Përmbledhje 16 Mars – 23 Mars 2015
Përmbajtja
1. A framework for banking structural reform
faqe 2
Xavier Vives
2. Transparency and the effectiveness of monetary policy after the Warsh Review at the Bank of
England
faqe 2
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan
3. Estimating the impact of robots on productivity and employment
faqe 3
Guy Michaels, Georg Graetz
4. Labour and finance in the aftermath of the Great Recession
faqe 3
Tito Boeri, Pietro Garibaldi, Espen R. Moen
5. The new authoritarianism
faqe 4
Sergei Guriev, Daniel Treisman
6. Does a politician’s age matter for policy?
faqe 4
Alberto Alesina, Traviss Cassidy, Ugo Troiano
7. How Scary Is the Bond Market?
faqe 5
Robert J. Shiller
8. Japan’s Accounting Problem
faqe 5
Adair Turner
9. How Far Will the Euro Fall?
faqe 6
Anatole Kaletsky
10. Winning the Too-Big-to-Fail Battle
faqe 6
Mark Roe
11. Slow Growth for US Interest Rates
faqe 7
Alexander Friedman
12. Asia’s Almighty Middle Class
faqe 7
Lee Jong-Wha
13. The Fed Versus Price Stability
faqe 8
Robert Heller
14. China’s Trial-and-Error Economy
Andrew Sheng, Xiao Geng
faqe 8
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
A framework for banking structural reform
Xavier Vives
… Even maintaining a
certain level of deposit
insurance for retail
deposits, runs may
occur for uninsured
debt if credible bail-in
procedures are in
place…
The present crisis has made evident the failure of the three pillars of the Basel II
system. Disclosure and risk assessment have been deficient (think for example
about the problems with rating agencies), and market discipline has been
ineffective because of the blanket insurance offered by ‘too big to fail’
policies. To this a collective moral hazard problem of ‘too many to fail’ may
have been added, since when many institutions choose correlated risks, as in
the 2007–08 crisis with high direct and indirect exposure to real estate, the
central bank and/or the regulator are compelled to bail out failing banks ex
post. The incentives to herd are particularly strong for small banks (see Acharya
and Yorulmazer 2007, Farhi and Tirole 2012). Furthermore, capital regulation has
not taken into account systemic effects (the social cost of failure), and capital
requirements have been softened and asset restrictions lifted, likely under the
pressure of industry lobbies.1 Supervision has proved ineffective since it allowed
a shadow banking system and systemic risk to grow unchecked. In summary,
the crisis uncovered massive regulatory failure. The regulatory response has
been to engage in the Basel III process of increasing capital and liquidity
requirements and to propose a structural reform of banking.
http://www.voxeu.org/article/framework-banking-structural-reform
Transparency and the effectiveness of monetary
policy after the Warsh Review at the Bank of
England
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan
… Another
disadvantage put
forward by the panel is
the possibility that
decisions do not fully
incorporate new
information that
becomes available
during the MPC
process...
Following the Warsh Review of transparency practices and procedures at the
Bank of England (Warsh, 2014), the Bank plans to change the structure of its
Monetary Policy Committee (MPC) meetings and release its policy decisions,
‘enhanced’ meeting minutes and (once a quarter) the Inflation Report all at the
same time (Bank of England, 2014). There have been critical reactions to the
proposals (see Goodhart 2015 and especially Eichengreen and Geraats 2015).
In its latest monthly survey of leading UK-based macroeconomists, the Centre for
Macroeconomics has canvassed their views on the idea of simultaneously
providing the different MPC documents and changing the MPC process. The
Warsh Review, published in December 2014 along with a response by the Bank,
describes how transparency could support four strategic policy objectives:
“making sound policy decisions; communicating judgments effectively; ensuring
accountability for its actions; and creating a fair and accurate historical
record”. One of the recommendations of the Warsh Review is that “[t]he Bank
should make public a concise summary of its policy decision and rationale as
soon as is practicable upon the meeting’s conclusion.
http://www.voxeu.org/article/transparency-and-effectiveness-monetary-policy
2
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
Estimating the impact of robots on productivity and
employment
Guy Michaels, Georg Graetz
Robots' capacity for autonomous movement and their ability to perform an
expanding set of tasks have captured writers' imaginations for almost a century.
