University Economics

There is an interesting piece over at VOX (hat tip - Graham Brownlow) asking whether economics undergraduates are being well trained - click here. There are at least six things which stand out for me in this piece.

1. Economics degrees need some economic history - economic history asks the big questions that need to asked.

2. There is too much of a focus on mathematics rather than economic intuition.

3. There is an overemphasis on econometric theory at the expense of analysing real data.

4. Econ graduates know very little about institutions and workings of the actual economy. For example, they know very little about finance, banking, and the monetary system.

5. There needs to be more heterodoxy e.g., networks

6. Graduates have little in the way of well-developed communication and presentation skills.

I totally agree with these critiques, and I am proud to say that these criticisms cannot be levelled against the graduates that Queen's University Management School produces - particularly those on the BSc Finance (but I would say that!).

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .

Bank Runs in Greece

Deposit withdrawals in Greece have been substantial over the past two years. However, the failure of Greece's politicians to form a coalition government has resulted in deposit withdrawals accelerating - click here and here for more on this. Depositors are rightly concerned about the exit of Greece from the euro and the subsequent devaluation of their deposits. The puzzle for me and many others is why are there so many deposits still remaining in the Greek banking system. One reason is that the Greek banking system is being kept alive by massive injections of money from the ECB. Will the ECB continue to support the Greek banking system in the face of a mass withdrawal of deposits? I doubt that there is the political will in Germany for this as the Bundesbank already has a huge exposure to Greece (as well as Spain and Italy) through the ECB's internal Target 2 system.

Finance: Past, Present and Future

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