Macro-economics

Claire Jones

Last month, students from four continents joined forces to call for reform of the economics curriculum.

In an open letter, the students said they wanted their courses to delve into a wider range of economics theories and methodologies than the standard neo-classical model that dominates undergraduate teaching, and to learn more about the implications of policy-making.

Speaking to those students was a heartening experience – all of them struck me as extremely thoughtful and articulate. Their desire for reform seemed driven by a curiosity about the world and what economics could do to improve it.

I suspect they’ll be encouraged by comments made in a speech today by the similarly thoughtful and articulate Benoît Cœuré, who sits on the European Central Bank’s executive board. 

Eurozone price rises sound alarms at ECB – FT

Libya turmoil crushes risk appetite – FT 

Simone Baribeau

Q: What do jitters over European debt, stubbornly high unemployment and earthquakes have in common?

A: They have all been cited as reasons for central banks to delay interest rate hikes.

It’s not just economic crises that cause central banks to postpone tightening monetary policy. Since the beginning of the year, a number of political and natural disasters have pressured banks to keep rates low. Here is Money Supply’s list of the top three non-financial events that kept rates low. Are we missing any? Comments welcomed below. 

Chris Giles

Alistair Darling’s task in the pre-Budget report was to improve the credibility of Britain’s deficit reduction plans for the public, the markets and for those running monetary policy. I am convinced this report will fail on all counts.

With a couple of hours digging through the numbers, the report strikes me as deeply political and its presentation extremely unhelpful. This is not the way to gain credibility. Why? 

Chris Giles

The Office for National Statistics has today published a paper defending its early estimates of Gross Domestic Product against criticisms that the figures are not worth the paper they are written on. But its case rests entirely on trust, writes Chris Giles of the Financial Times, and does not address the external concerns about its data.  

Mure Dickie

In the great Japanese debate on how to balance the contradictory demands of reining in the deficit and continuing stimulative spending, chalk up another political point for Shizuka Kamei, Japan’s minister for financial services. 

Ralph Atkins

German exporters remain confident despite the rising euro, writes Ralph Atkins of the Financial Times  

Daniel Pimlott of the Financial Times reviews the day’s economic news 

Krishna Guha

I have a good deal of sympathy for Sheila Bair’s idea that secured creditors should take a hit when a financial institution fails. But there are two problems with her proposal. First, it would kill the triparty repo market, where lenders assume secured really means secured. Second, it is not clear to me why we should want a standardised 20 per cent haircut. Better to estimate the haircut in normal bankruptcy and apply that to any special resolution process.

Moreover, it looks to me like the most promising way of getting some effective discipline from bank creditors is to focus on the more junior categories of debt – sub-debt and potentially reverse convertibles (I like the idea of requiring banks to hold debt that converts into equity when certain thresholds are breached).

Ralph Atkins

German resistance to IMF expansion plans is growing, writes Ralph Atkins in a blog