Here are some words from David Romer, spoken at the beginning of the NBER Summer Institute, Monetary Economics program:
Before we begin, we have a sad milestone to note. Anna Schwartz, who was a towering figure not just in the Monetary Economics program of the NBER, but in the field of monetary economics, died last month.
The usual way to mourn someone’s passing is with a moment of silence. I think everyone who knew Anna even a little realizes that that would be absolutely the wrong way to remember her. So instead, let’s remember her this week by being loud, forceful, and argumentative, and by interrupting one another when we feel really strongly about something. To honor her, we also need to keep our discussions and debates focused on the substantive questions at hand and firmly grounded in the evidence. And we need to be flexible and open-minded, willing to cheerfully change our minds even if it’s about a position we’ve argued for tenaciously for decades – as Anna did on the question of whether targeting monetary aggregates is a good way to conduct monetary policy.
But to truly honor Anna, what you need to do is to go back to your university or wherever you work after the conference is over, and do work that’s so damn good that it changes the way we think about basic questions in macroeconomics, and that’s so damn careful and thorough that fifty years from now, it’s still the first place that people look when they want to learn about an issue that your work addresses.
And, you’ll keep doing that work for decades. To put Anna’s research longevity in perspective, if you’re currently finishing your second year in graduate school, you’re probably about the same age that Anna was when she published her first paper. To match Anna’s research longevity, you’ll need to stay actively involved in important research until about 2080.
With those lofty goals in mind, let’s turn to the conference program.
11 Temmuz 2012 Çarşamba
The under-representation of women at the AEA meetings
There is no secret that women are under-represented in the Economics profession. Things have improved over time, though, but the proportion of women thins considerably as you look further up in the academics ranks. And this is not just a cohort effect coming from the increased proportion of women taking up Economics compared to previous years. Is there still a glass ceiling, despite the huge pressures on departments to hire and promote women?
Rosemary Cunningham and Madeline Zavodny show that one way to look at this is how well women are represented on the program of the annual meeting of the American Economic Association. Again, things have improved over time, but they are still under-represented compared to their numbers in the profession. And this despite the fact that there are sessions essentially reserved for them organized by CSWEP (Committee on the Status of Women in the Economics Profession) and IAFE (International Association of Feminist Economists). The classic argument is that women do not come to the meeting because it is held during a school holiday (very early January), but there is daycare. I would rather argue that it has to do with how the program is put together. As in much of what is going on at the AEA, being part of the old boys network is essential. Very few people from outside are lucky to break through. Women simply do not like taking part in such professional shmoozing, and they are not that welcome either. The fact that it is old people doing the program does not help either.
Rosemary Cunningham and Madeline Zavodny show that one way to look at this is how well women are represented on the program of the annual meeting of the American Economic Association. Again, things have improved over time, but they are still under-represented compared to their numbers in the profession. And this despite the fact that there are sessions essentially reserved for them organized by CSWEP (Committee on the Status of Women in the Economics Profession) and IAFE (International Association of Feminist Economists). The classic argument is that women do not come to the meeting because it is held during a school holiday (very early January), but there is daycare. I would rather argue that it has to do with how the program is put together. As in much of what is going on at the AEA, being part of the old boys network is essential. Very few people from outside are lucky to break through. Women simply do not like taking part in such professional shmoozing, and they are not that welcome either. The fact that it is old people doing the program does not help either.
10 Temmuz 2012 Salı
Avoiding sovereign debt dilution with debt seniority
There is a natural tendency for firms to borrow too much. This is known as the debt dilution problem. It occurs because the borrower does not factor in the impact on old debt of borrowing more. Indeed, it makes old more risky, and hence increases borrowing costs. The market response to this problem was to introduce debt seniority, wherein some debt classes have priority over others in liquidation. For example, primary mortgages have priority over secondary mortgages, and the latter carry higher interest rates. The fact that one has a secondary mortgage has then no bearing on the riskiness and cost of the primary mortgage.
Satyajit Chatterjee and Burcu Eyigungor point out that there is not such concept in sovereign debt, but it should. Indeed, debt dilution happens at a massive scale in sovereign debt, and the market response when debt dilution happens such as now in many countries is to have shorter terms. This increases costs significantly, as Southern European countries have recently witnessed. Chatterjee and Eyigungor show that if sovereign debt also had a seniority structure, the frequency of default would be significantly reduced, by 40% taking the example of Argentina. It also reduces the volatility of spreads by two thirds. That seems very interesting.
Satyajit Chatterjee and Burcu Eyigungor point out that there is not such concept in sovereign debt, but it should. Indeed, debt dilution happens at a massive scale in sovereign debt, and the market response when debt dilution happens such as now in many countries is to have shorter terms. This increases costs significantly, as Southern European countries have recently witnessed. Chatterjee and Eyigungor show that if sovereign debt also had a seniority structure, the frequency of default would be significantly reduced, by 40% taking the example of Argentina. It also reduces the volatility of spreads by two thirds. That seems very interesting.
