Kristian S. Blickle, Cecilia Parlatore, and Anthony Saunders in this NY Fed paper:

Using highly detailed data on the loan portfolios of large U.S. banks, we document that these banks “specialize” by concentrating their lending disproportionately into one industry. This specialization improves a bank’s industry-specific knowledge and allows it to offer generous loan terms to borrowers, especially to firms with access to alternate sources of funding and during periods of greater nonbank lending. Superior industry-specific knowledge is further reflected in better loan and, ultimately, bank performance. Banks concentrate more on their primary industry in times of instability and relatively lower Tier 1 capital. Finally, specialization counteracts a well-documented trend in reduced

Luis Garicano in this voxeu piece points to this new edited book by him – Capitalism after COVID: Conversations with 21 Economists. The book emerged after discussions with leading economists:

While developed countries experienced an unprecedented economic shock between March 2020 and the spring of 2021, none of them suffered a financial crisis, nor did their citizens have to endure widespread poverty or their firms have to go through waves of bankruptcies. The bulk of the shock was absorbed by the public sector budget. 
That the world could produce such a massive, coherent, and rapid economic response to the pandemic had a lot to do with the consensus that quickly emerged among economists on how best to respond to the unprecedented shock. Within days of the declaration of a pandemic

Michael Debabrata Patra, Harendra Behera and Joice John in this RBI Bulletin article look at one of the contentious issue facing Indian economy: steep yield curve.

The sovereign yield curve has a special significance for monetary policy in influencing a wide array of interest rates in the economy. Explicitly integrating macroeconomic variables with latent factors of the yield curve in a dynamic factor model, the results reveal that the level of the yield curve has undergone a downward shift from the second quarter of 2019, reflecting the ultra accommodative stance of monetary policy. Abundant liquidity is depressing short-term interest rates more than proportionately and steepening the slope of the yield curve, alongside a pick-up in issuances of ultra-long dated paper. Global policy

Petter Lundborg and Dan-Olof Rooth in this voxeu research:

School meal policies differ significantly between countries. Sweden and Finland serve healthy school lunches free of charge to all students, for instance, while children in neighbouring Norway and Denmark bring their own packed lunches from home. This column a programme that introduced free nutritious school lunches for all pupils in Swedish primary schools between 1959 and 1969, and finds that children who participated during their entire primary school period went on to have higher lifetime incomes.

This entry was posted on June 17, 2021 at 11:42 am and is filed under Academic research & research papers, Demographics/Pension, Economics – macro, micro etc, Growth and

EABH Podcast features Marie Laperdrix, Head of Archives and History at BNP Paribas. Marie informs about how the French Bank has been steadily building and digitizing BNP Paribas archives.
BNP Paribas group has emerged after a series of a mergers. The Comptoir d’Escompte de Paris merged with Banque Nationale pour le Commerce et l’Industrie (BNCI) in 1966 to become Banque Nationale de Paris (BNP). In 2000, BNP merged with Paribas to become BNP Paribas.
The digital archives are really impressive. A dig into the archives took me to this history of how BNP came to India in 1860!
In 1860 the Comptoir d’Escompte de Paris opened a branch in Calcutta. This was a pioneering move as, until then, rather than opening branches of their own abroad, the practice of French financial institutions had

Catherine Schenk in BankUnderground blog:
Since the Great Financial Crisis started in 2007 there has been renewed interest in using the past as a basis for policy responses in the present, but how useful is history and how is it best used? Certainly, the old chestnut that ‘those who neglect the past are sure to repeat it’ is a valid warning, but how to select the appropriate historical examples and draw the right lessons is a more nuanced exercise that is explored in this post.

Galbraith (1990): ‘the extreme brevity of the financial memory’ makes financial markets susceptible to unstable euphoria.
Greenspan (1997): ‘regrettably, history is strewn with visions of such ‘new eras’ that, in the end, have proven to be a mirage. In short, history counsels caution’.
Macmillan (2008): ‘the

Björn Andersson, Mikael Apel and Iida Häkkinen Skans of Riksbank (Sweden central bank) in this paper look at 10 questions around distributional aspects of mon pol:
Income disparities have remained roughly unchanged since 2015, but have increased in the longer term. The increased income disparities are due to the incomes of those who are not working having increased much less than wage incomes, while capital incomes have increased significantly for those with the highest incomes. The coronavirus pandemic is likely to increase income disparities. It is more difficult to analyse what has happened to the differences in wealth in Sweden because there have been no statistics since 2007.
An expansionary monetary policy affects the economy broadly. A fall in interest rates has an effect on

