Talk in Chicago on testing, dating and monitoring of structural change of the exchange rate regime

I have long collaborated with Achim Zeileis, Ila Patnaik, Anmol Sethy and Vimal Balasubramaniam on testing, dating and monitoring of structural change of the de facto exchange rate regime. A few weeks ago, Anmol Sethy had done a talk about the ZSP methodology in Singapore. In April, Achim Zeileis will do a talk about this in Chicago.



Here's a quick status report of this work:

• The key methodology paper is forthcoming: Testing, Monitoring, and Dating Structural Changes in Exchange Rate Regimes, in Computational Statistics & Data Analysis, Volume 54, Issue 6, June 2010, pages 1696--1706. If you don't have access, here is a preprint.


• The R package fxregime has the full code. While this package has been in development for a long time, it is now at version 1.0-0 which is our way of saying it's ready for use. You can do the full analysis of any currency series -- testing, dating and monitoring for structural change in the exchange rate regime -- using this package.


• An application paper on China and India: The difficulties of the Chinese and Indian exchange rate regimes, in European Journal of Comparative Economics, 6(1), June 2009.


• An application paper where the dates of structural change of the exchange rate regime are used in an analysis of firm data: Does the currency regime shape unhedged currency exposure?, in Journal of International Money and Finance, 2010 (forthcoming). If you don't have access, here is a preprint.

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Tracking the literature

`Repec' is very nice public domain effort in economics which is building up a database of papers in economics. They have a series of email alerts for New Economics Papers (NEPs) where an editor examines the flow of papers and picks a few in a field. I am the editor for the NEP on international finance, so please do subscribe to this as a mechanism to track the literature in this field. They do both RSS and email alerts.

You might also find it useful to setup an RSS or email subscription to the blog through which NIPFP working papers are announced.

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The joys of central planning

When central planners take the outcome away from the self-organising system of the market economy, we often get strange outcomes. At the end of June 2009, 32 foreign banks
were in India with 293 branches. In addition, 43 foreign banks were in India through `representative offices'. (Source: RBI Annual Report. Hat tip: Radhika Pandey).


In a news item today, I saw Domino's say that they have 300 branches in India and will go up to roughly 500 in three years. With RBI giving out permissions for all foreign banks (put together) to open 18 branches in India a year, this means we'll soon have more outlets of Domino's in India than all foreign banks put together.

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The two great industries of Bombay

A few years ago, when Percy Mistry's committee was working on the MIFC report, I used to joke that of the two great industries in Bombay, movies will make it first to international customers. A few days ago in the New York Times, Anupama Chopra has a story showing that some action on that front is now visible.

Winning on a global scale in finance and in movies has some common features : it involves raw materials like human capital, top end computer technology, freedom of speech, openness to other cultures, a large home market, the natural opportunities of connecting up with the disapora, and Schumpeterian creative destruction.

With all these in place, Bombay's movie industry is nicely globalising itself. Finance requires all these - and that bodes well for BIFC. But finance requires a few more things. It requires sophisticated financial regulation, and a sound macroeconomic policy framework. It requires that the government get out of producing financial services just as the government does not produce movies. India has a tonne of work to do on these.

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Worth reading this SEBI order

SEBI is pushing on the frontiers of enforcement in India. This is the order on Bank of Rajasthan.



I was surprised to see how small the market reaction was (this image is from Yahoo Finance):

What am I not understanding?

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6th research meeting of the NIPFP DEA Research Program

Hope to see you, 9th and 10th March.

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Interesting readings

• Vikas Bajaj in the New York Times on privatisation in India.


• I had recently written a blog post on India's foolishness on visa rules for people coming into conferences. Siddharth Varadarajan has a great opinion piece on this in the Hindu. In sensible countries, there is no such thing as a `visa for the purpose of attending a conference'. It's just called a tourist visa.


• An editorial in the Wall Street Journal on India's success on establishing a private sector with competition in mobile phones.


• Swaminathan S. Anklesaria Aiyar in the Economic Times on what the budget speech should say. Also see Ila Patnaik in Indian Express on the roadmap, and in Financial Express on expenditure. Writing in the Business Standard, Sanjaya Baru is also optimistic about what Pranab Mukherjee will be able to pull off.


• An extremely insightful conversation on charges of ETFs (in the comments to this post). This is the sort of thing one hopes for in blogs.


• Give financial sector a Financial Stability Board, in the Times of India.


• Bibek Debroy in Indian Express on India's license-permit raj of exchange controls.


• I was at IFMR recently: did a talk on distribution of financial products, and looked at the `KGFS' idea on increasing outreach of financial products.


• Sanjeev Sanyal in Business Standard on the outlook for Bombay.


• Andrew Jacobs in the New York Times on new developments in the Chinese end of India's tiger extinction problem.


• John Gravois on remittances.


• We in India can look at the brainpower in the Chilean cabinet with wonder and envy.


• Catherine Rampall in the New York Times, reviewing Capitalism and the Jews by Jerry Z. Muller, which made me think about the different story of business-oriented ethnic groups of India.


• Robert Litan on financial innovation.


• Tarun Ramadorai in the Financial Express on hedge fund regulation.


• Alessandro Beber and Marco Pagano, on voxEU, analyse the global evidence on bans on short selling in the crisis. Hopefully we will learn the lesson for the next crisis.


• One of the great achievements of monetary policy reform in recent decades has been the establishment of executive Monetary Policy Committees (MPCs) which use formal voting mechanisms through which the policy rate is modified in order to achieve an inflation target, on a regular meeting cycle, with full transparency about how each person voted and why.
  Writing on voxEU, Tim Besley and Andrew Scott emphasise the role of `fiscal councils' where some (but not all) of these ideas are deployed into fiscal policy.


• I find it interesting to look at how the army of a great power works. See Elizabeth Rubin in Time magazine on Robert Gates (the US defence minister), and Chris Wilson in Slate on some remarkable soldiers. I suppose journalists like Elizabeth Rubin and Chris Wilson are also integral to being a great power.


• Interesting new things in the world of trading and exchanges, all from the Financial Times: Size of share orders cut in half on global markets and Small orders breed dark pools and higher costs by Jeremy Grant, Markets: Ghosts in the machine by Jeremy Grant and Michael Mackenzie, and lastly New US options exchange battles for market space by Hal Weitzman.

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