Friday, 23 July 2010

Euro redivivus...

or dead cat bounce? The Euro has surged since touching a recent low of below 1.20 to the dollar. After relentless news headlines hammering the common currency, and all the pundits claiming that parity was next, the market decided to turn a corner. Apparently, the upcoming double-dip in the US is even worse than all the "EU can't compete" sneers of our Anglo-Saxon friends. But make no mistake - purchasing power parity is still a long way off, and probably closer to 1.10 or so. That's true if you look at the Big Mac Index or more sophisticated measures, which the Economist just updated today. OANDA updates the Big Mac Index every day [and cites the exchange rate the other way around, i.e. you get 0.78€ per $]. Introduced by the Economist, it simply uses the ratio of Big Mac prices in different countries as an exchange rate forecast. It actually does pretty well, over relatively long time horizons. Elsewhere, Orley Ashenfelter and co-authors have used Big Mac prices to calculate ppp-adjusted wages. So, what does this mean for the exchange rate? In the short term, there is no way to tell. It's darn easy to tell really pessimistic stories about the US economic outlook (making monetary easing more likely than tightening), or do the same for Euro (another failed bond auction, anyone?). Over the medium term, I expect those Big Macs to do well at forecasting.

Damn good writing...

for the five-minute-creative-reboot; but who will fix my umlauts?

Thursday, 22 July 2010

One hell of a clever investor - Antonio Salazar

Bloomberg has calculated that, relative to the size of the economy, Portugal has the largest quantity of gold of any country. Apparently, this is the fruit of dictator Antonio Salazar stockpiling the stuff, received in no small part in exchange for things like tungsten (very useful for making armor-piercing tank rounds - I wonder where they used those between 1939 and 1945?). How you go from that to a headline like "Gold Makes Dead Portuguese Dictator Top Investor - Bloomberg" I will never know. Well, it's summer, and I suppose it beats Nessie...


Well, it's always nice to be asked... especially if it's a sign that you are known for something. Well, almost always. Recently, I found this in my inbox:

from: NN


date: Sat, Dec 5, 2009 at 18:13

subject: Bubble Help!

Dear Sir,
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.

Thank you
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.

I also enjoyed this one:

from: NN


date: Tue, Apr 6, 2010 at 00:28

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.

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

How BP should have handled the spill

How to communicate in public is something I spend more time thinking about than is probably good for my sleep... I teach the research seminar at the UPF econ department, which is a second-year boot camp on research techniques for our doctoral students. A lot of emphasis is put on presenting and writing, and I actually show students Steve Jobs introducing the Ipod on youtube and then discuss with them what you can learn from Steve for our presentations.
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

Youth unemployment

Many of our graduates are actively hunting for work now. Some already found good jobs, others are interns at interesting places (congrats to Paulina Tourn, who is currently with the WTO). Now, Edoardo Campanella (ITFD 08-09) has written an article highlighting the problem of youth unemployment in Europe. It's for project syndicate, which feeds content to over 140 newspapers worldwide. Luckily, Edoardo isn't talking from personal experience. He is currently an economic advisor to the Italian Senate, and was formerly an economist at the World Trade Organization.

Thursday, 15 July 2010

Soccer and Autonomy

This week, I was getting quite a few emails from friends from all over the world, talking about soccer. The idea that a German in Barcelona isn't THAAAAT much into soccer takes some by surprise... Of course, not everyone in Catalunya identifies with the Spanish national soccer team, even when they are winning. Last time Germany played against Spain in the Eurocup finals, some of my Catalan colleagues said "We are counting on you guys tonight." This time, when asked if he was looking forward to the cup, one colleague born and bred in Barcelona said "My country is not competing." So I wonder who the press has been talking to that claims that issues of national identity and regional autonomy have been put on a back burner by the country winning the cup. As a matter of fact, and by strange coincidence, last Saturday saw a tremendously large demonstration in Barcelona. People were protesting against the Spanish supreme court decision that denies Catalunya many of the basic rights enshrined in its "Estatut", passed by referendum here and approved by the Spanish parliament. Gone is Catalan as the official language, a right to minimum expenditure of the Spanish state here, etc.

Oddly, the decision by the supreme court may actually be good news for those who favor Catalan independence. It is a miserly and narrow-minded decision, denying a people with a different language and culture even minimal symbolic recognition. This is the kind of ungenerous, stupid reaction to small requests for autonomy that has often led to independence in the long run. Britain's treatment of "Home Rule" in Ireland is a case in point. For many years before World War I, Parliament denied the most basic forms of autonomy to its conquered province. When it finally passed some minimal delegation of powers, implementation was delayed by World War I. When the British hugely overreacted to a minor armed rebellion (by shelling Dublin from warships, etc.), the political mood completely changed. Five years later, Britain ceded control over Southern Ireland. Now, the Supreme Court decision isn't quite the same as the bloody suppression of the Easter Rising in Dublin, but it has a similar, bloody-minded feel to it. What I don't get is why there isn't more of a systematic attempt to organize civil disobedience, withholding of taxes, etc.

Wednesday, 14 July 2010

Supermodels / Rethinking my financial crises syllabus

Of course, I think of my course on financial crises as mildly entertaining, or better... but perhaps I should have a session on supermodels to spice things up a bit? 3quarksdaily has an interesting post that links some of the work on information cascades in financial markets with how any one individual becomes an acclaimed model. The answer is distinctly reminiscent of Soros "reflexivity" point -- people's reaction themselves are relevant news in financial markets, and in terms of who gets "booked" for the next fashion show. Any similarities with the market for new Ph.D.s are entirely accidental...

Thursday, 1 July 2010

The class of 2010 graduates

... 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!

[and here is a link to some other pics from the graduation party, including photos of the other master's programs]