Notes on "Monetary policy transmission in vector autoregressions: A new approach using central bank communication" (Neuenkirch, Matthias)

Monetary policy transmission in vector autoregressions: A new approach using central bank communication

Neuenkirch, Matthias

Journal of Banking and Finance, November 2013, Vol.37(11), pp.4278-4285 [Peer Reviewed Journal]

Notes on "Mere Exposure to Money Increases Endorsement of Free-Market Systems and Social Inequality" (Caruso, Eugene M. ; Vohs, Kathleen D. ; Baxter, Brittani ; Waytz, Adam)

Mere Exposure to Money Increases Endorsement of Free-Market Systems and Social Inequality

Caruso, Eugene M. ; Vohs, Kathleen D. ; Baxter, Brittani ; Waytz, Adam

Journal of Experimental Psychology: General, 2013, Vol.142(2), p.301-306 [Peer Reviewed Journal]

America-centric version
social Darwinism
a marginally signficant interaction between nations and money condition
presence of money benefits individuals, but more favours socially advantaged groups

Notes on "International trade of scarce water" (Lenzen, Manfred ; Moran, Daniel ; Bhaduri, Anik ; Kanemoto, Keiichiro ; Bekchanov, Maksud ; Geschke, Arne ; Foran, Barney)

International trade of scarce water
Lenzen, Manfred ; Moran, Daniel ; Bhaduri, Anik ; Kanemoto, Keiichiro ; Bekchanov, Maksud ; Geschke, Arne ; Foran, Barney 
Ecological Economics, October 2013, Vol.94, pp.78-85 [Peer Reviewed Journal]

The impact cannot only be measured by the quantity of water used, but also quality
The water exploitation index
lacks information of the quality and sources of water
a Multi-Region Input-output framework

Notes on "The effect of reducing quantitative easing on emerging markets" (by Bouraoui, Taoufik)

The effect of reducing quantitative easing on emerging markets
Bouraoui, Taoufik
Applied Economics, 28 March 2015, Vol.47(15), p.1562-1573 [Peer Reviewed Journal]

Routledge

not finished

Notes on "Forecasting volatility of the U.S. oil market" (by Haugom, Erik ; Langeland, Henrik ; Molnár, Peter ; Westgaard, Sjur)

Forecasting volatility of the U.S. oil market

Haugom, Erik ; Langeland, Henrik ; Molnár, Peter ; Westgaard, Sjur

Journal of banking and finance, Oct 2014, Vol.47, pp.1-14 [Peer Reviewed Journal]

using the generalized autoregressive conditional heteroscedasticity approach

(not finished)

Notes on "Endogenous Product Differentiation, Market Size and Prices" (Ferguson, Shon M.)

Endogenous Product Differentiation, Market Size and Prices

Ferguson, Shon M.

Review of International Economics, 2015, Vol.23(1), pp.45-61 [Peer Reviewed Journal]

larger markets for differentiated goods often provide consumers with a greater variety of products
how market size affects the extent of endogenous product differentiation
assumptions: endogenizing fixed costs, costly product differentiation
market size and firm number alone do not provide sufficient information to make inferences about markups when product differentiation is endogenous and costly
prices can increase when markets expand may provide a valuable insight for economists who study anti-competitive behavior
the model is extended to include two countries and trade costs
the model allows for firms to endogenously choose from a continuous set of technologies by creating a trade-off between fixed costs and product differentiation
the theoretical model suggests that endogenous product differentiation contributes positively to the welfare gains from economic integration

Milton Friedman: Contributions to Economics and Public Policy

Robert A. Cord and J. Daniel Hammond

Print publication date: 2016

Published to Oxford Scholarship Online: August 2016

Print ISBN-13: 9780198704324

DOI: 10.1093/acprof:oso/9780198704324.001.0001

not started yet

Notes on "Has Government Any Role in Money?" (Milton Friedman and Anna J. Schwartz)

http://www.nber.org/chapters/c7507.pdf

Competition versus government monopoly in the creation of or control over outside or high-powered money
so-called free banking
the determination of the unit of account and its relation to media of exchange

the resource cost of a pure commodity currency and hence its tendency to become purely fiduciary
the peculiar difficulty of enforcing contracts involving promises to pay that serve as a medium of exchange and of preventing fraud in respect of them
the technical monopoly character of a pure fiduciary currency which makes essential the setting of some external limit on its amount - questioned, far more persuasively
the pervasive character of money and the important effects on parties other than those directly involved in the issuance of money

