Thursday, 23 December 2010
Saturday, 18 December 2010
Friday, 10 December 2010
Saturday, 4 December 2010
Wednesday, 1 December 2010
Sunday, 28 November 2010
Tuesday, 23 November 2010
Saturday, 20 November 2010
Tuesday, 16 November 2010
Thanks to ITFD '11 student Kart Siilart for the picture, who, in addition to having a psychology degree from Harvard and an MBA from Insead, also turns out to be a pretty decent photographer...
Friday, 12 November 2010
To cut a long story short, we got there -- the good fairies in the Barcelona GSE office guided us through the whole process, and starting with the class of 2011, our (and all other Barcelona GSE) masters are official - hooray!
Monday, 8 November 2010
- Jordi Gali
- Jaume Ventura
- Jan Eekhout
- Gino Gancia
- Nicola Gennaioli
- Joachim Voth
- Marta Reynal
- Fernando Broner
Friday, 22 October 2010
Monday, 18 October 2010
Thursday, 30 September 2010
The proprietary trading business turns in part on one’s ability to find the fool -- to find people willing to take the stupid side of the smart bets you are placing. One of the side effects of our seemingly endless financial crisis is to wash a lot of fools, many of them German, out of the game.If you export lots and import little, you have to export capital, by definition - you are lending to the rest of the world. For whatever reason, German banks - many of them state-owned - have a singular ability to populate financial markets with klutzes who cannot tell garbage from fine food. The trade surpluses which should translate into a huge foreign capital stock, ready to pay the pensions of ageing Germans, instead have a habit of going up in smoke every time a Nasdaq/subprime/bond bubble bursts. The welfare implications of that are not very hard to figure out... and you won't read in the German press about it. So either the country fixes its financial system (beloved 3 pillars and all), or it should use some of those shiny cars at home.
Wednesday, 29 September 2010
Thursday, 12 August 2010
Friday, 23 July 2010
Thursday, 22 July 2010
I am a member of an Irish University and my Economics thesis is on the link between irrationality and bubbles in the financial market, was wondering would you have any journal recommendations or articles which could help me within this topic.Yes, absolutely. As a matter of fact, since I work in the area, it'll be more efficient if I write the thesis for you, and send you a draft next week.
subject: about your paper "How the West Invented Fertility Restriction"
Dear Professor Voth,
I am UBC PhD and have some questions about your paper "How the West Invented Fertility Restriction". As i have not encountered this topic before, if you have some spare time, I would be thankful to have your ideas on these:
1) It seems that European Marriage Pattern is a puzzle that there has been many researches trying to solve the puzzle. Is there any surveys or texts you can introduce me that summrizes different ideas about this subject?
2) In your paper, you have brought some evidence that fertility restrictions through late marriage was voluntary in old days. Are there any counter arguments in the litrature? Does any other researcher interprets this fertility restrictions through late marriage, in another way?
3) And if there are any useful references for this subject.
This is after my co-author gave a presentation at UBC. The paper has 4.5 pages of references; we also spend a lot of time on possible counterarguments... Reading? A paper? You gotta be kidding. Let's write to the authors instead, and get some personalized feedback on unique questions.
Hmmm. Maybe I can magically transfor my career by trying this:
Dear Jean Tirole/Philip Aghion/Elhanan Helpman/Robert Barro,
I am a member of UPF's economics department. I would like to publish a brilliant paper. Please send me your most outstanding articles (unpublished), so that I can put my name on them and submit them to the AER.best,Joachim Voth
Don't get me wrong - I love to hear from students interested in my research. I just hope that the level of interest is a touch above "help me with my homework, pls"...
Monday, 19 July 2010
Sometimes, one can learn a lot from bad examples, too. Little people, listen up - BP didn't quite get it right, to put it mildly (the chairman of the board, after meeting Obama, graciously spoke about the "little people" in the US affected by the spill). So, in a bid to be constructive, here is some brilliant advice from the good folks at Daily Goat on what BP should have done...
