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Showing posts from October, 2015

Problems with Stress Testing

Since the 2008 financial crisis, banks around the globe have been subject to stress testing. The concept of stress testing is found in engineering (can bridges withstand wind speeds of x mph?), computer science, cardiology, birthing, nuclear power plants, etc.. In banking, the idea of stress testing is whether a bank can remain insolvent under certain economic scenarios (e.g., a fall in house prices, a rise in unemployment etc) and how it would fare if a 'tail event' were to hit the banking system (e.g., the failure of a major financial institution). Central banks conduct these tests to ensure that banks have enough capital to absorb losses which may occur under any of these circumstances. Below is a Bank of England video which explains how they go about stress testing banks.

However, I have two issues with stress tests. First, stress testing makes banking stability akin to an engineering problem. But stress tests cannot pick up or model how human behaviour changes in reactio…

Whither the Chinese Economy?

Tomorrow evening I will be speaking to the Mandarin Speakers Association in Belfast. The title of my talk is: Whither the Chinese Economy? My talk will very much be an outsider's perspective on the Chinese economy. I will also provide a long-run perspective by placing China's recent growth in the context of its long-run economic performance. In my talk I will be addressing the following three questions:
1. Why was China a laggard among major economies by 1800 and why did it remain so?
2. Why has China experienced unprecedented economic growth since 1978?
3. Can China avoid the 'Argentina trap'?  

Railway Mania Interview on Share Radio

My colleague Gareth Campbell recently gave an interview on Share Radio about the railway mania. Gareth explains the role played by high dividends, uncalled capital and overexpansion in driving the boom and bust in railway shares. You can access the podcast at Gareth's Railway Mania website. Gareth has written several seminal papers on the railway mania. He and I have written several papers on the mania, looking at the role of shareholders, managers, and the media in the railway mania. 

Why Was England the First Industrial Nation?

Why was England the first industrial nation? Why did the Industrial Revolution happen in the eighteenth century? In the coreecon video below, Oxford's Professor Bob Allen answers these questions. His main thesis is that it was high wages which pushed England to industrialise.

Israeli Bank Stock Crisis of 1983

The Share Centre'sshareradiostation has an interesting series of podcasts on the History of Booms, Busts and Bubbles - click here. In this podcast, Richard Grossman gives an interview about the Israeli Bank Stock Crisis of 1983. I didn't know much about this crisis until I listened to this podcast, but is a fascintating story. The crisis was so severe that Israeli banks had to be nationalised. The really interesting thing to me was that Israeli banks (and their pension funds) were buying their own shares!

Meredith's Musings

Queen's Management School has started its first blog. The blog is called Meredith's Musings after Professor Hugh O. Meredith, a professor of economics in the School from 1911 to 1945. I have written the first post which provides some background on Meredith's career and how the Management School today is continuing the traditions started by Meredith - influencing other disciplines and trailblazing research which speaks to policy debates.