Notes on "The Role of Monetary Policy" (by Milton Friedman)

The Role of Monetary Policy
by Milton Friedman
The American Economic Review, Volume LVIII, March 1968, Number 1
https://assets.aeaweb.org/assets/production/journals/aer/top20/58.1.1-17.pdf

The price level is clearly the most important in its own right
The link between the policy actions of the monetary authority and the price level, while unquestionably present, is more indirect than the link between the policy actions of the authority and any of the several monetary totals. Moreover, monetary action takes a longer time to affect the price level than to affect the monetary totals and both the time lag and the magnitude of effect vary with circumstances. As a result, we cannot predict at all accurately just what effect a particular monetary action will have on the price level and, equally important, just when it will have that effect.
The monetary authority avoids sharp swings in policy
By setting itself a steady course and keeping to it, the monetary authority could make a major contribution to promoting economic stability.

Notes on "Capitalism and Freedom" (Milton Friedman)

Capitalism and Freedom
by Milton Friedman

moderate monetary policy and moderate supply of liquidity, control inflation rate, a stable economic growth trend
small government
free market
(not finished)

Notes on "Why Are Excess Returns on China's Treasury Bonds So Predictable? The Role of the Monetary System" (by Fan, L. ; Tian, S. ; Zhang, C.)

Why Are Excess Returns on China's Treasury Bonds So Predictable? The Role of the Monetary System
by Fan, L. ; Tian, S. ; Zhang, C

one quarter ahead excess returns on China’s Treasury bonds with maturities of one to 5 years are highly predictable by a group of pre-determined variables

High predictability of bond excess returns suggests that investors can get a higher return on average by taking an active trading strategy

a monetary system can significantly influence the return dynamics in the bond markets in transitional economies such as China

to improve market efficiency, although the PBC still sets the official rates for nominal and real economic targets, it could take into account more the expectation for future interest rates and economic situations.

when the interest rates are expected to rise in the near future, current term structure of the official rates might be set with a larger positive slope; and when the future interest rates are expected to decrease, the term structure of current official rates might be set to be flat or even inverted.

Notes on “The Monetary System : Analysis and New Approaches to Regulation” (by Jean‐François Serval)

The Monetary System : Analysis and New Approaches to Regulation
by Jean‐François Serval

Not finished 

Reading notes on the improvement of productivity in developing countries

·        Title: 

Performance measurement: Does education impact productivity?

·        Author: Larbi‐apau, Josephine A. ; Sarpong, Daniel Bruce

·  

The impact of education on productivity in the agriculture sector

Postsecondary education is positively related to the productivity

Source: Maddison, A. 1987. Growth and slowdown in advanced capitalism economies: Techniques of quan· titative assessment. Journal of Economic Literature vol. 25 (2): Table A-12.

Vary between different countries and over time

·        Title: 

Higher Education, Productivity, and Earnings: A Review

·        Author: Pencavel, John

·        

Question the measure of the impact of education on earnings and productivity

The association between age and earnings for any schooling level rises because individuals augment the knowledge and training acquired from school by accumulating skills on the job; thus, the age-earnings association is better understood as an association between earnings and labor market experience. There is, indeed, an independent role of age (independent of work experience) because as an individual ages, his physiological and psychological characteristics evolve, and these may exert an effect on earnings. However, in many surveys, information on both an individual's labor market experience and his age are not collected so that their separate effects cannot be distinguished.

·        Title: 

Performance measurement: Does education impact productivity?

