I had delivered a talk based on the Q3, 2016-17 growth numbers to understand the impact of demonetisation on them and related questions on the drive itself. A year into the demonetisation decision, India's growth has tumbled only faster - It had come in at 6.6% in the October-December 2016 quarter, but has been at 5.6% in the two quarters that followed. While it can be argued that the real economic impact of the initiative was thus felt post Q3, 2016-17, the fact of the matter is that the impact had started becoming visible even earlier on as I argue in this post based on the talk. Appended below is the original.
Earlier this week, the Bank of England raised interest rates for the first time in a decade, while the US Federal Reserve kept the fed funds rate unchanged. While the latter’s policy going forward is more likely to be an increase in interest rates, there is less surety about the latter.
Rising interest rates and higher bond yields are here to stay. Real estate prices seem not to be affected by higher finance costs. Household debt continues to rise especially in advanced economies. Real estate supply remains constrained and demand continues to grow.
France’s GDP grew by 0.5% in the third quarter, down slightly from 0.6% in the second. The annual rate of growth in the eurozone’s second largest economy was 2.2%, the highest since 2011, driven by consumer spending and business investment. The pace of growth matched economists’ expectations, reflecting economic stability since Emmanuel Macron became president.
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017, popularly known as the Nobel Prize for economics, has been awarded to Richard H. Thaler for his contributions to behavioural economics. Thaler is the second behavioural economist & scientist to win the Nobel prize after Daniel Kahneman won it in 2002 for having integrated insights from psychological research into economic science.
Green bonds have been the best performers in the Eurozone year to date. Is it a warning knell or cause for celebration? The IMF austerity is still in place, but there are hopes they will relent. Portuguese bonds have also rallied since March whilst Spanish Bonos declined. German Bund yields are up to 28 bps since January heralding an end to ECB QE.
Richard Thaler, the father of ‘nudge theory’, has made economics more human. The recent economics Nobel prize winner has shown that financial and economic decision makers are not always rational, but mostly deeply human. The concept of 'nudge theory' is a relatively subtle policy shift that encourages people to make decisions that are in their broad self-interest. It’s not about penalising people financially if they don’t act in certain way. It’s about making it easier for them to make a certain decision.