Recently robots have emerged from the pages of science fiction novels into the
real world, and discussions of their possible economic effects have become
ubiquitous (see e.g. The Economist 2014, Brynjolfsson and McAfee 2014). But a
serious problem inhibits these discussions – there has so far been no systematic
empirical analysis of the effects that robots are already having. In recent work we
begin to remedy this problem (Graetz and Michaels 2015). We compile a new
dataset spanning 14 industries (mainly manufacturing industries, but also
agriculture and utilities) in 17 developed countries (including European countries,
Australia, South Korea, and the US). Uniquely, our dataset includes a measure of
the use of industrial robots employed in each industry, in each of these countries,
and how it has changed from 1993-2007. We obtain information on other
economic performance indicators from the EUKLEMS database (Timmer et al.
2007). We find that industrial robots increase labour productivity, total factor
productivity, and wages.
… While fears that
robots destroy jobs at a
large scale have not
materialized, we find
some evidence that
robots reduced lowand middle-skilled
workers’ employment ...
http://www.voxeu.org/article/robots-productivity-and-jobs
Labour and finance in the aftermath of the Great
Recession
Tito Boeri, Pietro Garibaldi, Espen R. Moen
The 2008 Global Crisis and the associated increase in unemployment on both sides of
the Atlantic sparked a new interest in the relationship between financial
imperfections and labour market dynamics. In the aftermath of the Crisis, a growing
empirical literature has studied the links between financial conditions and
employment adjustment. The Great Recession has indicated that firms' leverage and
firms' access to finance are clearly correlated to hiring and firing decisions. It is now
empirically accepted that frictions in bank lending are correlated to employment
losses when credit conditions deteriorate (see micro evidence reported by
Chodorow-Reich and Bentolila et al. 2014).1 Our recent research (Boeri et al. 2014)
confirms these findings. The Diamond-Mortensen-Pissarides (DMP) model is the main
paradigm for addressing imperfect labour markets. In the baseline framework, there
is no role for finance. All projects that display positive net present values are realised
and financial markets are assumed to be perfect. What if financial markets are not
perfect? Does a different access to finance influence the firm hiring and firing
decisions? These basic questions call for a deeper understanding of the relationship
between labour and finance.
http://www.voxeu.org/article/labour-and-finance-aftermath-great-recession
… It is true that labour
market institutions in
Europe reduced labour
shedding, but the
dramatic rise in US
unemployment is likely
to have been the
counter part of its
finance orientation ...
3
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
The new authoritarianism
Sergei Guriev, Daniel Treisman
… The kind of
information-based
dictatorship we identify
is more compatible with
a modernised setting
than with the rural
underpinnings of
totalitarianism in Asia …
Dictatorships are not what they used to be. The totalitarian tyrants of the past –
such as Hitler, Stalin, Mao, or Pol Pot – employed terror, indoctrination, and
isolation to monopolise power. Although less ideological, many 20th-century
military regimes also relied on mass violence to intimidate dissidents. Pinochet’s
agents, for instance, are thought to have tortured and killed tens of thousands of
Chileans (Roht-Arriaza 2005). However, in recent decades new types of
authoritarianism have emerged that seem better adapted to a world of open
borders, global media, and knowledge-based economies. From the Peru of
Alberto Fujimori to the Hungary of Viktor Orban, illiberal regimes have managed
to consolidate power without fencing off their countries or resorting to mass
murder. Some bloody military regimes and totalitarian states remain – such as
Syria and North Korea – but the balance has shifted. The new autocracies often
simulate democracy, holding elections that the incumbents almost always win,
bribing and censoring the private press rather than abolishing it, and replacing
comprehensive political ideologies with an amorphous resentment of the West
(Gandhi 2008, Levitsky and Way 2010). Their leaders often enjoy genuine
popularity – at least after eliminating any plausible rivals. State propaganda aims
not to ‘engineer human souls’ but to boost the dictator’s ratings.
http://www.voxeu.org/article/new-authoritarianism
Does a politician’s age matter for policy?
