Russia’s `Default’
21st BIS Annual Conference
Central banking after the pandemic: challenges ahead
This year’s conference focused on the question of how central banks can meet their mission to preserve the value of money. The sessions focused on inflation – the containment of which is an important aspect of preserving money’s value – as well as preserving the value of money from the longer-term, structural perspective, focusing on the challenges of digital innovation.
- La’O, Kalemli-Özcan, Smets
- Reis, Krogstrup, Sturzenegger
- Schoar, Adrian, Biais
- Parlour, He, Niepelt
Economic Journalism Award 2022
G20 Side Event, Bali
4th IFAWG Meeting — G20 Side Event on Macro-Financial Implications of CBDC, Bali
Conference on “The Digital Revolution and Monetary Policy: What is New?,” CEPR/SCG, 2023
Conference jointly organized by CEPR’s MEF group and RPN FinTech & Digital Currencies at the Study Center Gerzensee. Organized by Refet Gürkaynak and Dirk Niepelt.
Conference website.
When Children Die
Interview in NZZ with the leader of the palliative care section at the University of Zurich’s childrens’ hospital:
Wie sprachen [Kinder] darüber [ihre Ahnung, bald sterben zu müssen]?
Ein Kind sagte, es müsse zwei Koffer packen. Den einen nehme es auf seine Reise mit, den anderen lasse es zu Hause, damit es nicht vergessen werde. Ein anderes wollte auf einem Besen in den Himmel reiten. Ich habe auch schon ein kleines Kind erlebt, das kaum sprach und plötzlich zu seinen Eltern sagte, wie lieb es sie habe. Das war unglaublich berührend. Im Moment, als es das sagte, war der Satz noch nicht als Zeichen der Verabschiedung deutbar. Manchmal merken wir erst im Rückblick, dass das Kind gespürt hat, was kommt.
Was sagen Sie, wenn ein Kind Sie fragt, ob es bald sterben werde?
Das werde ich äusserst selten gefragt. Kinder fragen auch ihre Eltern nicht. Wenn, dann eher das Reinigungspersonal oder eine Lehrerin.
Weshalb?
Sie schützen die Eltern. Das heisst aber nicht, dass sie diese Frage nicht haben.
“Life Among the Econ”
Learning from Lucas
Tom Sargent describes how he learnt macroeconomics the Lucas way, starting from the Cowles Commission approach and digesting Muth’s (or Richardson’s?) rational expectations.
“Kampf um die Währungshoheit (Defending Monetary Sovereignty),” SM, 2022
Schweizer Monat, April 2022, with Markus Brunnermeier. PDF.
We describe challenges the digital money revolution poses for central banks and predict that more and more monetary authorities will introduce CBDCs.
White House on Digital Assets
An executive order dated March 9, 2022 outlines what is on the White House’s mind:
The United States has an interest in responsible financial innovation, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border funds transfers and payments, including through the continued modernization of public payment systems. We must take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections; financial stability and financial system integrity; combating and preventing crime and illicit finance; national security; the ability to exercise human rights; financial inclusion and equity; and climate change and pollution. …
(d) We must reinforce United States leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets. The United States has an interest in ensuring that it remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments and capital flows in the international financial system, particularly in setting standards that promote: democratic values; the rule of law; privacy; the protection of consumers, investors, and businesses; and interoperability with digital platforms, legacy architecture, and international payment systems. The United States derives significant economic and national security benefits from the central role that the United States dollar and United States financial institutions and markets play in the global financial system. Continued United States leadership in the global financial system will sustain United States financial power and promote United States economic interests.
Passports for Sale
Henley & Partners lists what is costs.
A growing number of countries host residence and citizenship by investment programs (also known as golden visa programs) that offer a variety of attractive investment options designed to cater to each family’s unique requirements. In an unsettled, ever-changing world, wealthy individuals need a plan B for themselves and their families — one that offers them a safer place to live in times of crisis, while also providing them with greater access to global business and lifestyle opportunities.
