of the deficit. The RBI monetary policy remained subservient to fiscal policy.
The government knew without ending adhocism the reforms will not mean much. Thus, it decided to undo the policy in phased manner.    Globally, the 1997

Today is the last day of the year 2021. Here is a quick review of the mostlyeconomics blog in the year 2021:
Views – 1,14,551
Visitors – 82,383
Posts published – 721
Top 5 posts
Impact of monetary policy on bitcoin prices – 258 views
LIC IPO: an empirical study – 245 views
RBI sets up regulation review authority to review its regulations – 222 views
100 years of Imperial Bank of India – 199 views

Book Review: The Conjuror’s Trick – An interpretive history of Paper Money in India by Bazil Shaikh -191 views

Both the viewership and number of posts have declined compared to 2020:
Views – 2,23,823
Visitors – 1,58,465
Posts published – 820
Infact the viewership and number of posts are at their lowest since 2012.
2021 was a very tough year and was difficult to  post regularly. Thanks a lot

Tyler Cowen on the MR Blog:
For my latest Bloomberg column, I ran the experiment of typing “economics” into the TikTok search function, and here is what came up:

The first video I saw was about the high pay of economics majors in the job market, relative to softer majors. The speaker has a strange British accent, and it is possible that he was deliberately trying to look and sound stupid. It has been liked more than 32,000 times. The next was a rant about the outrageous price of beer at sporting events. There is no obvious intelligence or analysis in the video. It has been liked almost 32,000 times.
I also saw a video called “Why I left economics,” in which a student who took an economics class at Brown explains how his professor taught about inequality but lived in a mansion with