·        Author: Larbi‐apau, Josephine A. ; Sarpong, Daniel Bruce

·        

Research on developing countries, agriculture

Critics: Cobb-Douglass assumption of constant rate of returns

Top of Form

·        Title: 

Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry

·        Author: Rycx, François ; Saks, Yves ; Tojerow, Ilan

Notes on "The United States dominates global investment banking: does it matter for Europe?" (By Charles Goodhart and Dirk Schoenmaker)

The United States dominates global investment banking: does it matter for Europe?
By Charles Goodhart and Dirk Schoenmaker
http://www.lse.ac.uk/fmg/workingPapers/specialPapers/PDF/SP243.pdf

the Vickers Report (2011)
Liikanen (2012)
European countries may find a global investment bank to be too large and too dangerous to support
Pisani-Ferry and Wolff, 2012
investment bank: bring together the suppliers and the demanders
US banks have very high market shares in Europe
the capital market union and the bank union are still under construction
the decline of the European banks may reduce the Europe's hand in the EU-US Regulatory Dialogue
the supervisory implications are not a problem for Europe
the large firms can take precautions themselves

Notes on "Political economy of a euro area banking crisis" (by Panicos O. Demetriades")

Political economy of a euro area banking crisis

By Panicos O. Demetriades

http://www.lse.ac.uk/fmg/workingPapers/specialPapers/PDF/SP245.pdf

A brief outline of the Cypriot banking crisis, its main ingredients, its timeline and its deeper political economy causes

too big to fail, too big to save and too big to regulate

Cyprus business model: growing contingent liability

bailing in shareholders, bond holders and uninsured depositors

eroded the independence of the central bank and brought the justice system under unprecedented political pressure

Notes on "Illiquidity and stock returns: cross-section and time-series effects" (Yakov Amihud)

Illiquidity and stock returns: cross-section and time-series effects"  
by Yakov Amihud

Not finished 

Notes on "Complexity in financial markets" (by Markus K. Brunnermeier and Martin Oehmke)

Complexity in financial markets
by Markus K. Brunnermeier and Martin Oehmke
https://www0.gsb.columbia.edu/faculty/moehmke/papers/Complexity.pdf

Complexity only matters when agents are boundedly rational.
Workable complexity is difficult

(not finished)

Notes on "Central bank communication and monetary policy"

Central bank communication and monetary policy

A survey of theory and evidence

By Alan S. Blinder, Michael Ehrmann, Marcel Fratzscher, Jakob De Haan and David-Jan Jansen

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp898.pdf?380fa5b27a75abbce110013251f9afaf

Central bank communication -> create news and reduce noise

The four extreme cases when central bank communication matters: nonstationarity, the learning, non-rational expectation and asymmetric information between the public and the central bank

The three channels: direct effect of the overnight rate on the aggregate demand, direct effect on the expected future short rates, the direct effect of the short term changes in short rates on the expectations of the entire sequence of the future short rates 

There are limits to how much the information could be digested efficiently

The honest central bank talk is almost certain to coordinate beliefs in the right direction

What to communicate: objectives and strategy, policy decisions, the economic outlook, the path of future policy rates

Notes on "Asset Bubbles: Re-thinking Policy for the Age of Asset Management"

Asset Bubbles: Re-thinking Policy for the Age of Asset Management
Prepared by Brad Jones
Authorized for distribution by Luc Everaert
February 2015
IMF

compress risk premium -> misallocation of resources
Behavior of asset managers

Bubbles episodes could be more frequent than the past
regulations have to be more multifaceted, guard against the risk of "fighting the last war"
behavior of asset managers creates instability

Notes on "How have central banks implemented negative policy rates?" (by Morten Beth and Aytek Malkhozov)

How have central banks implemented negative  policy rates?"
by Morten Beth and Aytek Malkhozov

(not started)

Notes on "THE REAL EFFECTS OF FINANCIAL MARKETS" (Philip Bond, Alex Edmans, Itay Goldstein)

THE REAL EFFECTS OF FINANCIAL MARKETS 
Philip Bond, Alex Edmans, Itay Goldstein 
http://www.nber.org/papers/w17719

(not started)

Notes on "Financial Markets and the Real Economy" (by John H. Cochrane)

Financial Markets and the Real Economy
John H. Cochrane 
University of Chicago

The central modern: price is generated by expected discounted payoffs
The expected excess return or “risk premium” is higher for assets that have a large negative covariance with the discount factor.

