Dirk Niepelt

In an NBER working paper entitled “The Scandinavian Fantasy: The Sources of Intergenerational Mobility in Denmark and the U.S.,” Rasmus Landersø and James J. Heckman argue that [m]easured by income mobility, Denmark is a more mobile society, but not when measured by educational mobility. … Greater Danish income mobility is largely a consequence of redistribution … policies. While Danish social policies for children produce more favorable cognitive test scores for disadvantaged children,...

In a recent NBER working paper, Luca Benati, Robert E. Lucas, Jr., Juan Pablo Nicolini, and Warren Weber report estimates of long-term money demand. They write: [U]sing annual data on money (M1, for us), nominal GDP, and short term interest rates from 31 countries over periods that range in some cases to over 100 years. We find remarkable stability in long run money demand behavior in many countries, and an equally surprising sameness across different countries. In some cases of...

In the FT, Rachel Sanderson and Martin Arnold report that the board of Monte dei Paschi is about to approve a recapitalization led by JPMorgan in order to avoid the alternative, a bailin according to European rules. Other news sources reported that the European Commission had made it clear that it rejected the proposal by Italy’s prime minister (supported by the ECB president) to change the rules and let the Italian government finance the recapitalization. EU finance ministers and Angela...

The Independent Evaluation Office of the International Monetary Fund released a critical report on IMF supported policies in Greece, Ireland and Portugal. It questions the legitimacy of certain decisions. The executive summary states that [t]he IMF’s pre-crisis surveillance mostly identified the right issues but did not foresee the magnitude of the risks … missed the build-up of banking system risks … shared the widely-held “Europe is different” mindset … Following the onset of the...

On his blog, Lukas Hässig suggests that a leading Swiss banker might have exploited insider information. The comments to the post are even more revealing than the article.

In a paper, Larry Ball argues that inadequate collateral and lack of legal authority were not the reasons that the Fed let Lehman fail. … … the primary decision maker was Treasury Secretary Henry Paulson–even though he had no legal authority over the Fed’s lending decisions. … evidence supports the common theory that Paulson was influenced by the strong political opposition to financial rescues. … Another factor is that both Paulson and Fed officials, although worried about the effects of...

Adjusted for GDP, The Economist’s Big Mac Index suggests that the Swiss Franc is 9 percent over valued relative to the US Dollar while the Euro is 17 percent under valued.

The Economist reviews core ideas in economics. The introductory article points out that economists’ fundamental mission is not to forecast recessions but to explain how the world works. It argues that economists have delivered and it discusses six exemplary areas of economic research: Nash equilibrium; Mundell-Fleming trilemma; Minsky financial-instability; Stopper-Samuelson effect of trade on wages; Keynes fiscal-multiplier; and Akerlof’s and others’ work on information asymmetries....

Finanz und Wirtschaft, July 20, 2016. PDF. In a perfect world, monetary and fiscal policy are coordinated. In the real world with its political frictions they are not. So much on helicopter money.

In the FT, Edward Luce worries about a loss of dignity that is reflected in contemporary politics. Republicans generally favour liberty over equality and Democrats the reverse. Other people’s dignity is not up for grabs. Mr Trump’s hostile takeover of the Republican party has shredded that equation. … “You walked out of a Reagan rally in a spirit of optimism,” says Stuart Stevens, an adviser to Republican nominee Mitt Romney. “You leave a Trump rally ready for a fight.” … … Luigi...