Bleg: Nepal – what is it like?
Does anyone know what Nepal is like to visit? Does anyone have any suggestions about places to visit in Nepal.
Any comments (relevant) welcome.
This proof’s a lemon
I couldn’t resist posting this chart linked byMegan McArdle. It is just SO appropriate given Matt’s recent post. If using graphs like this counted as proving a scientific fact then the world would be a whole lot easier to explain 🙂
Internet at work is a blessing (for your boss)
It’s always seemed to me a bit over the top to block social internet sites at offices. I’ve wondered if people spend more time looking up free proxy servers that aren’t blocked than they would have if they’d been allowed to check their Gmail. Now a study says that most people do surf at work and it actually makes most of them more productive: the opportunity to take a break and relax for a minute helps them to concentrate harder the rest of the time.
Clearly the productivity gain to surfing at work is concave, so the question is really, “at what point do the marginal gains become negative?” According to this study it’s only when you surf more than 20% of the working day that your productivity starts to decline! Read more
Note on commodity prices/exchange rate
The ANZ New Zealand commodity price index, in world prices, rose 1% over March – or so I’ve been told. In New Zealand dollars the index fell – as the exchange rate rose. This lead to the following quote:
At a time when the domestic economy is still very weak, a higher NZ dollar is likely to delay any support the export sector is able to provide
I think it is essential to keep in mind what a higher exchange rate means here. If the exchange rate rose on the back of rising commodities prices (which was part of the story – although definitely not all, hence the fall in $NZ prices) then it is perfectly natural. The increase in returns associated with the higher commodity prices is merely being spread across the economy – rather than directly into exporters pockets.
Now, I feel that the concern comes from the fact that we currently want to avoid declines in production – because the labour market is fragile. A lower exchange rate makes imports more expensive and exports more competitive – leading to more production than before.
However, if this is the case then we should be clear that the issue is that we are worried about production and employment declining into some sort of “vicious cycle” – rather than just saying lower exchange rates are good.
So remember, a higher exchange rate on the back of higher commodity prices “shares the good fortune” of increasing prices across the economy – this isn’t necessarily a bad thing.
Award for worst piece of economic analysis this year
I am virtually certain it would go to this piece by Phillip O’Connor from the University of Auckland. I mean, I thought this is the sort of award that would always go to NZPA, as they have to quickly release something that sometimes misses the point. However, a Senior Lecturer from Auckland has managed to illustrate to me how bad analysis can be.
Now in case other people can’t see some of the issues with his “analysis” I will discuss some things under the flap. And to be honest, I’m writing this in sheer shock – I have never met an economics lecture this off track. Maybe it is because I went to Victoria University – where the lecturing is top rate 😉
Bleg: A negative OCR – how?
I like the idea of being able to keep cutting the OCR – even once it hits zero. It doesn’t mean that market rates will be negative, that doesn’t make any sense – but it does mean that monetary policy can push banks to lower reserves and increase the amount of money in circulation. This is useful if we think we are facing deflation and the OCR has already hit zero.
However, how would we make it work? If we only said reserves were reserves when they are held by a central bank, there would be no (or little) incentive for retail banks to hold reserves in this fashion when there is a penatly interest rate. But they could just “hide money under the pillow”.
As a result, any definition of reserves in this case needs to include money hidden under banks collective pillows.
Furthermore, we need to be careful about what we do class as reserves on the other side. If we class bonds as reserves we are only letting banks either lend or take a penalty – if lending prospects are bad then the RBNZ would just be taking money off the bank, not so much of a good move in the face of the current credit crisis. If banks buy bonds it is still “stimulatory” – so that is something we want to leave there.
So how do we capture non-active reserves? Does the RBNZ have enough information to do this? Does it have the right to do this? I would love some advice.