Friday, 16 July 2010
Thursday, 15 July 2010
Wednesday, 14 July 2010
Thursday, 1 July 2010
... and what a gorgeous-looking, fun and stylish crowd they are! It's been a pleasure to teach you. I hope you will all stay in touch -- I'll miss you!
Wednesday, 30 June 2010
Sunday, 27 June 2010
Friday, 18 June 2010
Saturday, 15 May 2010
Wednesday, 12 May 2010
Thursday, 6 May 2010
Monday, 3 May 2010
This weekend, we had a CREI-CEPR conference on the Political Economy of Economic Development. Held in the beautiful monastery in Manresa, there was an embarrassment of intellectural riches, with Tim Besley speaking on the emergence of state capacity, Jim Robinson presenting joint work with Daron Acemoglu about the monopoly of violence in Venezuela, and a whole host of other interesting papers (from local elite capture in China to war and genetic relatedness).
At the same time, we had news about the biggest bailout in history being finalized. After a mini-bounce this morning, Greek bonds have started to trade lower... it seems that the last few weeks of flip-flopping have unnerved investors a great deal. I wrote some months back that the game was entirely political - that the economics were hopeless, and that only a political decision to make Greece whole could stave off default. It seems that markets came around to that view, and now find it hard to believe that the political solution is at hand. As exercises in "shock and awe" go, this one is as yet not very successful...
Tuesday, 20 April 2010
Friday, 16 April 2010
Wednesday, 14 April 2010
Sunday, 4 April 2010
Somewhat oddly, Evans-Pritchard drags out the old chestnut how Philip II's defaults ruined his bankers, including the Fuggers. This is what Fernand Braudel famously claimed, but we find the exact opposite -- the same banking familes who lent to Charles V also lent to Philip, and the ones affected by the early bankrutpcies (in the 1550s) are still there in the 1590s, doing a healthy business, including the Fuggers. Even a default needn't be a calamity, if you play it right.
The implications for today? I think a Uruguayan solution (ie a healthy haircut for the bondholders) would make a lot of sense. It won't be fun for the investors, but we are creating a world of monstrous moral hazard if we bail out Greece and, in turn, the French and German banks who bet that the taxpayer will always help. Will this create another Lehman-style meltdown? I don't think so. Financing costs on sovereign debt are going to go up anyway, by a bit, in the next few years; many people are worried about the overall level of debt as it is. A Greek default won't change a thing. A lot of people received higher interest on their Greek bonds (unless they bought in the last 2 years); the higher return goes with higher risk, which should materialize in their portfolios roundabout now.
Friday, 26 March 2010
Fiscal austerity will now be reinforced by the IMF. In an earlier post, I raised some questions if that is going to work -- it's a bit like root-canal work without anaesthesia. Everybody else is trying to spend more, in a bid to ward off depression. If budget cuts are too big, you get more recession. Today brought the news that Ireland's GDP fell even more in Q4 than in Q3, which puts it on a very different trajectory from everybody else. This tells you that very severe budget cuts can backfire, as Chancellor Brüning of the late Weimar Republic could also tell you. Given the size of the adjustment needed in Greece, I doubt that public finances can be cut back to health.
