Our public debt and growth paper on VOX

Countries with high public debt tend to grow slowly – a correlation often used to justify austerity. This column presents new evidence challenging this view. The authors point out that correlation does not imply causality – it may be that slow growth causes high debt. They argue that policymakers should be wary – the case for cutting debt to boost growth still needs to be made. The rest is here

Is public debt bad for growth?

Not really.

This paper uses an instrumental variable approach to study whether public debt has a causal effect on economic growth in a sample of OECD countries. The results are consistent with the existing literature that has found a negative correlation between debt and growth. However, the link between debt and growth disappears once we instrument debt with a variable that captures valuation effects brought about by the interaction between foreign currency debt and exchange rate volatility. We conduct a battery of robustness tests and show that our results are not affected by weak instrument problems and are robust to relaxing our exclusion restriction.

The paper is here


-------------------------------------------------
♦DiggIt!   ♦Add to del.icio.us   ♦Share on Facebook

Italy and original sin

Krugman on our original sin paper


http://krugman.blogs.nytimes.com/2011/11/10/original-sin-and-the-euro-crisis/



----------------------------------------------- ♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Chinese Perfume Brands

I took this picture in a shopping mall in Wuhan (Hubei Province, China)

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

When Financial Sectors Become “Too Large”

At the end of July Alan Greenspan published an Op Ed arguing that tighter financial regulation and capital standards will lead to the accumulation of “idle resources that are not otherwise engaged in the production of goods and services” and are instead devoted “to fending off once-in-50 or 100-year crises” resulting in an “excess of buffers at the expense of our standards of living.”...

....While former Chairman Greenspan implicitly assumed that stricter regulation will have a negative effect on financial intermediation and depress future GDP growth, our results suggest that there are many countries for which tighter credit standards could actually increase growth.

The rest on EconoMonitor
-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Lebanese Innovations

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

11 luglio CORIPE day

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

100 trillion dollars (Zimbabwe)

These bills are worth more as a souvenir (5 USD) than when they were legal tender. Below are 10 and 5 billions.

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Too much finance?

This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We develop a simple model in which the expectation of a bailout may lead to a financial sector which is too large with respect to the social optimum. We then use different empirical approaches to show that there can indeed be “too much” finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 110 percent of GDP. We conclude by showing that the size of the financial sector was a significant amplifying factor in the global crisis that followed the collapse of Lehman Brothers in September 2008.

The vox.eu article about it is here

The paper is here

An older version of the paper is  here

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Housing prices in Geneva are still going up

For what is worth, the Switzerland and Geneva series appear to be cointegrated.
Such a long-run relationhsip suggests that either rest of Switzerland prices need to increase a lot or that Geneva prices need to go down (or both).
If I were a hedge fund, I would be short on Geneva and long on the rest of Switzerland.
-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Keynes on exams

The results of his civil service exams infuriate Keynes. He writes to Strachey:

"I have done worst in the only two subjects of which I possessed a solid knowledge - Mathematics and Economics. I scored more marks for English History than for Mathematics - is it credible? For Economics I got a relatively low percentage and was eight or ninth in order of merit..."

He was later to say: "I evidently knew more about Economics than my examiners."

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Development and grammar

Here

------------------------------------------------
-♦DiggIt!   ♦Add to del.icio.us   ♦Share on Facebook  

On economists

Therefore, the total impact includes a journal's impact on many disciplines
other than economics. For many purposes this may be an entirely reasonable
measure of influence, but economists, being a rather narrow-minded and
self-centered group, are probably more concerned with a journal's impact on the
economics profession

Liebowitz and Palmer (1984)
Journal of Economic Literature 22, p.81-82.
-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Interview with the BBC on the costs of default

here (my part starts at minute 8)

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Ravi Kanbur is very wise

issue makes me uncomfortable within myself, takes me off my high moral perch when I talk (or lecture) to others about poverty, and it is an issue for which I do not have an answer. It is quite simply this—those of us, including me, who analyze poverty and discourse about poverty, seem to do rather well out of it. Working on poverty issues, whether in international agencies, in bilateral donor

The rest is here

The development set poem by Ross Coggins


‘Excuse me, friends, I must catch my jet
I’m off to join the Development Set;
My bags are packed, and I’ve had all my shots
I have traveller’s checks and pills for the trots!

The Development Set is bright and noble
Our thoughts are deep and our vision global;
Although we move with the better classes
Our thoughts are always with the masses.

In Sheraton Hotels in scattered nations
We damn multi-national corporations;
injustice seems easy to protest
In such seething hotbeds of social rest.

We discuss malnutrition over steaks
And plan hunger talks during coffee breaks.
Whether Asian floods or African drought,
We face each issue with open mouth.