(not finished)

Ｎotes on "What drives business cycle and international trade in emerging market economies" (by Marcelo Sanchez)

What drives business cycle and international trade in emerging market economies
by Marcelo Sanchez

• uses data from fifteen EM countries
• small open economy model (similar in Kollmann 2001) (model developed from microeconomics model)
• four types of shocks: technology shocks, preference shocks, monetary shocks, risk premium shocks
• be built from Faust (1998), Canova and De Nicolò (2002) and Uhlig (2005) 
• different countries are influenced by different factors and have different responses to shocks
• both real and nominal rates should be considered, especially in countries with unachieved inflation targets

Notes on "International Trade and its Effects on Economic Growth in China" (by Peng Sun and Almas Heshmati)

International Trade and its Effects on Economic Growth in China
by Peng Sun and Almas Heshmati

Joining the WTO was a big achievement of China
China was devoted to reducing trade barriers and enhancing to its openness to the world
Important variables: real GDP, real capital stock, labor, R&D lag, real IMP, real EXP, net EXP ratio, high tech EXP ratio, capacity of local office
fluctuating efficiency trend
net export share in GDP has a significant positive effect on efficiency, high-tech export is less significant
policy implication: encourage export and high-tech trade, strengthen the competitiveness of exports, take notice of unbalanced sectors

Notes on "The Commonwealth in the Unfolding Global Trade Landscape: Prospects Priorities Perspectives Commonwealth Trade Review 2015 "

The Commonwealth in the Unfolding Global Trade Landscape: Prospects Priorities Perspectives Commonwealth Trade Review 2015

http://thecommonwealth.org/sites/default/files/inline/Commonwealth%20Trade%20Review%202015-Full%20Report.pdf 

53 independent states
3.4 trillion dollars trade in 2013
exports to China 14-fold between 2000 and 2013, imports from China 8-fold between 2000 and 2013
rise in regional trade agreements

(not finished)

Notes on "The United States, the European Union, and the "Globalization" of World Trade: Allies or Adversaries?"

Reading notes on several UK business reports

Small businesses over 99%

Large businesses generate over 50%

More business births than business deaths

More female business leaders

London is the centre of businesses in the UK

Notes on Essays on repeated games (Shivani Nayyar)

Essays on Repeated Games
Shivani Nayyar
http://www.princeton.edu/~smorris/pdfs/PhD/Nayyar.pdf

cooperation, interaction between self-interested agents
 (not finished)

Notes on "Superfreakonomic" (by Steven D. Levitt and Stephen J. Dubner)

Superfreakonomic: Global Cooling, patriotic prostitutes and why suicide bombers should buy life insurance
Steven D. Levitt and Stephen J. Dubner

Cost and benefit analysis made by all parties in all sorts of cases
Short sighted thinking
Opportunity cost

(not finished)

Notes on "CMA Retail banking MIR Issues statement"

adverse effect of competition: AEC
competition and market authority: CMA

The theory of harm (hypothesie to be tested)
market power to banks
customers harder to switch between banks
barriers to entry worsen the outcomes for customers

Notes on "Bailing out the Banks: Reconciling Stability and Competition An analysis of state-supported schemes for financial institutions"

Bailing out the Banks: Reconciling Stability and Competition An analysis of state-supported schemes for financial institutions
Thorsten Beck (Tilburg University and CEPR) 
Diane Coyle (Enlightenment Economics, University of Manchester and CEPR) 
Mathias Dewatripont (Universite Libre de Bruxelles, Solvay Brussels School, ECARES and CEPR) Xavier Freixas (Universitat Pompeu Fabra and CEPR) 
Paul Seabright (Toulouse School of Economics and CEPR)

Financial regulation:
Stabilize the financial system
Restart lending
One for all does not work
Stability should be measured by real terms instead of accounting terms

Competition policy:
Avoid distortions of competition
Conditions on bailouts should vary according to the banks' specific characteristics

(not finished)

Notes on "Need cash? Look into your company" (Kaiser and Young)