Alberto Alesina, Traviss Cassidy, Ugo Troiano
… If young politicians
were simply more
energetic than older
ones, they would
plausibly attract more
transfers from higher
levels of governments in
every year of their
term…
In 2012, the average age of European parliamentarians was 53 years (Power and
Shoot 2012). In the US, the average age of current Members of the House of
Representatives is 57 years, and the average age of current Senators is 62 years
(Manning 2014). Motivated by the concern that aging electorates would
increasingly select older politicians, the Foundation for the Rights of Future
Generations advocates a right to vote from birth, exercised by parents as
surrogates until the child reaches a certain age (Gründinger 2013). Such a proposal
reflects the conventional wisdom that a politician’s age influences policy choices.
But does a policymaker’s age really matter? This is an empirical question which until
recently had not been explored. In the academic literature, the famous Downsian
framework predicts that a politician’s characteristics do not matter for policy,
because both candidates in a two-way race will propose the policy platform
favoured by the median voter. However, a rapidly growing set of studies have
shown that the characteristics of political leaders can affect policies. The existing
literature has focused on education and gender. For instance, Besley et al. (2011)
find that more educated leaders increase economic growth. Brollo and Troiano
(2015) show that male politicians are more likely to engage in political patronage
compared to their female counterparts
http://www.voxeu.org/article/politician-s-age-and-policy
4
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
How Scary Is the Bond Market?
Robert J. Shiller
The prices of long-term government bonds have been running very high in recent
years (that is, their yields have been very low). In the United States, the 30-year
Treasury bond yield reached a record low (since the Federal Reserve series began
in 1972) of 2.25% on January 30. The yield on the United Kingdom's 30-year
government bond fell to 2.04% on the same day. The Japanese 20-year
government bond yielded just 0.87% on January 20. All of these yields have since
moved slightly higher, but they remain exceptionally low. It seems puzzling – and
unsustainable – that people would tie up their money for 20 or 30 years to earn
little or nothing more than these central banks' 2% target rate for annual inflation.
So, with the bond market appearing ripe for a dramatic correction, many are
wondering whether a crash could drag down markets for other long-term assets,
such as housing and equities. It is a question that I am repeatedly asked at
seminars and conferences. After all, participants in the housing and equity
markets set prices with a view to prices in the bond market, so contagion from
one long-term market to another seems like a real possibility. I have been thinking
about the bond market for a long time. In fact, the long-term bond market was
the subject of my 1972 PhD dissertation and my first-ever academic publication
the following year, co-authored with my academic adviser, Franco Modigliani.
… Regarding the stock
market and the housing
market, there may well
be a major downward
correction someday.
But it probably will have
little to do with a bondmarket crash …
http://www.project-syndicate.org/commentary/bond-market-crash-contagion-by-robert-j--shiller-201503
Japan’s Accounting Problem
Adair Turner
Over the next few years, it will become obvious that the Bank of Japan (BOJ) has
monetized several trillion dollars of government debt. The orthodox fear is that
printing money to fund current and past fiscal deficits inevitably leads to
dangerous inflation. The result in Japan probably will be a small up-tick in inflation
and growth. And the financial markets' most likely reaction will be a simple yawn.
Japanese government debt now stands at more than 230% of GDP, and at about
140% even after deducting holdings by various government-related entities, such
as the social-security fund. This debt mountain is the inevitable result of the large
fiscal deficits that Japan has run since 1990. And it is debt that will never be
“repaid" in the normal sense of the word. Figures provided by the International
Monetary Fund illustrate why. For Japan to pay down its net debt even to 80% of
GDP by 2030, it would have to turn a 6%-of-GDP primary budget deficit (before
interest payments on existing debt) in 2014 into a 5.6%-of-GDP surplus by 2020,
and maintain that surplus throughout the 2020s. If this was attempted, Japan
would be condemned to sustained deflation and recession. Even a modest step
in that direction – the sales-tax increase of April 2014, for example – produced a
severe setback to economic recovery.
http://www.project-syndicate.org/commentary/japan-monetization-government-debt-by-adairturner-2015-03
… While Europe is
playing with social and
political fire, Japan
simply needs to tweak
its accounting entries. A
shrug of the shoulders is
well justified …
5
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
How Far Will the Euro Fall?
