Sound Money Research Articles

CAMELS MODEL ANALYSIS FOR DISTRICT CENTRAL CO-OPERATIVE BANKING ENTERPRISES IN ANDRA PRADESH

CAMELS is a perceived worldwide rating framework to evaluate the relative money related quality of banking enterprises and to propose essential procedures to enhance shortcomings of banking enterprises. In India, Reserve Bank of India established methodology in 1996 pursued on the proposals of Padmanabham Working Group (1995) board of trustees. In the present examination, an endeavour has been made to rank the different district co-operative banking enterprises working in Andra Pradesh and investigate the five positions in their budgetary execution amid the examination time frame. In Andhra Pradesh before detachment of Telangana State, there were 22 DCCBs (district co-operative banking enterprises) in Andhra Pradesh State Cooperative Bank. For breaking down similar execution of the DCCBs in Andhra Pradesh, CAMELS model has been utilised for the (CAGR compound yearly development rate) of 12 years (2002-2003 to 2013-2014) and from that point, thorough rank test and factual measures have been utilised. CAMELS remain for capital adequacy, asset quality, management efficiency, earnings capacity, liquidity and sensitivity. CAMELS' proportions have the imperative to feature the sound money related position and additionally the wellbeing of the DCCBs of the co-agent DCCB through smaller scale investigation of an asset report and pay explanation things.

Savings, Private Property and Sound Money

The overarching goal of this paper is to provide an answer to the following question from the perspective of economists working within the Mengerian or Austrian tradition: What are the essential pre-requisites and pre-conditions for a process of economic growth and development to take place? In course of our discussion, we focus on three important pre-requisites. First, we look at the implications of the presence of time preference, especially for the importance that savings have for adopting longer and more productive production processes and boosting productivity. Second, we analyze the problem of economic calculation and isolate the important institutional pre-conditions that are necessary for the allocation of higher order goods: private property in higher order goods and the use of money. These institutional pre-conditions, as we discuss, are thus also essential for the process of economic growth. And finally, we discuss the importance of a sound monetary order for generating sustainable economic growth.

The Promise of Nominal GDP Targeting

Monetary policy is important for two key reasons. First, monetary policy determines the path of the price level, and it heavily influences other variables like nominal wages and nominal GDP. As seen in the 1970s, high inflation can be damaging to the health of the economy and to the well-being of individual citizens. Savers are punished, and resources are diverted from productive investments into inflation hedges such as gold. Second, monetary policy plays a big role in the business cycle. As demonstrated by the Great Depression, and to a lesser extent the global recession of 2008–2009, unstable monetary policy can lead to high unemployment and financial turmoil. Unpredictable monetary policy is especially harmful. The great amount of attention devoted to the Federal Reserve and its actions indicates that the current system is not as predictable as the market would like. A different monetary policy system could enhance predictability and ensure sound money. This primer will present one such system: nominal gross domestic product (NGDP) level targeting. The first section will clearly define monetary policy, describe the two main methods that central banks have traditionally used to carry out policy, and analyze the weaknesses of these methods. Later sections will articulate what NGDP is and how a policy of NGDP targeting works. Subsequent sections will list the most common criticisms of NGDP targeting and explain why these criticisms are misguided, and they will present arguments in support of the policy. Finally, the primer will provide specific recommendations for how to move from the current system to a system based on NGDP futures targeting.

DETERMINANTS OF CORRUPTION

ABSTRACTThis study used multi-variable regression analysis of 106 independent variables to determine which ones relate to the World Bank’s Control of Corruption Index; either directly as a determinant of Control of Corruption, or indirectly as a determinant of a determinant. This study found six determinants for the World Bank’s Control of Corruption Index: PH2 (+), Marxist (−), Conflict (−), Rule of Law (+), Regulatory Quality (+), and Police Reliability (+). This study was successful in finding the determinants for two of the determinants, Rule of Law and Regulatory Quality. The determinants of Rule of Law were: Democracy (+), Internet Users (+), Access to Electricity (−), Sound Money (+), Christians-Catholic (−), and Fractionalization Linguistic Collier (+). The determinants of Regulatory Quality were: Democracy (+), Internet Users (+), Electrical Consumption (+), the Gini coefficient (−), and Gov-Communist (+).

