In this post, we describe a novel approach to measuring herding in financial markets, which we employed in a recently published paper. We develop a theoretical model of herd behavior that, in contrast to the existing theoretical literature, can be brought to the data, and we show how to estimate it using financial markets transaction data.
How should one understand the disconnect between the new highs reached by
global equity indices and the new depths plumbed by real interest rates
worldwide? Several competing explanations attempt to reconcile these trends, and
getting it right is essential for calibrating monetary and fiscal policy
"So the TPP should be judged not against the hypothetical past in which U.S.
workers did not face foreign competition but in the context of a world in which
trade integration in Asia is already happening — with or without the United
States. Its merit will depend on U.S. negotiating priorities."
So-called “frontier market economies" are the latest fad in investment
circles. Whether surging capital inflows in these countries – including
Bangladesh, Vietnam, Honduras, Bolivia, Kenya, and Ghana – should be cheered or
lamented is a question that has become a kind of Rorschach test for economic
analysts and policymakers.
With the bond market appearing ripe for a dramatic correction, many are
wondering whether a crash could drag down markets for other long-term assets,
such as housing and equities. But when an event has never occurred, it cannot be
predicted with any semblance of confidence.
I have never understood why New Keynesians can be so defensive about their modelling of price setting. Their response every time should be ‘well at least it’s better than assuming an intertemporal auctioneer’."
"David Levine's model/story is a very Monetarist model/story. (OK, a Keynesian model/story too, if by "Keynesian" we mean theoretically correct Keynesians who recognise the central importance of the medium of exchange.) But he misses seeing the point of his own model/story because he misses seeing that phones are money in his story."
Different characteristics of a politician could affect policy. Whereas existing
studies analyse gender and education, this column discusses the effect of a
politician’s age on governance and re-election. Younger mayors are more likely
to strategically increase expenditures and attract more transfers from the
higher levels of government right before the election. These fiscal cycles are
positively correlated with re-election and, hence, potentially explain why
younger mayors are more likely to be re-elected.