Monthly Archives: May 2014

Emerging Market may hit back with their own version of QE: Raghuram Rajan

Emerging markets may begin to retaliate with monetary weapons of their own such as intervening in exchange rates if the central banks of the developed world are not mindful of the harm they cause because of their cheap money policies, said the Reserve Bank of India governor Raghuram Rajan. The unconventional policies pursued by the US Federal Reserve and the Bank of Japan may be help build risks in the financial markets which when blows up could probably lead to another crisis, he  .. 

Nazi pork and popularity: How Hitler’s roads won German hearts and minds

Nice article by Hans -Joachim Voth on how Autobahn (National Motorway Network.

‘At least he built the Autobahn’. Many Germans remember this phrase from conversations with parents and grandparents pointing to how the Nazi regime could receive such widespread support. The regime’s overwhelming popularity at home was essential for its policies, from the aggressive pursuit of war abroad to genocide. The building of Germany’s motorway network has survived in popular memory as a palpable, unambiguously benign accomplishment of the National Socialist government; in retrospect, it serves as a ready explanation for the regime’s genuine popularity from 1933 onwards.


Has the Financial Crisis Permanently Changed the Practice of Monetary Policy? -Benjamin M. Friedman

Brilliant Paper:

I argue in this paper that one of the two forms of hitherto unconventional monetary policy that many central banks have implemented in response to the 2007 financial crisis – large-scale asset purchases, or to put the matter more generically, use of the central bank’s balance sheet as a distinct tool of monetary policy – is likely to become part of the standard toolkit of monetary policymaking in normal times as well. As intended, these purchases have lowered long-term interest rates relative to short-term rates, and lowered interest rates on more-risky compared to less-risky obligations. Moreover, their introduction fills a conceptual vacuum that has long stood at the heart of monetary policy analysis and implementation.


By contrast, forward guidance on the future trajectory of monetary policy has been less successful. Public statements by central banks about their actions and intentions will no doubt continue, but transparency for the sake of transparency is not the same as the deliberate attempt to shape market expectations for purposes of achieving specific monetary policy objectives.

Finally, there is a conceptual component to all this as well. In contrast to the last century or more of monetary theory, which has focused on central banks’ liabilities, the basis for the effectiveness of central bank asset purchases turns on the role of the asset side of the central bank’s balance sheet. The implications for monetary theory are profound.