Online Finance

I have been working with Qing Ye and Clive Walker on a paper which looks at the effect of the media on financial markets in nineteenth-century London. The main finding of our paper is that there is a media discount which appears after the emergence of arm's-length ownership and increased market participation. This suggests that diffuse ownership may be a prerequisite for the media effect. Our findings help explain why the media appears to have little effect on present-day developing country financial markets. The working paper is available at the QUCEH website.

Happy St Patrick's Day! Every year on St Patrick's Day, I re-read Patrick's autobiographical The Confession of St Patrick . An electronic version is available for free  here .

Sir John Vickers has published a VoxEU piece which is highly critical of the Bank of England's recent 'tame' proposals regarding the amount of capital banks should be required to hold. He argues persuasively that banks need to hold much more capital than suggested by the Bank. He is not alone. Stanford's Anat Admati has recently argued that capital regulation is deeply flawed in terms of its design and the limited amount of capital banks are required to post - click here .  In my book, Banking in Crisis , I make the argument that bankers need 'skin in the game' to make banking stable. How much skin should they have? Historically, bank shareholders stood to lose more than their investment in the bank due to extended shareholder liability regimes. In other words, they stood to lose much more than their skin in some cases! This, I argue, resulted in stable banks that acted conservatively, which in turn promoted banking stability.

The latest review of my book Banking in Crisis has recently appeared in Business History Review , which is published out of Harvard Business School . You can access the review here . The review describes Banking in Crisis as "an important contribution to financial history and contemporary policy debate". The reviewer laments that the radical reform which I call for in the book would require an even more catastrophic collapse than that of 2008.

What happens when a country's banking system shuts down? Ben Norman and Peter Zimmerman at Bank Underground (a blog written by Bank of England staff) answer this question by looking at the industrial dispute which hit the Irish banking system in May 1970 and lasted for about six months - click here to read their post. The closure of the banking system meant that cheques could not be cleared. So what happened? Irish people still wrote cheques and retailers (and publicans!) accepted cheques, playing a very important role in keeping the Irish economy going. There is little evidence that the strike had a detrimental effect on retail sales or the economy. However, when the strike ended, some cheques did bounce and retailers and publicans did suffer some losses. Subsequently, when there was a strike in 1976, retailers etc were more cautious about accepting cheques. One publican said that "when the banks start serving booze, we will start cashing cheques"! Maybe the publicans ...

Secular stagnation is where economic growth is persistently negligible or very low. The first notable economist to talk about secular stagnation was Alvin Hansen , who argued in the late 1930s that economic growth in the US was low and would remain low due to declining population growth and declining technological innovation. The post-war baby and technological booms meant that people largely forgot about Hansen's theory. However, in the light of low economic growth and near-zero real interests which have persisted since 2008, Larry Summers and others have revived the secular stagnation hypothesis - click here and here . In the video below, Oxford's Kevin O'Rourke gives a lecture to the British Academy entitled "Economic Impossibilities For Our Grandchildren?" which addresses the secular stagnation hypothesis and prescribes various policies to address it. A working paper version of his lecture is available here .

At this time of year, there is nothing better than listening to a good Christmas song and thinking (deeply) about the macroeconomy. In the video below, the folks at econstories  combine the two in their 'Deck the Bells with Macro Follies' spoof. I hope that all my blog followers have a prosperous 2016!