Of Gold and Paper Money

We consider the role of money as a means of payment, store of value and medium of exchange. I outline a number of quantitative and qualitative experiences of monetary management. Successful regimes have sprung up in a variety of surprising places, and been sustained with state (centralised) interventions. Although the link between state and money, and its standard of identity and account may be clear, particularly in earlier stages of economic development, the extent to which the state is widely felt to hold responsibility for ‘sound money’ is less clear in modern democracies, where there are many other public responsibilities implying ongoing trade‐offs.

Wealth inequality, democracy and economic freedom

Using a novel panel data set from the Credit Suisse on the top wealth shares for 46 sample countries spanning 2000–2014, this paper empirically investigates to what extent wealth inequality influences economic freedom and whether this relationship is affected by the level of democracy. Economic freedom is measured by the Fraser Institute's economic freedom summary index as well as its five major sub-indices, such as government size, property rights, access to sound money, freedom to trade, and regulations. Wealth inequality is measured by the top wealth shares. Trade union density is used as an instrument for wealth inequality. Empirical results suggest that the rising wealth inequality significantly hampers overall economic freedom, property rights protection, freedom to trade, soundness of money and regulatory environment. Furthermore, this negative effect of wealth inequality is reinforced at a lower level of democracy. These findings are robust to alternative measures of wealth inequality, economic freedom, treatment for endogeneity, and model specification.

Goods Inflation, Asset Inflation, and the Greatest Peacetime Inflation in the US

In every episode of global monetary inflation originating in the Federal Reserve, we find both asset price inflation and goods inflation. The interrelationship between these two types of inflation depends both on cycle-specific factors and more general factors which transcend the cycle and stem from essential aspects of monetary disorder. The purpose of this article is to analyse the nature of this interrelationship and elaborate on the concepts of monetary disorder, goods inflation, and asset inflation. In today’s world of monetary systems where there is no stable demand for high-powered money (which itself is no longer a highly distinct asset) monetary disorder can be hard to recognize until quite late in the inflationary process. Asset price inflation now has a popular meaning quite different from the original found in Austrian business cycle theory. Two decades of widespread inflation targeting at around 2% per annum have encouraged us to ignore an old lesson. In a well-functioning capitalist economy under a sound money order, prices would fluctuate considerably upwards and downwards with a tendency to revert to the mean over the very long run. Finally the principles and hypotheses developed here are analysed in the laboratory of history, specifically for the greatest peacetime inflation in the U.S. (1963–80).

Assessing the Determinants of Interest Rate Spread of Commercial Banks in Oman: An Empirical Investigation

This study aims to examine the factors that determine interest rate spread (IRS) of commercial banks listed on Muscat security market over the period 2008 – 2014. They are classified into four groups of financial, economic, market and legal indicators. The Spearman correlation matrix results show that all economic indicator variables have significant relationship with interest rate spread except GDP variable. No significant relationship exists between financial indicator variables and interest rate spread, but in legal indicator variables there is significant relationship with interest rate spread only in two variables the size of government and regulation. Finally, there is a significant relationship between market indicator based on market concentration measured by Herfindahl-Hirschman Index and interest rate spread. OLS regression analysis indicates a statistically significant impact on IRS by factors like return to asset ratio, liquidity risk and risk aversion within the financial group and unemployment rate, debt services ratio and principal repayment from the economic group and Herfindahl-Hirschman Index based on market concentration group. Finally, there is a significant impact of sound money and regulation within the legal group on IRS. The researchers recommend an adaptation in the monetary policy to exploit the high level of liquidity in the banking sector by facilitating easy access to debt to individuals as well as firms thus providing the margin competitive interest rate.

Bringing Balance to the Force? A Comparative Analysis of Institutionalisation Processes in the G20’s Mutual Assessment Process and the EU’s Macroeconomic Imbalances Procedure

ABSTRACTEvents from 2008 onwards have bought the old consensus on the sound money and finance paradigm (the ‘Great Moderation’) into bold relief. One manifestation of this crisis of belief is the increased focus on global imbalances, institutionally reflected in the creation of the Mutual Assessment Process (MAP) at the G20 level and subsequently the Macroeconomic Imbalances Procedure (MIP) at the European Union (EU) level. Comparing both newcomers to international macroeconomic policy coordination, this article analyses four features that shape (and we show, institutionalise) the process of paradigm contestation: presence, position, promotion and plausibility. We argue that although initially the G20’s MAP scored higher in terms of presence, position and promotion, it is the EU’s MIP, which heralds a more substantial shift in macroeconomic management. Collectively, both indicate the increased prominence of global imbalances as the subject of inter- or supranational management, and a broadening of the notion of necessary or legitimate economic governance.