BA and MA Thesis Guidelines, Writing Tips
I supervise theses that focus on macroeconomic questions, use models to answer them, and are written in English or German. If you are interested in writing your thesis with me please follow these steps:
- Contact me by e-mail to check whether I can act as your thesis supervisor. Attach your grade sheet and sketch very briefly what type of questions you are interested in.
- Once we have agreed that I act as supervisor prepare a one- or two-page proposal outlining as concisely and precisely as possible, what your research question is; what kind of model you plan to use in order to answer the question; and what kind of results you anticipate.
- We will discuss your proposal and you might revise it until we have a common understanding of the research question and the strategy to answer it. We also agree on a rough timeline.
- Then you are free to go. It’s up to you how often you get back to me with questions.
(No) rules:
- I do not impose strict time limits or minimum/maximum length requirements etc. Ceteris paribus, completing the thesis faster or composing a shorter text is preferred.
- I don’t require a hardcopy of the thesis, a PDF suffices.
- I strongly suggest that you work with LaTeX; this allows you to focus on content rather than layout (and it nevertheless results in a more appealing end product).
- Of course, all formal requirements set by the faculty or the university apply.
The grade accounts for the following:
- Language and presentation: Extent to which grammar, wording, terminology and bibliography are correct, clear, consistent.
- Personal contribution: Extent to which thesis writer acts independently when choosing the topic, preparing the proposal, and working on the thesis.
- Topic: Extent to which the research question is relevant, challenging and focused.
- Depth: Extent to which the thesis thoroughly analyzes the topic.
- Structure: Extent to which the presentation conforms with logical reasoning and to which formal analysis and verbal reasoning correspond to each other.
- Model: Extent to which the model focuses on key aspects of interest and is solved correctly.
- Literature: Extent to which the author relates the work to relevant existing literature.
- Of course, BA students are not expected to deliver publishable research; it is all the more important that the thesis meets formal standards and the reasoning is clear and logical.
I typically grade within a few days.
Some advice on how to do research, write and present:
- John Cochrane: Writing Tips for Ph.D. students
- Berthold Herrendorf: How to Make Academic Presentations
- Tobias Klein’s page on academic writing which links to many additional pages
- Jesse Shapiro’s four steps of writing a paper
-
Claes Bäckman’s extensive collection of useful resources for researchers
Updated September 2022
Fabio Panetta on the Digital Euro
In a speech, the ECB’s Fabio Panetta argues that a digital Euro is necessary because
[i]n the digital age … banknotes could lose their role as a reference value in payments, undermining the integrity of the monetary system. Central banks must therefore consider how to ensure that their money can remain a payments anchor in a digital world.
He argues that
outsourcing the provision of central bank money [to stable coin providers] … would endanger monetary sovereignty [as would the absence of a national digital currency].
Panetta also argues that a digital Euro could
- improve the confidentiality of digital payments and
- increase choice and reduce costs
and should
- avoid interfering with the functioning of the financial system and
- be available within private payment solutions.
Panetta does not discuss
- seignorage and
- time consistency motivations.
“Digital Finance bedroht Geld- und Währungshoheit (Digital Finance Threatens Monetary Sovereignty),” NZZ, 2022
Neue Zürcher Zeitung, February 17, 2022. PDF.
- The federal council’s digital finance strategy focuses on regulation.
- There are limits to this strategy when financial markets operate globally and virtually.
- Preserving monetary sovereignty requires an attractive national currency.
- Carrots, not only sticks.
- An attractive currency is not only stable but also usable in digital form.
Webinar on “The Digital Euro: Policy Implications and Perspectives,” CEPR/SUERF, 2022
Olga Tokarczuk’s “The Books of Jacob”
Goodreads rating 4.19.
A sweeping novel of 950 pages (!) which starts on page 960. The Nobel laureate describes hundreds of characters, with even more names; immerses in countless locations, languages, and creeds. Her protagonists always remain strangers.