So, just before we all despair, four German economists writing in the FT come up with a real solution (indirectly). They remind us that the German constitutional court put a lot of emphasis on the no-bailout clause in the Stability Pact; its last ruling said that, if violated, Germany would have to leave the Euro. Should aid to Greece really go ahead, I expect someone to sue the German government. Sure, German lawyers and judges sometimes find ways of bending the law if it suits those in power (just try watching Roland Freisler in action, or reading "Der Führer schützt das Recht", a treatise by the brilliant Carl Schmitt on why Hitler's massacre of the Nazi Party's left wing was perfectly legal). Today's bunch will of course do nothing so outrageous (and I am not trying to say that declaring "too bad" and ignoring earlier EMU rulings would be comparable to Schmitts and Freisler's transgressions. I am just trying to point out that creative lawyers and judges can justify anything -- they did award Freisler's widow a bigger pension after she sued, because he would have had a brilliant career in West Germany had he not been killed by a bomb in 1945). So there is a non-zero chance, given its earlier rulings, that the Constitutional Court would actually oblige the government to either stop support to Greece, or get out of the Euro. If you take a deep breath for a minute, and dispassionately think about the consequences, this may be actually good solution for everyone (except, perhaps, the ECB bankers who would presumably have to move away from Frankfurt). The new Deutschmark would probably revalue by a lot. The soft-currency countries who now dominate EMU would get their beloved pesetas, francs, and escudos back, but with a common design on the pieces of paper. Policy could be as loose as Spain, Portugal, Greece, Italy, France, and Cyprus like; Germany could engage in its preferred policy of reducing unit labor costs, and running big current account surpluses. Every time they get too big, the Euro would devalue against the DM, the way the lira et al. used to. Everyone is happier. Probably, countries like Holland and Austria would shadow the new DM, as they did before EMU. Now, to be realistic ... if history teaches you something, it's that countries will stick to a silly monetary standard for way too long, especially if it's seen as the ultimately proof of adulthood in terms of currency. Just think of how long it took countries to abandon the gold standard in the 1930s... and as a beautiful paper by Sachs and Eichengreen showed many moons ago, you can explain most of the variation of when countries exited the Great Depression by when they abandoned gold.
Wednesday, 17 March 2010
Monday, 1 March 2010
Overall, I fear this is a no-hoper unless the EU rides to the rescue on a white stallion. Fiscal consolidation on the scale required of Greece is beyond even the most cohesive states. I cannot think of countries other than after a major war producing such a shift in their public finances. Germanyin the early 1930s under Brüning tried to engineer a swing in the public accounts that was of a similar magnitude (it reduced nominal spending by about 1/3 from 1928-32). The budget cuts were so severe that Brüning became known as the ‘Hunger Chancellor’. Many believe that the program of fiscal consolidation enacted by his government undid the Weimar Republic.
Let’s get back to the little table. I think that a range of 5-9% for the interest rate is pretty optimistic, too – as creditors start to worry that Greece may not repay, they will demand ever higher interest rates. This creates a self-fulfilling dynamic, of the type that some politicians have branded “speculative attack”. It is, of course, nothing of the sort – nobody is manipulating markets here, rising interest rates just mean that, as a borrower looks ever worse, creditors are not keen to refinance them. Kehoe and Cole have a very nice paper, inspired by the Mexican crisis, on self-fulfilling sovereign debt crises, and Wei Xiong of
So what should be done? Many equate default with a cataclysmic meltdown. This is not entirely without reason. As Rogoff, Reinhart, and Sevastano show in their paper on serial defaults, these can seriously damage your “fiscal health” – the state institutions you need to build a modern tax state. On the other hand, there is pretty convincing literature arguing that, since governments rarely sell contingent debt, defaults are a way to achieve market completeness. Investors de facto anticipate that things can go wrong, and the higher interest they receive beforehand compensates them for the risk. Defaults are when countries collect on the ‘insurance’ they bought before. Theories in the ‘excusable default’ vein (Grossman-Van Huyck, say) require that defaults happen in verifiably bad states of the world, and are driven by exogenous events. Half of that at least applies to
Sunday, 28 February 2010
Friday, 19 February 2010
Thursday, 18 February 2010
Thursday, 11 February 2010
"Analysts at Capital Economics said Thursday's GDP data backs up the theory that a return to solid and unsustainable growth in Spain is unlikely anytime soon."As typos go, this one is just wonderful. I am sure they meant sustainable, but... there is so much that was utterly unsustainable about the boom in the last 10 years that one doesn't even know where to start. Building houses that nobody wants to live in, at prices no-one is willing to pay, is my #1 on the list. It also sums up nicely the problem -- the old growth model post-1999 won't work, and there is not much of an alternative in sight. The government keeps saying R+D will pull Spain out of the crisis, but that is like Greece saying that a closer look at its national accounts show a massive surplus.
