Wednesday, November 26, 2008

Books

I tend to be a compulsive reader (and book buyer, da wife gets very scared when she sees me surfing amazon.com), but recently I've been busy and I haven't been reading much. However, I just finished White Tiger and I loved it (the book also mentions the New Delhi market where I bought the book! By the way, buying books in India is fantastic).
In the meantime, the world entered in full Bolanomania. I haven't read 2666 (but Tyler Cowen recommends this book review which ends with: BolaƱo has joined the immortals.). However, I did read The Savage Detectives (no detectives in the book) and I have mixed feelings about it. I loved some parts of the book and found other parts very boring, and, yet, I have the feeling that the good parts wouldn't be so good without the boring parts. I also often think about the book (and I read it almost two years ago), so it must be a good book.
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Monday, November 24, 2008

Barclays Capital on Ecuador's default

Barclays Capital Research has an excellent piece on potential contagion from Ecuador's default. One of the authors is my friend and co-author Eduardo Levy Yeyati (in fact, the piece is partly based on our past research). Unfortunatley, the piece is not available on the net.
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The new US Treasury Secretary

The New Republic has a very nice profile (the story was written before the appointment). Free Exchange (the blog of The Economist) speculates on who will replace Geithner at the NY Fed.
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SING TO THE TUNE OF 'BOHEMIAN RHAPSODY' BY QUEEN

Is this the real price?
Is this just fantasy?
Financial landslide
No escape from reality

Open your eyes
And look at your buys and see.
I'm now a poor boy (poor boy)
High-yielding casualty
Because I bought it high, watched it blow
Rating high, value low
Any way the Fed goes
Doesn't really matter to me, to me

The whole text is here.
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Sunday, November 23, 2008

Rose

Kids who love "rose" (pink) even more than my daughter.
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LACEA, lot's of good stuff but also some bad news

I am on my way back from LACEA. I had no time to enjoy Rio but I saw lots friends (and I was surprised to find out that many regularly read No Original Content) and the conference was really good. Great papers with high policy content, so far away from standard ivory tower stuff.

Because of my commitments with the Economia panel I lost many interesting sessions, but I did manage to listen to Abhijit Banerjee’s fantastic interpretation of India’s economic success (with a discussion of how, in his view, India and China are screwing all other countries at the same stage of the development process) and Ricardo Hausmann’s discussion of internal decoupling in Latin America (Ricardo could be asked to give talk about the standard deviation of the temperature inside his refrigerator and still manage to make it fascinating).

Of course, the fact that there were so many good papers is not so surprising. Given the policy-obsession of Latin American economists, LACEA is always a good conference. The most surprising thing was a very bad plenary (or semi-plenary) presentation. Probably the worse since I have been going to LACEA. I hope that my friends will not suffer too much.
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Saturday, November 22, 2008

Friends with nice houses

The Wall Street Journal has an article about the house of my friend, coauthor, and former colleague Ernesto Stein.
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Thursday, November 20, 2008

Luca Ricci on Business Week

Luca, who also used to be a rollerblader, tells Business Week about the employment effects of the crisis.
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A cloudy day in Ipanema



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Tuesday, November 18, 2008

Off to LACEA

The conference is very good (the program is here), the journal is excellent (check out the editorial board) and the place, well, uh uh, how do you describe Rio? You can listen to this (in English with Stan Getz here) or read Tyler Cowen who concludes: "Might Brazil be the best place, period? " (the only problem is that the weather seems to be crappy right now)
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Funny...

Click on the pipcture to enalarge. Thanks to Raja.

Monday, November 17, 2008

Two types of liquidity

Lasse Heje Pedersen explains. See also this nice column by Carmen and Vincent Reinhart on the cost and responsibilities that come with exorbitant privileges.
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Evil, stupid, or both

A friend who lives in a major emerging market country sent me an email describing the policymaking process in his country. It goes like this: Peter Seller's Inspector Clouseau illustrates how sometimes sheer stupidity is more dangerous than evil. Our current stance is that, unlike Clouseau, the government is evil, but in a very stupid way.
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Italian mothers in law and the Middle East

Da Wife sent me this article on a divorce caused by a terrible Italian mother in law (I think she's getting along well with her own Italian mother in law, so I don't think this was a subtle hint to anything).