There is something wonderful in being a stranger, in being foreign, something to be relished, something as alluring as candy. It is good not to be able to understand a language, not to know the customs, to glide like a spirit among others who are distant and unrecognizable. Then a particular kind of wisdom awakens—an ability to surmise, to grasp the things that aren’t obvious. Cleverness and acumen come about. A person who is a stranger gains a new point of view, becomes, whether he likes it or not, a particular type of sage. Who was it who convinced us that being comfortable and familiar was so great? Only foreigners can truly understand the way things work. (pp. 390)
From Smyrna and Athos to Ivanie, across fluid Poland, Brünn (exact location), Vienna (exact location) and Offenbach to Paris in times of the French Revolution and the Supreme Court. From pariah creditors to noble debtors. Jacob and his daughter Eva; Yente and Nahman; and the heroes in the background, Hayah, Asher, and Thomas. Life in the eighteenth century, torn between hunger, disease, murder and rape; lies that kill, curses that float; and debates about Aufklärung, when religious zeal morphs into political activism and the practice of law.
The Word rules.
… the world is made of words that, once uttered, lay claim to every order, so that all things seem to occur at their behest. All things belong to them. Every curse, even the slightest, has an effect. Every single word that’s said. (pp. 645)
Nahman’s creed:
… I patiently stumble forward, not inquiring into the price I will have to pay, and even less so about any reward. My friend and ally is that moment, that urgent hour, the dearest time to me, when suddenly out of nowhere the writing gets easy, and then everything appears to be wonderfully able to be expressed. What a blissful state it is! Then I feel sage, and the whole world becomes a cradle that the Shekhinah has laid me down in, and now the Shekhinah leans in over me like a mother over an infant.
The path to the left is only for those who have shown they deserve it, those who understand what Reb Mordke always said—that the world itself demands to be narrated, and only then does it truly exist, only then can it flourish fully. But also that by telling the story of the world, we are changing the world.
That is why God created the letters of the alphabet, that we might have the opportunity to narrate to him what he created. Reb Mordke always chuckled at this. “God is blind. Did you not know that?” he would say. “He created us that we would be his guides, his five senses.” And he would chuckle long and hard until he began to cough from the smoke.
The novel comes with a bibliography, so is the story real?
Literature is a particular type of knowledge, it is … the perfection of imprecise forms. (p. 14)
In any case,
… any person who toils over matters of Messiahs, even failed ones, even just to tell their stories, will be treated just the same as he who studies the eternal mysteries of light. (p. 10)
Goodreads summary:
The Nobel Prize-winner’s richest, most sweeping and ambitious novel yet follows the comet-like rise and fall of a mysterious, messianic religious leader as he blazes his way across eighteenth-century Europe.
In the mid-eighteenth century, as new ideas–and a new unrest–begin to sweep the Continent, a young Jew of mysterious origins arrives in a village in Poland. Before long, he has changed not only his name but his persona; visited by what seem to be ecstatic experiences, Jacob Frank casts a charismatic spell that attracts an increasingly fervent following. In the decade to come, Frank will traverse the Hapsburg and Ottoman empires with throngs of disciples in his thrall as he reinvents himself again and again, converts to Islam and then Catholicism, is pilloried as a heretic and revered as the Messiah, and wreaks havoc on the conventional order, Jewish and Christian alike, with scandalous rumors of his sect’s secret rituals and the spread of his increasingly iconoclastic beliefs. The story of Frank–a real historical figure around whom mystery and controversy swirl to this day–is the perfect canvas for the genius and unparalleled reach of Olga Tokarczuk. Narrated through the perspectives of his contemporaries–those who revere him, those who revile him, the friend who betrays him, the lone woman who sees him for what he is–The Books of Jacob captures a world on the cusp of precipitous change, searching for certainty and longing for transcendence.
Goodreads reader Marc’s summary:
For those who like wide-ranging historical novels, this is the real thing. Tokarczuk immersed herself in 18th-century Greater Poland, which then covered large parts of Eastern Europe. Seen from the West, it was a perifere area, but it stood in intense contact with the Eastern Ottoman Empire, which at that time still controlled almost the entire Balkans. Tokarczuk sketches dozens of characters who constantly go back and forth between those two regions. These are especially Jews, and the author examines that Jewish world in great detail.