We bring in consultants whose circumlocution
Raises difficulties for every solution –
Thus guaranteeing continued good eating
By showing the need for another meeting.

The language of the Development Set
Stretches the English alphabet;
We use swell words like “epigenetic”
“Micro”, “macro”, and “logarithmetic”

It pleasures us to be esoteric –
It’s so intellectually atmospheric!
And although establishments may be unmoved,
Our vocabularies are much improved.

When the talk gets deep and you’re feeling numb,
You can keep your shame to a minimum:
To show that you, too, are intelligent
Smugly ask, “Is it really development?”

Or say, “That’s fine in practice, but don’t you see:
It doesn’t work out in theory!”
A few may find this incomprehensible,
But most will admire you as deep and sensible.

Development set homes are extremely chic,
Full of carvings, curios, and draped with batik.
Eye-level photographs subtly assure
That your host is at home with the great and the poor.

Enough of these verses – on with the mission!
Our task is as broad as the human condition!
Just pray god the biblical promise is true:
The poor ye shall always have with you.’





-------------------------------------------------♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Grecia edi costi del default

Il debito pubblico si differenzia da quello privato, per la mancanza di una procedura ben definita per punire uno stato che non ripaga i debiti. Le ripercussioni si pagano in termini di reputazione, commercio estero e accesso ai mercati internazionali. Ma sono effetti che durano pochi anni. Per la teoria economica la ristrutturazione del debito sembrerebbe meno costosa di quanto si pensi. Forse perché è stata sempre accompagnata a un deprezzamento del tasso di cambio. Cosa impossibile per la Grecia.

il resto e' qui

grazie a Giulia

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

What will happen if Greece defaults? Insights from theory and reality

My piece (with Eduardo Borensztein) on the costs of default: here

-------------------------------------------------

♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Intervista sulla crisi greca alla radio della svizzera italiana

qui oppure qui


http://reteuno.rsi.ch/modem/welcome.cfm?IDc=40891



-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Nadine with models

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Bankers' conflicts of interest in the interwar years: Lessons for today’s regulators

My (joint with Marc Flandreau and Norbert Gaillard) new piece on VOX

The global crisis is frequently compared to the Great Depression and the interwar debt crises. This column argues that, contrary to prevailing opinion, the interwar debt crisis had little to do with bankers’ conflicts of interest – intermediaries were in fact careful in selecting and placing sovereign bonds. Then, as now, public opinion may not be the best guide to policy The rest is here

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Me on the Economist

Eduardo Borensztein and Ugo Panizza counts as many as 257 sovereign defaults between 1824 and 2004. Between 1981 and 1990 alone, there were 74 defaults....Messrs Borensztein and Panizza show that having defaulted is associated with a credit-rating downgrade of nearly two notches.....That said, markets appear to have short memories. Only the most recent defaults matter and the effects on spreads are short-lived. Messrs Borensztein and Panizza find that credit ratings between 1999 and 2002 were affected only by defaults since 1995.....Messrs Borensztein and Panizza find that a defaulting country grows by 1.2 percentage points less per year while its debt is being restructured compared with a similar country that is not in default. This effect, too, is concentrated in the first year after default. Once again, measuring from the point of default will somewhat understate the damage: defaults tend to occur during recessions, so GDP is already depressed when a country reneges...Another element to the costs of default may also alarm Greek policymakers. Messrs Borensztein and Panizza find that political leadership changed in the year of default or the year after in half of the 22 cases they study. That is twice the usual probability of such change. These political costs, at least, are unlikely to vary.

The rest is Here

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Great vox piece

with great pictures too. Here

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Macro Data 4 STATA

is now public http://sites.google.com/site/md4stata/.

This is Alex Tabarrok on MR. One commenter suggests to install Kountry. I did not now about it and it's indeed very cool (however, I am not sure that it is more useful than Md4Stata, they are both useful and I think that they complement each other)

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

New paper on "Old Bonds"

Conflicts of Interest, Reputation, and the Interwar Debt Crisis: Banksters or Bad Luck?
(with Marc Flandreau and Norbert Galliard)

This paper builds a new dataset with detailed information on the universe of
foreign government bonds issued in New York in the 1920s and uses these data to
describe the behavior of the financial intermediaries which operated in the New
York market during the period leading to the interwar debt crisis. The paper
starts by showing that concerns over reputation played an important role in
intermediaries‘ underwriting choices. Next, the paper checks whether banks
managed to charge abnormal underwriting fees on bonds that would eventually
default and finds no evidence of such practice (―banksterism‖). The paper
concludes by discussing some parallels between the experience of the 1920s and
the current debate on the "originate and distribute" model.

The paper is here
-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook

Social mobility in Italy: The second lowest in the OECD

The paper is here

-------------------------------------------------
♦DiggIt! ♦Add to del.icio.us ♦Share on Facebook