Need cash? Look into your company

Kaiser and Young

Harvard Business Review

Do not tie receivables to payables
Do not apply current / quick ratios
Overemphasis on quality
Don’t benchmark only with industry competitors
Don’t reward the sales force for growth alone
Don’t manage via income statements only

Notes on "Khaneman and Tversky (1979)"

Risk aversion in the positive domain is accompanied by risk seeking in the negative domain

Notes on "A Strategic Perspective on Bankruptcy" (Bill George, Andrew N. McLean)

A Strategic Perspective on Bankruptcy
Bill George, Andrew N. McLean
Harvard Business School, April 11, 2007

Bankruptcy -> restructuring
"take-it-or-get-nothing": a powerful bargaining tool
uncertainty of market movements leads to uncertainty of restructuring
out-of-court: less expensive, higher challenges
court-supervised: extraordinary demands are placed on management, easier access to finance
social cost of restructuring via bankruptcy

Notes on "Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis" (John B. Taylor)

Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis
John B. Taylor

Federal Reserve Bank of St. Louis Review, May/June 2010, 92(3), pp. 165-76. 

Great Moderation -> Great Deviation -> Great Recession
The interventions taken before, during and after the crisis did more harm than good (deviation from what was working well)
Avoiding further debt-increasing and wasteful discretionary stimulus packages, which do little to stimulate GDP
Fiscal policy should focus on reducing the deficit and the growth of the debt-to-GDP ratio
Monetary policy: similar as fiscal policy

Notes on "Corporation tax: Easy for multinationals to avoid?" (Ian Pollock)

Corporation tax: Easy for multinationals to avoid?
By Ian Pollock, Business reporter, BBC News 



(not finished)

Notes on "The right way to hedge" (McKinsey 2010)

The Right Way to Hedge
Bryan Fisher and Ankush Kumar, McKinsey 2010

Hedging against siloed business risk is a problem that aggregated risk across the broad enterprise could also include indirect risks.
To identify a company's true economic exposure, it is important to determine the natural offsets across business.
Hedging requires knowing total costs and benefits.
And only hedge the true risks

Notes on "The Capital Structure Puzzle: The Evidence Revisited" (by Michael J. Barclay and Clifford W. Smith)

The Capital Structure Puzzle: The Evidence Revisited
by Michael J. Barclay and Clifford W. Smith, University of Rochester
Journal of Applied Corporate Finance

Three main groups of corporate financial policies: taxes, contracting costs and information costs
Taxes: higher yields effectively reduce the tax advantage of debt over equity
Contracting costs: the use of debt rather than equity reduces what economists call the agency costs of equity - the reduction in firm value arises from the separation of ownership and control in large, public companies with widely dispersed shareholders
Information costs: market timing, signaling (managers have better information than investors), pecking order

Notes on "Cash and Working-Capital Discipline" (CFO research services)

Cash and Working-Capital Discipline
CFO research services in collaboration with American Express

Creating a secure foundation for growth
When ready availability of credit evaporated in the recent financial crisis, midsize companies lost little time in becoming more financially disciplined. They slashed costs and paid down debt at a ferocious pace, while working to eliminate excess inventory and improve collections in a competitive buyer's market for goods and services.
Maintaining the level of discipline isn't easy.

Constant pressure on working-capital improvement
Diligence - not innovation - is the essence of working capital improvement.
Survey results suggest that midsize firms have been blocking and tackling a lot in recent years - working hard to extract payments from increasingly distressed customers, negotiate more favorable terms with suppliers, and reduce inventory levels while maintaining overall margins.

Lack of bargaining power: A challenge for midsize firms
The intense scrutiny that midsize companies are applying to their receivables flows from a simple fact: when business conditions deteriorate and a buyer's market for goods and services develops, the ability to convert receivables to cash suffers.

Notes on "THE CFO's NEW VALUE ROLE" (Peter Clark, Stephen Neill, Greg Jones, Juliana Rowe)

THE CFO's NEW VALUE ROLE

By Peter Clark, Stephen Neill, Greg Jones, Juliana Rowe

The Stage 1 Managing for Value company focuses on those value creation options that begin end within financial officer's own function.

