General Collection

Gender and Job Market:

This article in medium by Nikita coulombe is an excellent piece on gender pay gap. The traditional theories have argued that gender pay gap exists purely because of discrimination. In this article she gives a rational explanation for why gender pay gap exists. She argues that gender pay gap exists because of the differences in utility women derive from higher paying jobs vis-a-vis men.

Brexit:

This is an old article from Mint before the results of Brexit referendum were out. This article argues that if Britain exits EU then a lot of cash from emerging markets will seek opportunities in emerging markets.

Corporate Bond Market:

According to this article on mint RBI is planning to allow banks to use corporate bonds as collateral in its liquidity adjustment facility. This will be a big boost to the Indian corporate bond market. It already high time that the government and RBI take some dramatic steps to improve the liquidity in this market.

New Indian GDP data:

An interesting article on the negative effects of fudging national GDP statistics. A lot of eyebrows were raised when India released its new GDP statistics calculation method. When the official government statistics loose credibility then private entities will spend resources on  estimating GDP. If multiple entities do the same, then it would be a duplication of work and wastage of resources. Irrespective of whether government is fudging its statistics or not, as long as the public perceive the statistics to be not true they will try to estimate their own GDP numbers and lead to wastage of resources. Lets hope the government does something to alleviate the doubts of public.

Water, Water, everywhere, but not a drop to drink:

A very good article by Barry Eichengreen in Mint on international liquidity. The policy rates of some the central banks of developed economies are in negative zone or close by yet there seems to be a shortage of liquidity. Excerpts from the article..

The key difference between these international assets and liquid assets in general, then, is that only the former are accepted in a large number of different countries and regularly used in transactions between them.

Post the financial crisis ratings of many countries have been downgraded and only highest grade sovereign bonds are acceptable in international transactions. As a result …“International liquidity has plummeted from nearly 60% of global GDP in 2009 to barely 30% today.” 

“Urging the US government to issue more debt is no solution; doing so would only threaten rating downgrades and make foreign investors reluctant to hold US Treasury bonds.”

The author discussed several other mechanisms like using high grade private debt and IMF allocating  SDRs to governments. However these wont be able to solve the problem.

“Probably the most practical solution is to permit the IMF to borrow on private financial markets and use the proceeds to issue additional SDRs. With member governments collectively guaranteeing its obligations, its bonds would be as good as gold.

To be sure, for their guarantee to be credible, members would have to commit to recapitalizing the Fund if it ever took losses on its loans. But, then, nothing is free.

Globalization’s benefits are sometimes exaggerated, but there have been important benefits. Failure to address the international liquidity problem could jeopardize all that has been accomplished.”

 

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Author: Bobbur Abhilash

I am a fourth year Doctoral student in the Finance and Control Department at IIM Calcutta.

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