Professor of Economics Richard Grossman recently presented the keynote address at a conference held at the Austrian National Bank.
The presentation, made on March 11, was titled, “Interest rate cycles and implications for the financial sector: a long-term view.” A summary is available here.
The conference was jointly sponsored by Austria’s central bank (the Oesterreichische Nationalbank), SUERF (the European Money and Finance Forum), and BWG (the Austrian Society for Bank Research).
Richard Grossman, professor of economics, is featured in a radio interview with Share Radio in London Feb. 19.
In the interview, Grossman talks about the consequences of the European Central Bank’s new quantitative easing (QE) policy, which may stimulate an economy when a standard monetary policy has become ineffective.
The ECB’s action follows in the footsteps of the central banks of Japan, the United Kingdom, and the United States, which also have used quantitative easing in the 2000s.
A concern that has been raised about the introduction of QE is that persistent low interest rates will lead to another boom-bust macroeconomic cycle similar to the one that ended in the US subprime crisis. Grossman, who conducts research on historical episodes of financial crises, argues that the European economy is so weak at the moment that the risk of QE causing a crisis is low, and certainly outweighed by the benefits.
Grossman said implementation of the QE may not be noticed right away.
“Over time, this will put a consistent downward pressure on the euro,” which Grossman argues will help European exporters.
Listen to the program here.
Bill Craighead, assistant professor of economics, is the co-author of “Current Account Reversals and Structural Change in Developing and Industrialized Countries,” published in the February issue of The Journal of International Trade and Economic Development.
The paper compares the experience of high-income and developing countries in adjusting current account deficits, which measure how much they are relying on external borrowing. In both types of country, construction is the most sensitive sector to the current account. On average, adjustments in developing countries are more severe, but that is mainly due to the effects of currency crises. When you take those out, they look more similar. Employment effects in developing countries are less relative to the changes in output, which may reflect differing labor market institutions.
Craighead credits Lisa Lee ’13 for providing her “outstanding research assistance” while writing the paper. Lee worked on the research in 2011 while participating in the Quantitative Analysis Center’s summer program.
On Feb. 6, recent Wesleyan graduates returned to campus and shared their experiences in finance. The conference, titled “Finance — Theory and Applications: A Conversation with Alumni,” covered mergers and acquisitions, value investing, trading and case study analysis. Attendees also had an opportunity to ask questions.
Anand Gopalan ’09, James Hounsell ’11 and Eugene Wong ’09, all of whom have relevant experience in the field of finance, spoke at the event. Joyce Jacobsen, professor of economics, also gave remarks at the conference. The event was hosted by Abigail Hornstein, associate professor of economics, with support from the Allbritton Center for the Study of Public Life and the Wesleyan Investment Group.
“What I enjoyed most was the opportunity to hear how interested the financial industry is in hiring liberal arts-educated students,” said attendee Michael Smith ’18. “With a strong liberal arts background, at a competitive financial firm, within six to 12 months the liberal art graduate is on par with a [top undergraduate business school] graduate.”
Photos of the event are below: (Photos by Hannah Norman ’16)
Abigail Hornstein, associate professor of economics and James Hounsell ’11 listen to Mattison Asher ’17, at right, who is one of the current leaders of the Wesleyan Investment Group (WIG).
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Professor of Economics Richard Grossman recently accepted two new posts. He was appointed to be a research fellow in the Economic History Program of the London-based Centre for Economic Policy Research (CEPR). Founded in 1983, CEPR’s mission is “to enhance the quality of economic policymaking within Europe and beyond, by fostering high quality, policy-relevant economic research, and disseminating it widely to decision-makers in the public and private sectors.” Grossman is one of only a few American research fellows at CEPR.
He was also recently appointed associate editor for socioeconomics, health policy and law of the journal Neurosurgery. See here for a bio of Grossman and other editors of the journal.
Masami Imai, professor of economics, professor of East Asian studies, is the co-author of an article titled “Attribution Error in Economic Voting: Evidence from Trade Shocks,” published in the January 2015 edition of Economy Inquiry, Volume 53, Issue 1, pages 258-257.
Rosa Hayes ’13, currently a research analyst at the Federal Reserve Bank of New York, also is one of the paper’s co-authors.
This article exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990 to 2009. Masami and his co-authors found that voters, on average, exhibit a strong tendency to oust the incumbent governments during an economic downturn, regardless of whether the recession is home-grown or merely imported from trading partners.