Achieving a value-optimal mix of debt and equity in the company's ongoing capital structure can and does generate significant - albeit one-time - incremental shareholder value.

As followers in that industry narrow their MFV gap, the pacesetting value firm must uncover and capture new value sources.

The Stage 2 successor adds Growth, Permanent Expense Reform/Efficiency Improvement and Investor Perceptions Management to the scope of value creation opportunities.

The Five Key Value Levers define the full range of value opportunities available.

(Five Key Value Levers from presentation by Stephen Neil and Greg Jones to the Australian Institute of Company Directors in Melbourne on May 9, 2002)

At the Stage 2, the CFO leader actively seeks to move MFV forward - away from his domain alone, into those areas of the company where even greater value opportunities reside.

In stage 3, the CFO-led MFV firm must add additional depth to the new breadth already introduced at the second stage. The key word is "maximum". MFV becomes Managing for Maximum Value.

Notes on "Structural bank regulation initiatives: approaches and implications" (Leonardo Gambacorta and Adrian van Rixtel)

Structural bank regulation initiatives: approaches and implications

Leonardo Gambacorta and Adrian van Rixtel 
Monetary and Economic Department
April 2013

The likely implications of initiatives for:

• finanical stability and systemic risk
• banks business models
• the international activities of global banks

How effective to improve the financial system?
What can be the impacts on banks' profitability and business models, both nationally and internationally?

The proposals for structural bank regulation break with the conventional wisdom that the banking sector's efficiency and stability stands only to gain from the increased diversification of banks' activities.

Structural bank regulation initiatives are designed to reduce systemic risk in several ways:

• shield the institutions carrying out the protected activities from losses incurred elsewhere
• prevent subsidies supporting the protected activities from cutting the cost of risk-taking and inducing moral hazard in other business lines
• reduce the complexity and possibly the size -> easier to manage, more transparent to outside stakeholders and easier to resolve

However, banks may respond to the reforms by shifting activities beyond the perimeter of consolidated regulation, structural regulation may affect the international activities of universal banks in particular, structural regulation may create business models that are in fact more difficult to supervise and resolve

Notes on "The Finance Function in a Global Corporation" (Mihir A. Desai)

The Finance Function in a Global Corporation

Desai, Mihir A.

HBS Centennial Issue Harvard Business Review 86, nos. 7/8 (July–August 2008)

Capital budgeting decisions and valuation must reflect not only divisional differences but also the complications introduced by currency, tax, and country risks.

Saddling the managers of subsidiaries with debt can cloud their profit performance, affecting how they are perceived within the larger organization and thereby limiting their professional opportunities.

The existence of an internal capital market broadens a firm's risk-management options.

Many multinationals let local subsidiaries and regions manage their risks separately.

Companies often limit- in arbitrary and puzzling ways - their considerable expertise in managing currency exposures.

Creating a Global finance function:

• Establish the appropriate geographic locus of decision making
• Create a professional finance staff that rotates globally
• Codify priorities and practices that can be adapted to local conditions

Notes on "How markets fail : the logic of economic calamities" (John Cassidy)

How markets fail : the logic of economic calamities

John Cassidy, 1963-

London: Penguin Books, 2010

• "The problem here is something which looked to a very solid edifice, and indeed, a critical pillar to market competition and free markets, did break down" (by Greenspan)
• Warning ignored (Rajan)
• The reaction to Rajan's paper demonstrated just how difficult it had become to query, even on a theoretical level, the dogma of deregulation and free market
• (not finished)

Notes on "This time is different : eight centuries of financial folly" (Carmen M. Reinhart, Kenneth S Rogoff)

This time is different : eight centuries of financial folly

Authors: Carmen M. Reinhart, Kenneth S Rogoff
Princeton, NJ ; Woodstock : Princeton University Press  c2009


• Grounded in a quantitative and historical analysis of crises
• Inflation and currency crisis
• History of financial crises
• Debt intolerance is a syndrome in which weak institutional structures and a problematic political system make external borrowing a tempting device for governments to employ to avoid hard decisions about spending and taxing
• Record a global database on financial crisis with a long-term view
• From 1720s until now
• Concentrate at the 20th century and later