Ten most read posts in August

Cecchetti and Schoenholtz place the beginning of the Financial Crisis on August 9, 2007 the day when BNP Paribas suspended redemptions from three of their mutual funds because their fund managers could not value their assets. With hindsight 20/20 the authors analyze the reasons why the BNP event was the spark that lit the tinder and shifted the system from a good state to a bad one.
Looking Back: The Financial Crisis Began 10 Years Ago This Week
By: Stephen G. Cecchetti, Kim Schoenholtz – Brandeis University, NYU

Can the “aura of expertise” hide the political biases of officials at Central Banks? What if these political biases are at odds with voters’ preferences? Narayana Kocherlakota, former President of the Federal Reserve Bank of Minneapolis, argues that in the case of the US the congress should consider imposing a lower bound for the level of interest rates and an upper bound for asset holdings.
Maybe Central Banks Are Too Independent
By: Narayana Kocherlakota – University of Rochester

Rey has claimed that the global financial cycle constrains the ability of policymakers to affect domestic conditions regardless of the exchange rate regime. In this recent lecture she talks about “the Global Financial Cycle, the Mundellian trilemma, the exorbitant privilege and exorbitant duty and the New Triffin Dilemma”. She argues that in order to deal with the Global Financial Cycle and the trilemma we need monetary and fiscal policy coordination and macro-prudential policies.
The Global Financial System, the Real Rate of Interest and a Long History of Boom-Bust Cycles
Author: Hélène Rey
From: London Business School

Globalization was not the only shock that destroyed “established social contracts” but it was the only shock that got the stigma of unfairness, unlike technology, argues Rodrik. When the globalization shock takes the form of immigration and refugees, as in advanced economies in Europe, the ensuing populist movement is right wing. When it takes the form of trade, finance and foreign investment, as in Southern Europe and Latin America, the ensuing populist movement is left-wing. Rodrik concludes by saying “… it is doubtful that populism will be going away. The world’s economic-political order appears to be at an inflection point, with its future direction hanging very much in balance.”
Populism and the economics on globalization
Author: Dani Rodrik
From: Harvard University

An extensive review of recent research on Central Bank independence by both economists and political scientists.
The Politics of Central Bank Independence
Authors: Jakob de Haan, Sylvester Eijffinger
From: University of Groningen – Tilburg University

Using data for 31 OECD and 49 non-OECD economies during the period 1998-2010, Pistoresi and al. find that: a) there is no evidence of decreased Central Bank independence after the financial crisis; b) during periods of financial instability, recession and low inflation Central Banks’ autonomy becomes undermined; c) in non-OECD countries the higher the level of political corruption the stronger the incentive to delegate to an independent Central Bank.
Central Bank Independence, financial instability and politics: new evidence for OECD and non-OECD countries
Authors: Barbara Pistoresi, Maddalena Cavicchioli, Giulio Brevini
From: University of Modena and Reggio Emilia – University of Verona

Have things changed since the financial crisis?
The Neglected Lessons of a Lost Decade
By: Narayana Kocherlakota – University of Rochester

Barkai finds that the decline in both labor and capital shares of GDP is due to an increase in markups. In particular, he finds that company profits rose from 2.2{5e7f07e14add20b2e04f4edb85a447d3cd8121fc27b809645e9fed603c22cc5c} in 1984 to 15.7{5e7f07e14add20b2e04f4edb85a447d3cd8121fc27b809645e9fed603c22cc5c} in 2014, with the trend being more pronounced in industries that underwent large increases in concentration.
Declining Labor and Capital Shares
Author: Simcha Barkai
From: University of Chicago

Byrne and Sichel suggest that the slowdown in productivity is even more puzzling if one accounts for the rapid innovation in information and communications technologies. They believe that these technical advances could provide the impetus for productivity growth.
The productivity slowdown is even more puzzling than you think
By: David Byrne, Dan Sichel – Federal Reserve Board, Wellesley College

As the mandate of Central Banks expands, becomes more complicated and “fuzzier” accountability becomes necessary to ensure legitimacy, argue Goodhart and Lastra. In particular, they foresee the delegation of macro-prudential supervision to Central Banks to become controversial as it is hard to monitor whether the authorities are “on the right track”. Finally they advocate the judicial review of Central Bank actions and decisions.
Populism and Central Bank Independence
Authors:Charles A Goodhart, Rosa Lastra
From: London School of Economics – Queen Mary University of London