In the meantime, I received another book recommendation from SiL Nadine. The book is titled Sharon and My Mother-in-Law. This made me think that Middle Eastern policy could have been different if we had exported some terrible Italian mothers in law to Palestine!
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Ecuador on the brink of default

So, are we again living in the age of defaults? Here is Bloomberg news: Ecuador, hamstrung by a tumble in oil, its biggest export, said last week it will use a 30-day grace period to decide whether to make a $30 million interest payment that came due Nov. 15....The price on Ecuador's 12 percent bonds maturing in 2012 plunged to 14 cents on the dollar on Nov. 14, sending yields over 100 percent, as investors braced for the first sovereign default since the global financial crisis deepened in September.
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Sunday, November 16, 2008

The coolest on-line art gallery

Here. What about non-online? Of course the one managed by Pepi, but I will never be able to afford anything there.
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Saturday, November 15, 2008

The only thing that scares Vladimir Putin

Becoming like George Bush
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...told you so

Micco-Panizza (2006) (but written around 2003) “This paper provides evidence for the fact that state-owned banks may play a credit smoothing role. …This suggests that state-owned banks could play a useful role in the transmission of monetary policy”

Oxford Analytica (2008) “Governments in several nations have also aggressively used public sector banks to provide credit and other types of financing to sectors that are particularly vulnerable to the crisis or those that are important for economic growth” Thanks to Arturo Galindo for sending the article.

… and they insulted us when we wrote our series of public bank papers. I don’t know what my noise-to-signal ratio is, but I think that my forecasting ability is improving and I'm still hoping for a crash in the Geneva-region housing market.
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Thursday, November 13, 2008

Torture

Read the post, watch the documentary, get depressed but hope that this will soon be over. You can also read Brad deLong's torture memo.
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Evil UN Staff

Pierre-Louis at Rigotnomics does not like us (see here and here). I think that he is completely right in pointing out serious staffing and inefficiency issues at the UN, but his proposed solution (cutting pay) doesn't make any sense.

First of all, we need to find out whether the UN pays too much. This is not an easy task. If we compare UN pay and benefits to those of other international organizations, we find that the UN pays less than, say, the Fund or the Bank (see here for evidence). Of course, this is not a fair comparison, because the quality of the staff might be different. I have only one observation for which I can compare pay, holding constant staff quality: myself. I can assure you, that I make much less money (PPP adjusted) and I have worse benefits in Geneva than in Washington (why did I move? Money isn't everything). So, I feel pretty confident in saying that the UN does not pay too much compared to similar employers. Of course, you can argue that all these employers (the Bank, the Fund, the BIS,…) pay too much and I would probably agree with you (some evidence is provided by the fact that people rarely leave these organizations). However, the fact that the Bank/Fund/BIS pay higher salaries, offer more generous benefits and stronger job security and, yet, have less serious staffing problems is prima facie evidence that high salaries are not the source of the problem.

Of course, one could lower salaries until people start leaving and this would reduce the UN personnel cost but I don't think that such a policy would increase the quality of the staff (it would probably lower it because the first people toleave are usually those who have outside options, see what happened at the Fund last summer).

The parallel with blood donors is also misleading. To be a good blood donor you need to have "clean" blood. Given that donors have private information on the "quality" of their blood, not paying for blood donation allows you to sort people with "good" and "bad" blood. To be a good employee, you don't only need to be idealistic (like for blood donors), but you also need to be intelligent and well-prepared. Staff members of NGOs are often idealistic and well-prepared, but I've seen many NGO idealists who are also complete idiots.

Summing up, we do have a serious personnel problem (please also note that I also have many colleagues who are incredibly hard working and committed, you often find them in their offices late at night and during weekends) but, in my view, cutting salaries is not the right solution (of course, I have a vested interest here).

Let me conclude with one observation about quality of research. In this post, Pierre Louis hints that the quality of UN researchers is lower than that of WTO researchers. Evaluating research quality is very difficult. But, for whatever rankings are worth, this ranking of the top 50 Swiss-based economists only includes 4 researchers who are based in international organizations: 3 are from BIS (ranked nr 4, 10, and 31) and one is from UNCTAD (ranked nr 26). Note that BIS pays much much much much better than the UN.
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Wednesday, November 12, 2008

Today I will be talking about institutions

These are some important points I need to mention.
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How to solve the time-inconsistency problem

Here. Thanks to Manu-Manu
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Tuesday, November 11, 2008

The next book I will read

The Secret Life of Syrian Lingerie: Intimacy and Design. Thanks to SiL Nadine. Here is more: Who wears a g-string with a fake miniature bird that lights up
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The economic team

Willem Buiter is not so excited about Obama's economic team. This is what he has to say: They’re old (the mean age is 61.9); Too few serious economists and far too many lawyers (he adds: the American political system is completely dominated by this largely socially unproductive and parasitic profession. I add, he should look at Italy!) They are protectionist; They are the unalluring faces of past failures!