9 Temmuz 2012 Pazartesi
School subsidies may increase school attendance and child labor
Child labor is widely recognized as a poverty trap problem. Parents know their child should go to school, but they cannot afford missing out on supplemental income or domestic help. And in cases where there is actually no good reason to send the child to school, it is because the economy does not have jobs for people with more education, because no one has more education. This is why several programs have been very successful in getting children into school as long as they provided the right incentives for parents: cash transfers and free lunches that provide the economic replacement of the income the child would have generated. The success is usually measured by looking at school attendance or outcomes.
Jacobus de Hoop and Furio Rosati point out that the impact on child labor is not so clear, especially as it is difficult to measure. Indeed, most of child labor is inside the household or in informal markets. Using data from Burkina Faso, they find that recipients from the BRIGHT program both increased school attendance and child labor. The BRIGHT program also includes the construction of school and provides for take-home food rations for girls.
De Hoop and Rosati show that these disheartening results can be consistent with altruistic parents when there are some non-convexities. The latter stem from the fact that there are substantial commuting times for school attendance. As the program built new schools, it reduced those commuting times. This in itself makes school attendance more likely, but at the cost of providing more time for work for those who were already going to school. This does not mean one should not build schools, though, rather one should find some other intervention that counteracts this perverse effect.
Jacobus de Hoop and Furio Rosati point out that the impact on child labor is not so clear, especially as it is difficult to measure. Indeed, most of child labor is inside the household or in informal markets. Using data from Burkina Faso, they find that recipients from the BRIGHT program both increased school attendance and child labor. The BRIGHT program also includes the construction of school and provides for take-home food rations for girls.
De Hoop and Rosati show that these disheartening results can be consistent with altruistic parents when there are some non-convexities. The latter stem from the fact that there are substantial commuting times for school attendance. As the program built new schools, it reduced those commuting times. This in itself makes school attendance more likely, but at the cost of providing more time for work for those who were already going to school. This does not mean one should not build schools, though, rather one should find some other intervention that counteracts this perverse effect.
7 Temmuz 2012 Cumartesi
6 Temmuz 2012 Cuma
What should a country do with a windfall?
You live in a country with a poor population and little infrastructure. Assume you are benevolent and the country gets a sudden, but temporary, windfall, say from the discovery of some natural resources. How should you allocate this windfall? The simple growth model with subsistence consumption would tell you to put as much as possible into capital. This would get the country above the unstable equilibrium and out of the development trap. But if you are already above, you can put some income towards current consumption, taking time preference into account.
Frederick van der Ploeg refines this on several dimensions. First, the efficiency of investment is not that high in a country that is not used to it, and there are decreasing returns. This would call to put more into consumption and especially into debt reduction. This is reinforced by the Dutch disease, which is the tendency of a country with abundant resources to turn into an economy that all revolves around these resources. It is very difficult to invest in anything else. It may thus be good to put some money into a sovereign wealth fund until the non-traded sector is ready to accept more investment. Also, additional consumption should be concentrated towards the poorest.
As some would say, this is very nice in theory, but practice should that resource-rich economies have a dismal growth record, largely due to mis-allocation. But it is worth thinking how this could be done better
Frederick van der Ploeg refines this on several dimensions. First, the efficiency of investment is not that high in a country that is not used to it, and there are decreasing returns. This would call to put more into consumption and especially into debt reduction. This is reinforced by the Dutch disease, which is the tendency of a country with abundant resources to turn into an economy that all revolves around these resources. It is very difficult to invest in anything else. It may thus be good to put some money into a sovereign wealth fund until the non-traded sector is ready to accept more investment. Also, additional consumption should be concentrated towards the poorest.
As some would say, this is very nice in theory, but practice should that resource-rich economies have a dismal growth record, largely due to mis-allocation. But it is worth thinking how this could be done better
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11 Temmuz 2012 Çarşamba
A Tribute to Anna Schwartz
Here are some words from David Romer, spoken at the beginning of the NBER Summer Institute, Monetary Economics program:
Before we begin, we have a sad milestone to note. Anna Schwartz, who was a towering figure not just in the Monetary Economics program of the NBER, but in the field of monetary economics, died last month.
The usual way to mourn someone’s passing is with a moment of silence. I think everyone who knew Anna even a little realizes that that would be absolutely the wrong way to remember her. So instead, let’s remember her this week by being loud, forceful, and argumentative, and by interrupting one another when we feel really strongly about something. To honor her, we also need to keep our discussions and debates focused on the substantive questions at hand and firmly grounded in the evidence. And we need to be flexible and open-minded, willing to cheerfully change our minds even if it’s about a position we’ve argued for tenaciously for decades – as Anna did on the question of whether targeting monetary aggregates is a good way to conduct monetary policy.