Economic Freedom, Income Inequality and Life Satisfaction in OECD Countries

Since Piketty’s Capital in the 21st Century in 2014, scientific interest into the impact of income inequality on society has been on the rise. However, little is known about the mediating role of income inequality in the relationship between market institutions and subjective well-being. Using panel analysis on a sample of 21 OECD countries to test the effects of five different types of economic freedom on income inequality, we find that fiscal freedom, free trade and freedom from government regulation increase income inequality, whereas sound money decreases income inequality. Income inequality is found to have a negative effect on life satisfaction. Mediation tests show that income inequality mediates the influence of fiscal freedom, free trade and freedom from government regulation on life satisfaction.

Pro-market economic policies and women’s economic wellbeing

Despite much scholarly research on a range of socio-economic and political effects of pro-market economic policies, scant research has been devoted to the gendered effects of these policies. This article advances the hypothesis that market-liberalising policies in five key areas — government size and spending, legal system and protection of property, access to sound money, freedom from excessive regulation, and economic openness — help women gain a more active role in the total labour force but do not ameliorate gendered economic discrimination. On the contrary, this article asserts that market-friendly economic reforms might contribute to the rise of women’s economic rights violations. Results from a panel of over 120 countries for the period from 1981 to 2011 indicate that pro-market economic policies are associated with an increased share of female employment in the labour force but less respect for women’s economic rights. Overall, the data analysis points to an overlooked, but important, contrast of more female employment yet less respect for women’s economic rights in freer economies. The results also present a dilemma for policymaking. Whereas pro-market policies and reforms might drive economic growth and create more employment opportunities for women, such policies and reforms might be implemented at the expense of women’s economic rights, which are crucial for the empowerment of women.

Institutional economics and firm creation in the hospitality and tourism industry

Despite its importance for the global hospitality and tourism industry, firm creation remains an under-researched activity, particularly in terms of differences across developing and developed economies. By examining the impact of institutional structure on firm creation across economies of varying development levels, this study aims to address gaps in the literature and inform theory, practice, and public policymaking. More specifically, formal institutions such as government size, protection of property rights, sound money, free trade, and regulation are examined to understand their impacts on firm creation. This study draws upon institutional theory and uses panel data (2001–2012) from the Global Entrepreneurship Monitor and Economic Freedom of the World index to test hypotheses with a sample of 37 developing and 28 developed countries. Analyses reveal differential effects of formal institutions on firm creation in developing and developed economies. Implications for future research, practice, and public policy are further discussed.

An Examination of the Former Centrally Planned Economies 25 Years after the Fall of Communism

This report analyzes the changes in economic freedom, political institutions, and performance of 25 former centrally planned (FCP) economies following the collapse of communism. The degree of economic freedom among these countries varied considerably. The FCP countries with higher levels of economic freedom in 2015 as measured by the Economic Freedom of the World summary ratings tended to grow more rapidly, achieve larger increases in international trade, and attract more foreign direct investment than their counterparts with less economic freedom. Differences among the FCP countries in the protection of civil liberties, democratic political institutions, and administration of government with less corruption are also identified and analyzed. A regression model of economic growth during 1995-2015 for 122 countries was developed and used to examine the determinants of growth and the performance of the FCP economies relative to high-income and other developing countries throughout the world. Regression analysis was also used to analyze the life satisfaction measure of the World Values Survey. The regression analysis indicates that economic freedom exerts a strong positive impact on both the growth of per capita GDP and the life satisfaction of individuals. Finally, the economic freedom area ratings were used to identify strengths and weaknesses of the FCP economies. Most of the FCP countries registered substantial increases in economic freedom in the areas of size of government, access to sound money, international trade, and regulation. But they have failed to improve their legal systems, and several FCP countries have even experienced recent deteriorations in this area. While the FCP countries achieved impressive growth and closed the income gap relative to high-income countries during 1995-2015, without improvements in the legal area, it is unlikely that this progress will continue. The addendum provides additional details for ten countries that have made the transition from communism to markets most successfully.