Raphael Auer, Codruta Boar, Giulio Cornelli, Jon Frost, Henry Holden and Andreas Wehrli in this BIS survey:
Central bank digital currencies (CBDCs) could ease current frictions in cross-border payments – and particularly so if central banks factor an international dimension into CBDC design from the outset. Based on a survey of 50 central banks in the first quarter of 2021, this paper explores initial thinking on the cross-border use of CBDCs.
While most central banks have yet to take a firm decision on issuing a CBDC, the survey responses show a tentative inclination towards allowing use of a future CBDC by tourists and other non-residents domestically. They have a cautious approach to allowing use of a CBDC beyond their own jurisdiction. Concerns about the economic and monetary

Mousumi Dutta, Saswata Ghosh,  Zakir Husain in this Ideas4India article:
India has made significant progress in improving maternal and child health outcomes, and the contribution of ASHAs – female community health workers – in promoting healthcare-seeking behaviour is widely acknowledged. In this context, Dutta et al. discuss findings from their study in rural Bihar and highlight two key issues: mothers-in-laws acting as mediators in the interaction between ASHAs and women of reproductive age, and the limited success in influencing educated women from affluent families.

This entry was posted on June 16, 2021 at 10:14 am and is filed under Academic research & research papers, Indian Economy/Financial Markets. You can follow any

Chinese Communist Party or CCP completes its 100 years in July 2021.
Minxin Pei in this Proj Synd piece cautions the party:

As the Communist Party of China prepares to mark its centennial on July 1, the poor longevity record of other dictatorial parties in modern times should give its leaders cause for worry. If the CPC is not on the right track with its neo-Maoist revival, its upcoming milestone maybe its last.

This entry was posted on June 15, 2021 at 6:19 pm and is filed under Discussion. You can follow any responses to this entry through the RSS 2.0 feed.
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Mikhail Mamonov, Anna Pestova and Steven Ongena in this voxeu research:
Financial sanctions against Russia’s state-owned and controlled banks were imposed consecutively between 2014 and 2019, allowing banks that would potentially be targeted in the future to adjust their international and domestic exposures. This column explores the informational effects of financial sanctions, showing that compared to similar private banks, ‘not yet sanctioned’ financial institutions immediately reduced their foreign assets while, rather unexpectedly, expanding their foreign liabilities. These informational effects crucially depend on geography, with targeted banks located further from Moscow decreasing their foreign assets by more and raising foreign liabilities by less than those located near the

Fed Vice Chair for Supervision Randal Quarles draws banking regulation lessons from flights and mail bags:
As many of you know, I am speaking to you from Salt Lake City, which, among its myriad other virtues, was the home of one of the earliest passenger airlines-Western Air Express, which ran its first passenger flight in the spring of 1926: Eight hours in a Douglas M2 between Salt Lake City and Los Angeles, with one stop in Las Vegas for fuel. Two of the first passengers sat on the mail sacks in the back, and those early plane travelers were adventurers in other ways as well. That year there were 12 fatal commercial airplane crashes and that number rose to 59 a year by 1930. That’s not total deaths-that’s fatal crashes, with many people on each plane. Comparing hours flown and

Nicholas Bloom, Paul Mizen and Shivani Taneja in this piece:

The COVID-19 pandemic prompted a collective shift to working from home. This column argues that though the shift was surprisingly easy, returning to the office will be hard. New evidence from a survey of 2,500 employees in the UK shows a preference in favour of home working 2-3 days a week, with lingering concerns of overcrowded transport and offices. But allowing workers to choose when to work from home will leave empty offices Monday and Friday, and many tasks such as large group meetings are more effective in person than online. Hybrid working will be the solution.
It will surely be tough for many to get back to office..

This entry was posted on June 15, 2021 at

Shromona Ganguly and Deepa S. Raj in this RBI Occassional Paper series:
The study examines determinants of default in education loans in Tamil Nadu, a state with significant presence in education loan disbursal in the country. It uses account level data of over two lakh borrowers from two public sector banks and one private sector bank in an attempt to identify significant predictors of default. Empirical analysis suggests that loan accounts with higher interest rate and of lower duration have higher default probability while loans extended to accounts with Aadhar information, collateral backing or some subsidy element have lower risk of default.