Anatole Kaletsky
_________________________
… As we know from
decades of Japanese
and Swiss experience,
selling a low-interest-rate
currency simply to chase
higher US yields is often a
costly mistake …
______________________
The US dollar is hitting new 12-year highs almost daily, while the euro seems to be
plunging inexorably to below dollar parity. Currency movements are often
described as the most unpredictable of all financial variables; but recent events
in foreign-exchange markets seem, for once, to have a fairly obvious
explanation – one that almost all economists and policymakers accept and
endorse. French President François Hollande, for one, has ecstatically welcomed
the plunging euro: “It makes things nice and clear: one euro equals a dollar," he
told an audience of industrialists. But it is when things seem “nice and clear" that
investors should question conventional wisdom. A strong dollar and a weak euro
is certainly the most popular bet of 2015. So is there a chance that the
exchange-rate trend may already be overshooting? In one sense, the
conventional explanation of the recent euro-dollar movement is surely right. The
main driving force clearly has been monetary divergence, with the Federal
Reserve tightening policy and the European Central Bank maintaining rockbottom interest rates and launching quantitative easing. But how much of this
divergence is already priced in? The answer depends on how many people
either are unaware of the interest-rate spread or do not believe that it will widen
very far.
http://www.project-syndicate.org/commentary/euro-exchange-rate-stabilitizing-by-anatole-kaletsky2015-03
Winning the Too-Big-to-Fail Battle
Mark Roe
_____________________
... Regulators must not be
deterred by bank
lobbying or studies that
measure neither the
short-term boost afforded
by a bank’s too-big-tofail status…
_____________________
Headlines about banks’ risks to the financial system continue to dominate the
financial news. Bank of America performed poorly on the US Federal Reserve’s
financial stress tests, and regulators criticized Goldman Sachs’ and JPMorgan
Chase’s financing plans, leading both to lower their planned dividends and share
buybacks. And Citibank’s hefty buildup of its financial trading business raises
doubts about whether it is controlling risk properly. These results suggest that some
of the biggest banks remain at risk. And yet bankers are insisting that the post-crisis
task of strengthening regulation and building a safer financial system has nearly
been completed, with some citing recent studies of bank safety to support this
argument. So which is it: Are banks still at risk? Or has post-crisis regulatory reform
done its job? The 2008 financial crisis highlighted two dangerous features of
today’s financial system. First, governments will bail out the largest banks rather
than let them collapse and damage the economy. Second, and worse, being
too big to fail helps large banks grow even larger, as creditors and trading
partners prefer to work with banks that have an implicit government guarantee.
Too-big-to-fail banks enjoy lower interest rates on debt than their mid-size
counterparts, because lenders know that the bonds or trading contracts that such
banks issue will be paid, even if the bank itself fails.
http://www.project-syndicate.org/commentary/banking-regulation-too-big-to-fail-by-mark-roe-201503
6
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
Slow Growth for US Interest Rates
Alexander Friedman
The US Federal Reserve’s new policy statement will, as usual, be analyzed in
excruciating detail in the days ahead, as investors seek guidance on when and
how quickly interest rates will be raised. Notably, the word “patient” does not
appear, and the Fed has signaled that it may raise its benchmark rate as early as
June. But the particular wording is far less telling than the context in which the
statement is being released.
In fact, uncertainty about monetary policy in the United States has been the
leading driver of financial-market volatility this year. After all, the potential effect
of interest-rate hikes on the US yield curve has a major impact on the pricing of all
global assets.
But three factors suggest that investors are over-emphasizing the risk of a curve
re-pricing. First, economic developments will likely lead the Fed to exhibit caution
when it comes to the process of raising interest rates. Second, even if the Fed acts
quickly, investor appetite for returns will anchor yields. Third, the technical features
of the market will ensure strong demand for US Treasury bills.
_________________________
… Though the Fed may no
longer be promising
patience, the current
financial environment
implies that investors
should not, for the time
being, anticipate a major
hike …
_________________________
http://www.project-syndicate.org/commentary/us-interest-rates-slow-growth-by-alexander-friedman2015-03
Asia’s Almighty Middle Class
Lee Jong-Wha
Despite recent economic uncertainty, Asia’s middle class is growing fast. In the
coming decades, this burgeoning demographic segment will serve as a keystone
for economic and political development in the region, with significant implications
for the rest of the world.