Measuring Economic Freedom: Better Without Size of Government

The Heritage Foundation and the Fraser Institute measure economic freedom in nations using indices with ten and five indicators respectively. Eight of the Heritage indicators and four of the Fraser-indicators are about specific types of institutional quality, like rule of law, the protection of property, and the provision of sound money. More of these is considered to denote more economic freedom. Both indices also involve indicators of ‘big government’, or levels of government activities. More of that is seen to denote less economic freedom. Yet, levels of government spending, consumption, and transfers and subsidies appear to correlate positively with the other indicators related to institutional quality, while this correlation is close to zero for the level of taxation as a percentage of GDP. Using government spending, consumption transfers and subsidies as positive indicators is no alternative, because these levels stand for very different government activities, liberal or less liberal. This means that levels of government activities can better be left out as negative or positive indicators. Thus shortened variants of the indices create a better convergent validity in the measurement of economic freedom, and create higher correlations between economic freedom and alternative types of freedom, and between economic freedom and happiness. The higher correlations indicate a better predictive validity, since they are predictable in view of the findings of previous research and theoretical considerations about the relations between types of freedom, and between freedom and happiness.

Human capital, institutional quality and industrial upgrading: global insights from industrial data

The tendency for human capital to accumulate and for institutional quality to improve as countries develop is well documented. This paper investigates the association of these changes with the evolution of industrial structure toward greater manufacturing sophistication. The empirical analysis is based on a newly constructed panel dataset for 15 industrial categories in 92 countries over the period 1970–2010. The results suggest that the extent to which increased tertiary human capital promotes industrial upgrading is contingent on the level of institutional quality, as measured by an index over size of government, legal structure, access to sound money, freedom to trade and market regulations. Institutional quality is found to be complementary to tertiary human capital in promoting the relative growth of advanced manufacturing.

ECONOMIC FREEDOM & HAPPINESS INEQUALITY: FRIENDS OR FOES?

This article examines the relationship between economic freedom and happiness inequality for a large sample of countries. We find that economic freedom is negatively associated with happiness inequality and robust to several alternative measures of happiness inequality, including the standard deviation, mean absolute difference, coefficient of variation, and Gini coefficient. Among the economic freedom areas, legal system and sound money are negatively correlated with happiness inequality. Drawing on the Engerman‐Sokoloff hypothesis, we use a measure of factor endowments as an instrument for economic freedom to provide a further robustness test, finding a negative association between economic freedom and happiness inequality. (JEL D63, I31, P16)

Give me liberty and give me control: Economic freedom, control perceptions and the paradox of choice

We explore the relationship between individual control perceptions and the degree to which a country's institutions and policies are consistent with the principles of economic freedom. Using data from the World Values Surveys (WVS) and the Economic Freedom of the World (EFW) index, we find that people living in more economically free countries are more likely to perceive greater control over their lives. This effect is not diminishing at higher levels of economic freedom. One possible channel that explains this relationship is the perception of procedural fairness and social mobility. Decomposing the EFW index, we further find that the area of sound money is what drives the results.

The Consequences of Keynes

This paper discusses the consequences of John Maynard Keynes for the science of political economy, or the fields of economics, economic policy, and politics. It argues that the consequences of Keynes in all three fields were negative and resulted in a significant retrogression. For economics, a macroeconomic theory of an unstable capitalist economy supplanted the theory of the market process which concentrated on the individual actions of entrepreneurs and their effects on relative prices and production. For economic policy, activist tinkering on behalf of policy advisors replaced the theory of limited and hands off governments. For politics, unrestricted politicians and continual deficits and inflation replaced restrained politicians who adhered to balanced budgets and sound money.

Innovation, Institutions, and Entrepreneurship

The literature has emphasized the role of market institutions in fostering entrepreneurship with a purpose of examining entrepreneurship and growth. However, the real driving force is innovation, not entrepreneurship, and many studies treat entrepreneurship as only a proxy for innovation. We use the Global Innovation Index to directly measure the effect of market institutions on innovation and find a very strong positive correlation. We also find that the effect of market institutions on innovation becomes stronger in developed economies and democracies but is unrelated to education. Lastly, the legal system, sound money, and free trade contribute the most to innovation.

Does economic freedom increase income inequality? Evidence from the EU countries

This paper examines the relationship between economic liberalization and income inequality in the EU using panel data for the 2000s. The empirical evidence suggests that economic freedom is strongly related to income inequality. However, not all areas of economic freedom affect income distribution similarly. Government size is robustly associated with inequality, and also when controlling for potential endogeneity in a dynamic panel data analysis. Regulation is linked to income inequality as well, whereas legal system and sound money have no significant effects on income distribution. In the case of freedom to trade internationally, the relationship differs between old (EU-15) and new (former socialist) EU countries.