But to truly honor Anna, what you need to do is to go back to your university or wherever you work after the conference is over, and do work that’s so damn good that it changes the way we think about basic questions in macroeconomics, and that’s so damn careful and thorough that fifty years from now, it’s still the first place that people look when they want to learn about an issue that your work addresses.
And, you’ll keep doing that work for decades. To put Anna’s research longevity in perspective, if you’re currently finishing your second year in graduate school, you’re probably about the same age that Anna was when she published her first paper. To match Anna’s research longevity, you’ll need to stay actively involved in important research until about 2080.
With those lofty goals in mind, let’s turn to the conference program.
Before we begin, we have a sad milestone to note. Anna Schwartz, who was a towering figure not just in the Monetary Economics program of the NBER, but in the field of monetary economics, died last month.
The usual way to mourn someone’s passing is with a moment of silence. I think everyone who knew Anna even a little realizes that that would be absolutely the wrong way to remember her. So instead, let’s remember her this week by being loud, forceful, and argumentative, and by interrupting one another when we feel really strongly about something. To honor her, we also need to keep our discussions and debates focused on the substantive questions at hand and firmly grounded in the evidence. And we need to be flexible and open-minded, willing to cheerfully change our minds even if it’s about a position we’ve argued for tenaciously for decades – as Anna did on the question of whether targeting monetary aggregates is a good way to conduct monetary policy.
But to truly honor Anna, what you need to do is to go back to your university or wherever you work after the conference is over, and do work that’s so damn good that it changes the way we think about basic questions in macroeconomics, and that’s so damn careful and thorough that fifty years from now, it’s still the first place that people look when they want to learn about an issue that your work addresses.
And, you’ll keep doing that work for decades. To put Anna’s research longevity in perspective, if you’re currently finishing your second year in graduate school, you’re probably about the same age that Anna was when she published her first paper. To match Anna’s research longevity, you’ll need to stay actively involved in important research until about 2080.
With those lofty goals in mind, let’s turn to the conference program.
The under-representation of women at the AEA meetings
There is no secret that women are under-represented in the Economics profession. Things have improved over time, though, but the proportion of women thins considerably as you look further up in the academics ranks. And this is not just a cohort effect coming from the increased proportion of women taking up Economics compared to previous years. Is there still a glass ceiling, despite the huge pressures on departments to hire and promote women?
Rosemary Cunningham and Madeline Zavodny show that one way to look at this is how well women are represented on the program of the annual meeting of the American Economic Association. Again, things have improved over time, but they are still under-represented compared to their numbers in the profession. And this despite the fact that there are sessions essentially reserved for them organized by CSWEP (Committee on the Status of Women in the Economics Profession) and IAFE (International Association of Feminist Economists). The classic argument is that women do not come to the meeting because it is held during a school holiday (very early January), but there is daycare. I would rather argue that it has to do with how the program is put together. As in much of what is going on at the AEA, being part of the old boys network is essential. Very few people from outside are lucky to break through. Women simply do not like taking part in such professional shmoozing, and they are not that welcome either. The fact that it is old people doing the program does not help either.
Rosemary Cunningham and Madeline Zavodny show that one way to look at this is how well women are represented on the program of the annual meeting of the American Economic Association. Again, things have improved over time, but they are still under-represented compared to their numbers in the profession. And this despite the fact that there are sessions essentially reserved for them organized by CSWEP (Committee on the Status of Women in the Economics Profession) and IAFE (International Association of Feminist Economists). The classic argument is that women do not come to the meeting because it is held during a school holiday (very early January), but there is daycare. I would rather argue that it has to do with how the program is put together. As in much of what is going on at the AEA, being part of the old boys network is essential. Very few people from outside are lucky to break through. Women simply do not like taking part in such professional shmoozing, and they are not that welcome either. The fact that it is old people doing the program does not help either.
10 Temmuz 2012 Salı
Avoiding sovereign debt dilution with debt seniority
There is a natural tendency for firms to borrow too much. This is known as the debt dilution problem. It occurs because the borrower does not factor in the impact on old debt of borrowing more. Indeed, it makes old more risky, and hence increases borrowing costs. The market response to this problem was to introduce debt seniority, wherein some debt classes have priority over others in liquidation. For example, primary mortgages have priority over secondary mortgages, and the latter carry higher interest rates. The fact that one has a secondary mortgage has then no bearing on the riskiness and cost of the primary mortgage.