The authors also found an important heterogeneity in the extent of attribution error. A split sample analysis shows that countries with more experienced voters, more educated voters, and possibly more informed voters—all conditions that have been shown to mitigate other voter agency problems—do better in distinguishing imported from domestic growth.
Richard Grossman, professor of economics, delivered a keynote speech at the 10th Chief Risk Officer Assembly in Munich, Germany on Nov. 19. The speech was based on his book, WRONG: Nine Economic Policy Disasters and What We Can Learn from Them (Oxford University Press), and focused the consequences of government policy for economic risk.
The CRO Assembly is organized by Geneva Association, an insurance industry think-tank, and the CRO Forum, which is made up of chief risk officers from large (primarily European) multi-national insurance and re-insurance companies. The conference took place at the headquarters of Munich RE, one of the world’s largest reinsurance companies. The program seeks to understand the nature of emerging and key strategic risks, and to understand how and where they relate to insurance.
Read more about Grossman in these past News @ Wesleyan articles.
On Oct. 24, Richard Grossman, professor of economics, was a discussant at a conference titled “Organizations, Civil Society, and the Roots of Development,” organized by the National Bureau of Economic Research in Cambridge, Mass.
Grossman commented on a paper by Dan Bogart (University of California at Irvine) titled “Securing the East India Monopoly: Politics, Institutional Change, and the Security of British Property Rights Revisited.” The paper focuses on the history of the English East India Company and ways it yields new insights on the relationship between politics, institutional change, and the security of property rights in Britain.
Richard Grossman, professor of economics, was invited to become a Research Network Fellow of CESifo, a leading European economic research organization based in Munich, Germany.
The CESifo Group consists of the Center for Economic Studies at the Ludwig Maximilian University of Munich, the Ifo Institute of Economic Research, and the CESifo Munich Society for the Promotion of Economic Research. CESifo combines the theoretically oriented economic research with empirical research and is often at the center of economic policy debates in Germany and throughout Europe.
As a fellow, Grossman will be a member of the Network’s Money, Macro, and International Finance area and will join prominent economists from all over the world who collaborate on research through participation at conferences and less formal meetings in Munich. Grossman’s research will be published in CESifo’s working paper series and other outlets.
Abigail Hornstein, associate professor of economics, and her former thesis student, Zachary Nguyen ’12 are the co-authors of a paper titled “Is More Less? Propensity to Diversify via M&A and Market” published in the International Review of Financial Analysis, June 2014, pp. 64-88.
Mergers and acquisitions (M&A) could lead to a firm diversifying into new industries, and the impact of this may be related to the firm’s prior diversification. By using a panel of 1,030 M&A transactions from 2000-2010, Hornstein and Nguyen found that that previously diversified firms are more likely to pursue industrially diversifying M&A.
“Both previous and contemporary diversification measures are not associated with the firm’s cumulative abnormal returns (CAR) at time of announcement but have a lasting effect on various performance measures up to two years later,” Hornstein explained. “We find evidence supporting both a diversification discount and premium, which can be predicted by the sign of the CAR at time of announcement.”
Their study suggests that while diversification is necessary to explain firm value, it is not sufficient.
After graduating, Nguyen worked at Charles River Associates in Boston 2012-14 and is now a first year student at The University of California — Berkeley School of Law.
Bill Craighead, assistant professor of economics, is the author of a paper titled “Monetary Rules and Sectoral Unemployment in Open Economies” published in the June 2014 issue of the Journal of Macroeconomics.
Search theory has given us a more realistic mechanism to study unemployment in macroeconomic models. In this paper, Craighead integrated search theory into an “open economy” macroeconomic model – i.e., a model of an economy that interacts with the rest of the world. One important question in open economy models is what measure of inflation should monetary policy respond to – consumer prices, which include imported goods, or producer prices (the prices of domestically-produced output). In this model, Craighead shows that monetary policies that focus on producer prices do a better job of stabilizing unemployment.
Professor of Economics Richard Grossman gave a public lecture about his book, WRONG: Nine Economic Policy Disasters and What We Can Learn From Them, at the Center for Economic Studies/Institute for Economic Research at Munich University on April 7. He delivered the talk in German. More information about the Munich Seminars is here. The book was published in November 2013 by Oxford University Press.
A video of the lecture is available here.