The OECD estimates that the global middle class (defined as households with daily
expenditures of $10-100 per person, in 2005 purchasing power parity terms) will swell
to 4.9 billion people by 2030, from 1.8 billion in 2009. Two-thirds are expected to
reside in Asia, up from 28% in 2009, with China home to the largest share. Indeed, if
China pursues the structural reforms and technological upgrading needed to
maintain rapid economic growth, its middle class should exceed one billion people
in 2030, up from 157 million in 2009. The rapid emergence of Asia’s middle class will
bring far-reaching economic change, creating new market opportunities for
domestic and international companies. Already, demand for consumer durables
has increased in the region, with China becoming the world’s largest market for
automobiles and mobile phones. But there remains substantial room for more
consumption in luxury goods and technological products, as the purchasing power
of the developing world’s middle class catches up to that in the advanced
countries.
http://www.project-syndicate.org/commentary/asia-middle-class-development-by-lee-jong-wha-201503
__________________________
... The public policies are
essential to sustain growth,
thereby ensuring the
continuous upward
mobility of lower-income
families…
_________________________
7
INSTITUTI I STUDIMEVE EKONOMIKE DHE BANKARE
The Fed Versus Price Stability
Robert Heller
__________________________
… The Fed should achieve
“price stability” for the US
currency, along with
moderate interest rates
and maximum
employment …
________________________
There is a big difference between the Federal Reserve’s mandate to maintain
“stable prices” – as enunciated in the Federal Reserve Act – and the Fed’s selfselected target of 2% annual inflation. So how is it that policymakers have
managed to substitute the latter for the former? The term “stable prices” is selfexplanatory: a bundle of goods will cost the same ten, 50, or even 100 years from
now. By contrast, if a country experiences 2% inflation over a ten-year period, the
same items that $100 can buy today will cost $122 at the end of the decade.
After 100 years, the price tag will be a whopping $724. In her recent
Congressional testimony, Fed Chair Janet Yellen referred several times to the
mandate of maintaining “stable prices”; but she mentioned the Fed’s 2% inflation
objective twice as often. “US inflation continues to run below the Committee’s
2% objective,” she said, and the current “high degree of policy accommodation
remains appropriate to foster further improvement in labor market conditions
and to promote a return of inflation toward 2% over the medium term.” Does the
Fed really want to increase annual inflation to 2%, such that the price level of the
country will increase by more than 700% over the next century? Is that what
Congress had in mind when it tasked the Fed with achieving “stable prices”?
http://www.project-syndicate.org/commentary/fed-inflation-target-by-robert-heller-2015-03
China’s Trial-and-Error Economy
Andrew Sheng, Xiao Geng
__________________________
… There is one important
component missing from
the government’s reform
agenda for 2015: improved
bankruptcy procedures for
failed borrowers ...
_______________________
Chinese Prime Minister Li Keqiang’s work plan for 2015, revealed at this month’s
National People’s Congress, highlighted the country’s shift to a “new normal” of
7% economic growth. The shift to slower growth poses serious challenges, but it
also creates an important opportunity for China to ensure its long-term economic
development. China’s leaders recognize this opportunity, and are taking action
to support the shift to more sustainable growth models. The finance ministry has
raised the central-government budget deficit from 1.8% of GDP in 2014 to as
much as 2.7% in 2015, and will allow highly leveraged local governments to swap
CN¥1 trillion ($161.1 billion) of debt maturing this year for bonds with lower interest
rates. Likewise, the People’s Bank of China (PBOC) has provided monetary
support, gradually lowering interest rates and reserve requirements. Because
wages are still rising, the inflation target for 2015 has been set at 3% – higher than
the actual 2014 inflation of 2%, even though producer-price inflation has been
negative for 36 months. The PBOC also has projected a stable exchange-rate
environment for this year – despite the steep depreciation of the Japanese yen,
the euro, and emerging-economy currencies against the dollar – thereby
promoting
global
stability.
http://www.project-syndicate.org/commentary/china-economy-slower-growth-by-andrew-shengand-geng-xiao-2015-03
8