Buiter concludes: the one beacon of hope in this fog of mediocrity is Paul Volcker, a truly great man with more character, intelligence and vision than the rest of the Board put together. (ndr: he is also the one who really increases the average age).

Addendum
Comment by Willem Buiter below (cool that he took the time to read something I wrote). Of course he's right. Also the median is high.
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Monday, November 10, 2008

Monetary sado-masochism

Since 1999 the FED moved the policy rate 45 times, the ECB 25 times. And yet, given the fact that the European labor market is much more rigid, it would make sense for the ECB to be more activist than the FED (I, sort of, show it in this paper). Moreover, in these tough times prudence can be counterproductive. A 1996 AER paper byCaplin and Leahy makes the point very well: Modest stimuli may prove ineffectual. If small reductions in interest rates are unlikely to promote a response, then they may be followed by further cuts. A vicious circle develops in which the expectation that the policy could fail leads investors to delay investment, thereby promoting failure.
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Sunday, November 9, 2008

But they still haven't found

what they are looking for.
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Amazing!


The Taj, not me (click picture to enlarge)









Thursday, November 6, 2008

Blow horn

All indian trucks seem to want you to "blow horn". I have no clue why.

Wednesday, November 5, 2008

Criticizing Alan Greenspan

While writing this post I realized that, these days, criticizing Alan Greenspan is a little bit like shooting at the Red Cross. However, when he was strong, powerful, and considered infallible, almost nobody dared saying anything bad about the Maestro. I say almost because, as usual, Paul Krugman was well ahead of the curve. Two early columns in 2001 ("Et tu, Alan" and "Doing the wrong thing) are not available on-line, but here you can find summaries. More recent columns are 2004, 2004, and 2005.
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Tuesday, November 4, 2008

Toilets

I am still in Vienna and just found out what that Austrian toilets are different. Here is Robert Waldman on the subject. Of course, only China has star-rated toilets.
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Airports

I’m sitting in Vienna’s airport on my way to New Delhi and I just realized that this was the only main European airport I had never visited. It’s nice, but what is the nicest main European airport? Well, surely not Paris. Charles de Gaulle is awful (this is sad because I really like Air France). While Munich is nice and very convenient, my vote goes to Amsterdam. Of course Schiphol is not as cool as Changi (which is the best airport in the world) but it’s very nice, it has a small Casino (not that I gamble), a small museum and, if you have a half day layover, you can visit Amsterdam and find whatever type of entertainment you might be looking for (of course, I mean this).

By the way, did you ever wonder why German airports have sex shops? What do people buy? Something to keep them busy during long flights? Next time I am in Munich or Frankfurt I’ll go in and ask.

What about airport names? Orange county picked the coolest airport name. Washington National and Houston, Texas picked the worst names. I took the Washington-Houston flight many times on my way to Mexico and flying from Reagan into Bush always looked like a nightmare (the only consolation is that the Houston Airport is named after Bush father). Of course, one could do worse. Imagine if one day the Rome-Milan flight will take you from the Giulio Andreotti to the Silvio Berlusconi Airport!
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More on the Bradley effect

If this analysis is correct, tomorrow night will be a long night. And don't forget Osama.
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Shiller on bubbles

..and why it's hard to talk about them. In fact, I still think that the Geneva housing market is in the middle of a huge bubble, but nobody believes me.
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Cool idea about the Fund

Here is Eswar Prasad: The second idea is to impose conditions on voting rights, rather than just on loans. Each country would get a list of criteria (e.g., a lower budget deficit, a more flexible exchange rate) that it would have to fulfil or have a plan for making progress towards. The IMF already jawbones its member countries, but only countries that borrow from it take its recommendations seriously....Conditionality on voting rights might make the IMF uniformly despised, but that is a price worth paying for being seen as an impartial institution that doesn’t just pick on emerging markets and small countries.
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Monday, November 3, 2008

Sovereign defaults are back!


This graph is from a UBS publication (click to enlarge). Over the last few years I have written (together with Eduardo Borensztein, Eduardo Levy Yeyati, Federico Sturzenegger, and Jeromin Zettelmeyer) several papers and a book on sovereign debt and defaults. But people have been telling us that we were stuck in the past.
It looks like that defaults are back. (here is a paper on the cost of default; here is a paper on the elusive cost of default; here is a paper on default and exports; here is book on sovereign debt with a chapter on default; we also have a super cool paper on the Law and Economics of Sovereign Debt and Default but it's not online yet).
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