This entry was posted on June 14, 2021 at 1:20 pm and is filed under Academic research

My new article in Moneycontrol on a last week policy decision which shook the world of money.

This entry was posted on June 14, 2021 at 12:00 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy. You can follow any responses to this entry through the RSS 2.0 feed.
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Seán Kenny, Postdoctoral fellow at und University Sweden has started a superb podcast on economic history.

The Economic History podcast is a platform for sharing knowledge, ideas and new research with a general interest audience. Each fortnight, we meet leading academics in the field and discuss a range of topics, including pandemics, long run economic growth, gender issues, financial crises, inequality, sustainable development and a number of weird and fun economic experiments in history. There is no time like the past to help us understand the present.
The podcast has featured 24 episodes so far and each one is a gem. It is amazing to grasp and understand economic history via this medium. The subject has many layers which papers, books etc. cannot cover and can be done much

Danae Kyriakopoulou in this OMFIF piece:
Central bankers have long been associated with birds, traditionally divided between inflation-worried hawks or employment-leaning doves. More recently a third species, the ‘green swan’, has entered the conversation. Here, central bankers are increasingly united.
‘Green swan’ was coined by authors at the Bank for International Settlements in January 2020 to characterise the new type of systemic risks from climate change. The term is inspired by Nassim Nicholas Taleb’s concept of ‘black swan’ during the 2008 financial crisis to connote rare, catastrophic and unpredictable events. However, the main difference between the concepts is that a green swan will not be a rare event in the face of inaction, it will be a certainty.
In the central banks and

Franklin Noll in this coindesk piece:

In 1861, civil war broke out in the United States. Over the next four years of conflict, the politics of the U.S. were remade and so were its monetary affairs. A new monetary system was born during the war years that exists with us today and is shaping our stablecoin future.

This entry was posted on June 9, 2021 at 9:31 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc. You can follow any responses to this entry through the RSS 2.0 feed.
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My new piece in Moneycontrol:
It is interesting how financial repression has made a comeback against all odds. While the financial repression policies are being conducted differently compared to their earlier avatars, the broad idea is the same 

This entry was posted on June 9, 2021 at 1:54 pm and is filed under Academic research & research papers, 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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The sudden melting of FT India debt Mutual Funds was more than just a meltdown.
SEBI recently released a order implicating one of its directors for selling off his and family’s investments in the said mutual fund schemes:
The issue that arises for consideration in the present matter is whether the redemption of units in some schemes of a mutual fund by a director of the Asset Management Company of the Mutual Fund, and his immediate family, at a time when the said schemes were facing significant redemption pressure (the schemes were later wound up) and the director was allegedly in possession of material non – public information relating to the same, would fall within the scope of ‘fraudulent’ or ‘unfair trade practice’ as defined under the SEBI(Prohibition of Fraudulent and Unfair

EL Salvador’s President Nayib Bukele has sent a law to Congress proposing to make bitcoin legal tender. Currently, the country has adopted US Dollar as its currency. So if the law goes through, the country will have both currencies:

El Salvador’s President Nayib Bukele has sent a law to the country’s congress proposing to make bitcoin legal tender.
If approved by the legislative body, El Salvador would become the first nation in the world to give the cryptocurrency this status.
Bukele posted a screenshot of the “Bitcoin Law” in a tweet on Wednesday.
“The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out,” the law reads.
If

Michael Chui in this BIS paper:
Technology companies entering the financial services industry have become a global phenomenon over the past decade. This trend is most remarkable in China where two large technology firms (BigTechs) have emerged as important market players, especially in payment services. This paper examines the factors driving this development and whether the Chinese experience could be applied elsewhere.
Several lessons emerge: first, like any company in a network industry, it is important to build and maintain a large user base and that is the key factor behind BigTechs’ expansion into the financial industry. On this basis, these BigTechs can be seen as “accidental financiers” rather than “aggressive invaders”.
Second, these firms are cautious in offering