This relates to another of this week' highlights: Tim Kehoe was giving here on Tuesday, giving a talk at the Barcelona GSE about lessons from the Great Depressions of the 20th century for the Spanish financial crisis. He compared Chile to Mexico, and (not entirely surprisingly) blamed divergent fortunes on the ill tidings brought by wrong-footed government intervention in the latter. A case that is not in the book that he edited with Prescott, which I think could have provided a more appropriate analogy, is interwar Britain. Britain re-entered the gold standard in 1925 at an overvalued exchange rate, hoping that the currency regime would provide "discipline" for the last 10 percent of factor cost adjustment vis-a-vis the US. Instead, it got sub-par growth while everyone else enjoyed the roaring twenties... By Kehoe's reckoning, Spain's unit labor costs are now about 135% of their 2000 level, while Germany's are at 110%. While unions were powerful in interwar Britain, I am sure they are more powerful in Spain today. There is none of the grim determination to regain competitiveness that I saw in Germany over the last 20 years, after the reunification boom and debt orgy produced a sharp decline in competitiveness. My sense is that a lost decade or two for Spain are beginning to look more likely by the day. And who knows? When Tim Kehoe presents the Catalan edition of his book in a few years (he actually speaks Catalan), there may be a chapter in it on the Spanish depression of 2008-2018.
Friday, 5 February 2010
As I will try to teach our students next term, telling a bubble apart from fundamentals-driven price increases can be really hard... until we take Charles Kindleberger's advice seriously, which is to look not at prices themselves, but at what motivates buyers. He essentially argued that if something is a. not very useful to you b. you only bought it because you think it will go up, there is a good chance that it's a bubble. Early finance models used to rule this kind of thing out with some quick and simple assumptions about arbitrageurs attacking the mispricing instantly, but we have gotten a lot better since - we can now write ever better models in which the Chinese garlic merchants can exist (and even make money). If I had to recommend just two papers, I would go for this and this.
Wholesale garlic prices in Beijing are now 15 times as high as in March, and still rising. Jerry Lou, a Morgan Stanley China strategist who has researched the opaque market here, said speculators-- fueled by the abundant liquidity sloshing around China-- have moved into the small market and strategically driven up prices. "You need a warehouse, a lot of cash and a few trucks. That's how it works," Lou said, describing garlic speculators' tools of the trade. "Basically, what you do is try to arrest as much supply as possible, then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars."
The interesting thing is that garlic seems to stand pars pro toto for a lot of goods -- copper, aluminum, oil all seem to have been hoarded with the same intentions. Apparently, there are a lot of Chinese pig farmers who have been stockpiling copper and nickel. When oil was trading at $130, my friend and co-author Mauricio Drelichman asked me if I thought it was a bubble, and then - after some umming and ahhhing -- said yes, and put some money on it. If someone pressed me today, I would say the same about most industrial metals and oil. Given that a. the government stimulus effect is going to go down a lot very soon b. unemployment is not looking good c. much of the bounce in industrial output was restocking, I am not convinced that oil should be around twice of what it was a year ago...
Monday, 1 February 2010
Thursday, 14 January 2010
Now, as an economic historian, I couldn't help wondering... we used to live in a world with LOTS of piece rate work, plus a daily threat of dismissal (or not being re-hired). Why is it that 19th century labor markets didn't create the same kind of long-run stability, given that workers (in a way) are willing to "overpay" for stable paychecks? Standard stories of why we get long-term contracts focus on either the rise of unions, or on the different skill requirements in modern industry. But this can't be quite right -- even in textiles, where work is (for all I know) very similar today to what it was 100 years ago, there is much less work under piece rate contracts. Ditto in the mines. So are people more loss-averse today? Does the rise of mortgage debt and auto financing mean that, despite much fatter paychecks overall, people hate any decline in their income much more? Anyway, its nice to come away from a jobtalk and have many more things to think about than before... and good luck to Rosario.
Monday, 11 January 2010
It don't mean a thing if you don't do modelling,[I will suggest that ITFD statistics supremo Kurt Schmidheiny adopts it as the theme song of our quant methods class]
It don't matter if you're frequentist or Bayesian,
You just need a model with some alphas and betas, x's and y's, and i's and j's and k's in!
So it don't mean a thing if you don't do modelling,