Satyajit Chatterjee and Burcu Eyigungor point out that there is not such concept in sovereign debt, but it should. Indeed, debt dilution happens at a massive scale in sovereign debt, and the market response when debt dilution happens such as now in many countries is to have shorter terms. This increases costs significantly, as Southern European countries have recently witnessed. Chatterjee and Eyigungor show that if sovereign debt also had a seniority structure, the frequency of default would be significantly reduced, by 40% taking the example of Argentina. It also reduces the volatility of spreads by two thirds. That seems very interesting.
Satyajit Chatterjee and Burcu Eyigungor point out that there is not such concept in sovereign debt, but it should. Indeed, debt dilution happens at a massive scale in sovereign debt, and the market response when debt dilution happens such as now in many countries is to have shorter terms. This increases costs significantly, as Southern European countries have recently witnessed. Chatterjee and Eyigungor show that if sovereign debt also had a seniority structure, the frequency of default would be significantly reduced, by 40% taking the example of Argentina. It also reduces the volatility of spreads by two thirds. That seems very interesting.
9 Temmuz 2012 Pazartesi
School subsidies may increase school attendance and child labor
Child labor is widely recognized as a poverty trap problem. Parents know their child should go to school, but they cannot afford missing out on supplemental income or domestic help. And in cases where there is actually no good reason to send the child to school, it is because the economy does not have jobs for people with more education, because no one has more education. This is why several programs have been very successful in getting children into school as long as they provided the right incentives for parents: cash transfers and free lunches that provide the economic replacement of the income the child would have generated. The success is usually measured by looking at school attendance or outcomes.
Jacobus de Hoop and Furio Rosati point out that the impact on child labor is not so clear, especially as it is difficult to measure. Indeed, most of child labor is inside the household or in informal markets. Using data from Burkina Faso, they find that recipients from the BRIGHT program both increased school attendance and child labor. The BRIGHT program also includes the construction of school and provides for take-home food rations for girls.
De Hoop and Rosati show that these disheartening results can be consistent with altruistic parents when there are some non-convexities. The latter stem from the fact that there are substantial commuting times for school attendance. As the program built new schools, it reduced those commuting times. This in itself makes school attendance more likely, but at the cost of providing more time for work for those who were already going to school. This does not mean one should not build schools, though, rather one should find some other intervention that counteracts this perverse effect.
Jacobus de Hoop and Furio Rosati point out that the impact on child labor is not so clear, especially as it is difficult to measure. Indeed, most of child labor is inside the household or in informal markets. Using data from Burkina Faso, they find that recipients from the BRIGHT program both increased school attendance and child labor. The BRIGHT program also includes the construction of school and provides for take-home food rations for girls.
De Hoop and Rosati show that these disheartening results can be consistent with altruistic parents when there are some non-convexities. The latter stem from the fact that there are substantial commuting times for school attendance. As the program built new schools, it reduced those commuting times. This in itself makes school attendance more likely, but at the cost of providing more time for work for those who were already going to school. This does not mean one should not build schools, though, rather one should find some other intervention that counteracts this perverse effect.
7 Temmuz 2012 Cumartesi
6 Temmuz 2012 Cuma
What should a country do with a windfall?
You live in a country with a poor population and little infrastructure. Assume you are benevolent and the country gets a sudden, but temporary, windfall, say from the discovery of some natural resources. How should you allocate this windfall? The simple growth model with subsistence consumption would tell you to put as much as possible into capital. This would get the country above the unstable equilibrium and out of the development trap. But if you are already above, you can put some income towards current consumption, taking time preference into account.
Frederick van der Ploeg refines this on several dimensions. First, the efficiency of investment is not that high in a country that is not used to it, and there are decreasing returns. This would call to put more into consumption and especially into debt reduction. This is reinforced by the Dutch disease, which is the tendency of a country with abundant resources to turn into an economy that all revolves around these resources. It is very difficult to invest in anything else. It may thus be good to put some money into a sovereign wealth fund until the non-traded sector is ready to accept more investment. Also, additional consumption should be concentrated towards the poorest.
As some would say, this is very nice in theory, but practice should that resource-rich economies have a dismal growth record, largely due to mis-allocation. But it is worth thinking how this could be done better
Frederick van der Ploeg refines this on several dimensions. First, the efficiency of investment is not that high in a country that is not used to it, and there are decreasing returns. This would call to put more into consumption and especially into debt reduction. This is reinforced by the Dutch disease, which is the tendency of a country with abundant resources to turn into an economy that all revolves around these resources. It is very difficult to invest in anything else. It may thus be good to put some money into a sovereign wealth fund until the non-traded sector is ready to accept more investment. Also, additional consumption should be concentrated towards the poorest.
As some would say, this is very nice in theory, but practice should that resource-rich economies have a dismal growth record, largely due to mis-allocation. But it is worth thinking how this could be done better
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