Her central story focuses on a Jewish heretic movement which actually existed in the middle of the 18th century. The movement was led by Jacob Frank, an Ottoman Jew. He was a very unlikely guru, but had an enormous charisma and managed to get tens of thousands of Jews behind his ‘Trinity Faith’. He seduced them with an eclectic mix of Judaism, Christianity and Islam, which was particularly attractive because it offered the Jews, with their always precarious position in Catholic Poland, the prospect of civil rights through baptism.
Olga Tokarczuk is the most acclaimed Polish writer of the moment (twice the Niké prize, once the Man Booker International prize, and, of course, the Nobel Prize 2018), but with this book she has had a really difficult time in her own country. Her focus on the Catholic discrimination against Jews in Greater Poland was not appreciated by the right-wing, conservative government currently in power in Warsaw. Also the picture she paints of an extremely diversified Polish nation, with a jumble of ethnicities and religious movements that lived together, contradicts the homogenic Polish identity that has been cultivated since the 2nd world war.
But that is precisely what makes this book extremely interesting. The way Tokarczuk brings all these different movements, cultures and ethnicities to life is a feast for the reader’s eye. Her narrative style even has a certain Marquezian flair, with a dash of magical realism through the character of the old Yenta who remains in a state of coma for hundreds of pages, and – stepped out of herself – glides through space and time, guiding the story a step further.
But there is a downside to this verbal firework: the immersion in all those worlds, the dozens of characters, the constant changes in perspective and time, all this makes reading this very bulky book a real test. For instance, it takes a quarter of the book, almost 250 pages, before the real story about the heresy of Jacob Frank takes off; until then Tokarczuk builds up, with constantly new characters, and travels back and forth between Poland, the Balkans and Smyrna (present-day Izmir in Turkey). Also the sometimes very intense theological discussions among the Jewish rabbis, diving into kabbala, demand a lot from the reader.
Again: this historical novel is quite a tour de force , not only in terms of size and depth. For me, the charm of the reading was mainly in the Chagal-like character of the visual language of Tokarczuk: she regularly sketches dreamy scenes with the comatose Yenta that floats over time and space and oversees everything. But in the long run it’s all a bit too much: the story just lingers on, endlessly, and I missed a real existential story, with people of flesh and blood. Hence the slightly lesser rating. But I’m definitely going to dive into Tokarczuk’s other work!
Newsletter of the Study Center Gerzensee, 2022
The new edition features an interview with Javier Bianchi. PDF.
It is “my” last Newsletter since I left the Center yesterday.
The FT Favors a Digital Dollar
On the question whether the Fed should seriously consider retail CBDC, the FT sides with the pro camp.
While elsewhere such central bank digital currencies can appear “a solution in search of a problem”, America’s lacklustre retail banking system and the importance of the dollar in cross-border money flows make an obvious case for reform.
Compare the contributions by Darrell Duffie and Chris Waller in the CEPR eBook.
“The Political Economy of Early COVID-19 Interventions in US States,” CEPR, 2022
CEPR Discussion Paper 16906, January 2022, with Martin Gonzalez-Eiras. PDF (local copy).
We investigate how politico-economic factors shaped government responses to the spread of COVID-19. Our simple framework uses epidemiological, economic and politico-economic arguments. Confronting the theory with US state level data we find strong evidence for partisanship even when we control for fundamentals including the electorate’s political views. Moreover, we detect an important role for the proximity of elections which we interpret as indicative of career concerns. Finally, we find suggestive evidence for complementarities between voluntary activity reductions and government imposed restrictions.
Forthcoming in the JEDC.
“Bargeld hat keine ökonomische Notwendigkeit (Cash, not Essential),” WR, 2022
Wirtschaft Regional, January 7, 2022. PDF.
Interview on private and public money, digital payments, Bitcoin, cash.
