Tag Archives: Notes

The Economist reports about “outcome switching”—promoting empirical evidence collected in the context of a specific hypothesis test (that didn’t succeed) as support for a different hypothesis. Outcome switching is a good example of the ways in which science can go wrong. This is a hot topic at the moment, with fields from psychology to cancer research going through a “replication crisis”, in which published results evaporate when people try to duplicate them.

The Economist reports that regulation catches up with peer-to-peer lending: Meanwhile, a case working its way through the courts may subject P2P loans to state usury laws, from which banks with a national charter are exempt. That would prevent the P2P firms from lending to the riskiest borrowers in much of America. In addition, the Consumer Financial Protection Bureau, a federal agency, announced this month that it would begin accepting complaints about P2P consumer lending. Rates of...

The Economist reports about initiatives by commercial and central banks that aim at adopting the blockchain technology. For commercial banks, distributed ledgers promise various advantages—but they also cause problems: Instead of having to keep track of their assets in separate databases, as financial firms do now, they can share just one. Trades can be settled almost instantly, without the need for lots of intermediaries. As a result, less capital is tied up during a transaction, reducing...

In the Pro Market blog, (previous) industry insiders describe the extent of rent seeking activities in pharmaceutical companies (bribing doctors), finance (exploiting information asymmetries vis-à-vis clients).

In his blog, Ben Bernanke discusses the merits of longer-term interest rate targeting as a monetary policy tool. A lot would depend on the credibility of the Fed’s announcement. If investors do not believe that the Fed will be successful at pushing down the two-year rate … they will immediately sell their securities of two years’ maturity or less to the Fed. … the Fed could end up owning most or all of the eligible securities, with uncertain consequences for interest rates overall. On the...

Rising. Source: SNB. The series “in EUR” is based on the author’s calculations. Note: The exchange rate floor vis-a-vis the Euro was in place from 6 September 2011 until 15 January 2015.

In a Study Center Gerzensee working paper, Pinar Yesin argues that the IMF’s Equilibrium Real Exchange Rate model (ERER) helps predict medium term exchange rate changes. The reduced form equation relates the real effective exchange rate to macroeconomic fundamentals. … one of the models, namely the ERER model, outperforms not only the other two in predicting future exchange rate movements, but also the (average) IMF assessment. … the IMF assessments are better at predicting future exchange...

On VoxEU, representatives of the German Council of Economic Experts outline the German crisis narrative. In disagreement with the ‘consensus view’ outlined in Baldwin et al. (2015) the German economists including Lars Feld, Christoph Schmidt, Isabel Schnabel and Volker Wieland do not want to implicate the ‘intra-Eurozone capital flows that emerged in the decade before the crisis’ as the ‘real culprits’. … [Rather] it is the government failures and the failures in regulation and supervision...

In his blog, John Cochrane discusses plausible features of habit models (that some other models share): Consumption moves more with income in bad times. In bad times, consumers start to pay inordinate attention to rare bad states of nature. [The habit model] also gives a natural account of endogenous time-varying attention to rare events.

In a New Republic blog, Alan Auerbach and Larry Kotlikoff discuss lifetime spending inequality. Due to taxes and income variability over the life cycle, this is much smaller than wealth or income inequality. Auerbach and Kotlikoff write: The top 1 percent of 40-49 year-olds face a net tax, on average, of 45 percent. … For the bottom 20 percent, the average net tax rate is negative 34.2 percent. … Our standard means of judging whether a household is rich or poor is based on current income....