Draghi is again central to Euroarea fortunes though in a different role as PM of Italy.
Antonio Armellini, David Marsh and Pierre Ortlieb in this piece:
Mario Draghi, Italian prime minister, is emerging as Europe’s pivotal politician days ahead of a crucial European Central Bank meeting likely to extend the monetary legacy he laid down as its president in 2011-19.
European statistics compiled by OMFIF show evidence of sharply rising producer prices across the euro area, by as much as 8% year-on-year (Figure 1). Although there are only limited signs of this feeding into permanently higher costs for consumers, much increased energy and other input prices, exacerbated by bottlenecks (Figures 2-4), complicate the ECB’s monetary policy-setting at the 10 June meeting of its governing

Profile of economist Rohini Pande:
Pande, 49 years old, is “one of the most influential development economists of her generation,” according to the American Economic Association, and has made groundbreaking contributions to political economy, international development, gender economics, anti-corruption, and efforts to combat climate change.
“Running through her work is an insistence not simply to ask what will work to improve the lives of the poor, but why it works, and what this teaches us about how institutions should be structured and how we should view the world,” says Charity Troyer Moore, Yale’s director for South Asia economics research.
In 2019, Pande was named the Henry J. Heinz II Professor of Economics at Yale University and director of the Economic Growth Center. She spent

Interesting paper by IDFC Institute researchers: Sneha P., Neha Sinha, Ashwin Varghese, Avanti Durani and Ayush Patel.
The Indian bureaucracy suffers from indecision and risk aversion, resulting in an inordinate focus on routine tasks, coordination failure, process overload, poor perception, motivational issues and a deterioration in the quality of service delivery. We argue that bureaucratic indecision, in a large part, is a form of rational self-preservation exercised by bureaucrats from the various legal and extra-legal risks to their person, careers and reputation. These risks originate from problems of organizational design, institutional norms and other political factors.
The research for this working paper included a review of interdisciplinary literature on bureaucracy and

It has been 20 years since Jim O’Neil coined the term BRIC – Brazil, Russia, India and China. In this IMF piece, He reflects on the acronym BRIC and way forward for emerging markets:
My primary goal in my first paper, “The World Needs Better Economic BRICs,” was to make a case for changing the framework for global economic governance, not necessarily the inevitable future growth of these countries.
In subsequent papers I laid out what the world could look like, in the highly unlikely event that the countries we studied reached their potential. We defined this potential using the standard methodology for macroeconomics, in which real economic growth is determined by two variables: the size of a nation’s workforce and the economy’s productivity. Because of their population size, the

Andrea Zaghini in this ECB working paper looks at how the pandemic impacted different bond markets in Europe:
By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment-grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. Contemporaneously, the high-yield segment shrunk to almost disappear at 4%. Another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 bp and started to be priced only after the early containment actions taken by the national authorities.

Andy Haldane, Chief Economist of Bank of England resigned recently.
Andrew Sentance, former MPC member in this blogpost looks at the qualities the new chief economist should have:
The Bank of England is searching for a new Chief Economist, and the formal deadline for applications was Wednesday 2 June. But what is the Bank’s Chief Economist expected to do? And what skills and qualifications does he or she need? After all, the Bank has lots of economists. What special responsibilities does our central bank need a Chief Economist to carry out?
In the initial phase, BoE appointed academicians as Chief econs. This changed recently with appointment of people like Haldane:

The role of Chief Economist at the Bank formally came into being when Mervyn King was appointed in 1991. However, it

Prof Nicholas Muller in this NBER research paper explains green interest rate:

This paper demonstrates how a central bank might operationalize an expanded role inclusive of managing risks from environmental pollution. The analysis introduces the green interest rate (rg) which depends on temporal changes in the pollution intensity of output. This policy instrument reallocates consumption from periods when output is pollution intensive to when output is cleaner. In economies on a cleaning-up path, rg exceeds r*. For those growing more polluted, rg is less than r*. In the U.S. economy from 1957 to 2016, rg exceeded r* by 50 basis points. Federal environmental policy reversed the orientation between rg and r*.
Useful way to think about how to bring central banks in the green economy

Klaus-Peter Hellwig of IMF in this working paper:
In this paper I assess the ability of econometric and machine learning techniques to predict fiscal crises out of sample. I show that the econometric approaches used in many policy applications cannot outperform a simple heuristic rule of thumb. Machine learning techniques (elastic net, random forest, gradient boosted trees) deliver significant improvements in accuracy.
Performance of machine learning techniques improves further, particularly for developing countries, when I expand the set of potential predictors and make use of algorithmic selection techniques instead of relying on a small set of variables deemed important by the literature.
There is considerable agreement across learning algorithms in the set of selected