Blockchains, dApps, and Smart Contracts—A Critical Review
Blog post by Dave Peck and the PSL team. Some issues they discuss:
Very few categories of data belong on-chain …
Today’s smart contract programming models are deeply flawed …
- Smart contracts can’t reference the “real-world”. They can only reference the blockchain itself. This is known as the “oracle problem” and it makes blockchains a necessarily closed system. This may sound like a trivial problem, but it is actually profound. For instance, it forces smart contract developers to jump through hoops to build “price oracles” when they want their on-chain code to reference real-world asset prices. Companies like Chainlink act as oracles,
- Smart contracts can’t be upgraded …
- Smart contracts require complex distributed systems to run, effectively, forever.
Distributed consensus technology could change radically in the next decade.
“Asset Pricing, r versus g, and Modern Monetary Theory: How Much Debt Can Governments Issue?,” Bern, Spring 2022
BA seminar at the University of Bern.
Uni Bern’s official course page:
- The seminar targets students who have completed their mandatory training in microeconomics, macroeconomics and mathematics (i.e., students in the second half of their BA studies) and who are interested in modern macroeconomic theory.
- We analyze arguments according to which the government does, or does not face an intertemporal budget constraint. What does the literature on asset pricing, rational bubbles, or the fiscal theory of the price level have to say? Why does the difference between the interest rate and the growth rate matter? Does “Modern Monetary Theory” add anything to these insights?
- We start by reviewing standard economic models (c. 3 classes). Thereafter, students read contributions to the literature, summarize them and present their summaries in class.
- There is a maximum of 12 participants, first-come-first-served (according to date of registration on KSL).
- Meetings: Tuesday, 12.15 – 14.00 h.
- Syllabus: PDF.
“Economic Challenges in Switzerland (and beyond),” Bern, Spring 2022
BA course at the University of Bern.
Uni Bern’s official course page:
- The course targets students who have completed their mandatory training in microeconomics, macroeconomics and mathematics (i.e., students in the second half of their BA studies) and who are interested in modern macroeconomic theory. The objective of the course is threefold: Students should learn to think analytically, like economists do; they should understand select tools of modern macroeconomic theory; and they should learn to apply the tools and the economic reasoning to frame and understand policy issues in Switzerland and beyond.
- We start by discussing a couple of macroeconomic policy topics at the level a newspaper would cover them. Based on this review we identify topics that are of most interest to the students and the lecturer. Collaboratively, we determine steps to analyze them more carefully and deeply and we execute these steps. Topics might include, for example, growth; monetary and fiscal policy; crypto-currencies; CBDC; government debt; sovereign debt crises; exchange rates; inequality; etc.
- The students drive the selection of topics and the analytical discussion in class—active participation is key!—while the lecturer guides the discussion and introduces tools where adequate. In small groups the students focus on a specific aspect of a topic, prepare a short note on it, and present it in class.
- The course grade is a weighted average of the grade for the student’s participation in class and the grade for the group’s note/presentation. There is no exam unless participation is very weak.
- We will meet during most weeks of the semester, with interruptions when the groups need time to prepare their notes/presentations.
- Lecture: Monday, 10.15 – 12.00 h.
- Topics for group work: PDF.
“Fiscal and Monetary Policies,” Bern, Spring 2022
MA course at the University of Bern.
Uni Bern’s official course page:
- This course covers macroeconomic theories of fiscal policy (including tax and debt policy) and the interaction between fiscal and monetary policy. Participants should be familiar with the material covered in the course Macroeconomics II. The course grade reflects the final exam grade.
- Monday, 12.15 – 14.00 h
- 1st exam: Monday, May 30, 2022, 12.15 – 14.00h
- 2nd exam: Monday, September 12, 2022, 12.15 – 14.00h
The classes follow selected chapters in the textbook Macroeconomic Analysis (MIT Press, 2019) and build on the material covered in the macro II course which follows the same text. Table of contents of the book. Page with more information about the book and exercises.
Main contents:
- Concepts.
- RA model with government spending and taxes.
- Government debt in RA model.
- Government debt and social security in OLG model.
- Neutrality results.
- Consolidated government budget constraint.
- Fiscal effects on inflation. Game of chicken.
- FTPL. Active and passive policies.
- Tax smoothing.
- Time consistent policy.
- Sovereign debt.
