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economic logic too economic logic too there is economics in everything the economic logic blog by guest posters monday january 20 2014 a solution to sovereign debt dilution contributed by h economicus when a country like greece gets close to a situation where it cannot pay interest on some of its debt it sometimes gets a new loan to stay liquid current bondholder may rejoice about the interest payout but they may worry about the increased likelihood of a haircut on their bonds as the difficulties of greece have only compounded imagine the same scenario with the roll over of some matured bonds because of the increased risk and interest rate greece needs to borrow a lot just to roll over this satisfies the lucky bondholder who just got their money but this dilutes the bonds of the other bond holders and if a haircut needs to apply to greek debt it is applies uniformly across all maturities while clearly the risk different maturities were facing were clearly different a political decision whether to apply a haircut or go for another loan has thus important and redistributive consequences for bond holders one can do better satyajit chatterjee and burcu eyigungor propose that sovereign debt should be subject to explicit seniority rules one could imagine one that gives more seniority to older maturities which would mean that the value of a bond increases with time as risk dissipates through successive roll over rounds this reduces the risk of dilution and of default as now the sovereign has to take into account the high cost of raising funds with low seniority for the case of argentina chatterjee and eyigungor show that this reduces the risk of default by a whooping 40 reduces the interest spread by 42 and only slightly increases debt but for this to work efficiently it requires that settlement is immediate and costless which is unfortunately unlikely for sovereign deb where political haggling is the norm posted by economic logician at 9 40 am no comments email this blogthis share to x share to facebook share to pinterest labels author h economicus financial markets international markets wednesday january 15 2014 appropriate aid subsidy levels contributed by jason vrooman preventative products and treatments for diseases have large social benefits decreasing illness and helping people to live healthier lives programs that provide subsidies to such products are a great boon to promoting better health especially in areas where affordability is an issue the way this is usually done is to provide the highest subsidy rates possible unfortunately such programs are very expensive to implement requiring money being spent in the most efficient means possible jessica cohen pascaline dupas and simone schaner gather and analyze data in kenya on artemisinin combination therapies acts subsidies used to treat malaria to test whether changing the level of subsidies affects levels of over treatment testing a range of subsidies 92 to 80 percent they find that the rate of malaria positive patients increases from 56 percent to 75 without significant drops in accessibility between the highest rate and the lowest this result runs counter intuitive to the idea that the best way to combat disease is to provide drugs at the highest subsidy levels possible they also tested the effect of providing a highly subsidized over the counter rapid diagnostic test rdt finding that it increased the rate at which illness is tested for malaria but compliance rates with negative results were only about 50 percent they attribute this to possible lack of faith in the rdts believing that in the long run compliance rates would increase this result shows just how important it can be to understand the local environment before doing any aid work posted by economic logician at 7 50 am no comments email this blogthis share to x share to facebook share to pinterest labels author jason vrooman health subsidies tuesday january 7 2014 are homeowners delusional about the value of their home contributed by h economicus the recent housing bubble in the us and others elsewhere before make you believe that market participants on the real estate markets lack some rationality while it is true that bubbles can happen even with rational economic agents this does not exclude the possibility that particularly homeowners may get fooled at least temporarily about the potential value of their home alice henriques shows that homeowners are quite delusional when house prices decline as evidenced by some price indexes they make on average a rather accurate estimate of the change in value of their home they err only slightly on the optimistic side but when house prices are booming their estimates are way off while corelogic reported an increase of 170 the self declared values in the survey of consumer finances increased by 200 this also shows that some results from this survey need to be taken with a grain of salt as there seems to be some systematic bias posted by economic logician at 7 45 am no comments email this blogthis share to x share to facebook share to pinterest labels author h economicus housing sunday december 8 2013 introducing economic logic too i have been pondering for a while what to do with my blog economic logic my job responsibilities have made it difficult for me to attend to it as much as i would like sometimes i would have to skip days sometimes i have not had time to read as much as i wanted or i should as i got it wrong in one case and i certainly have less time to write things up somebody suggested i should invite guest bloggers to help out i am now ready to do this but on a different blog economic logic too why keep them separate el got a reputation and i would hate to ruin it i have no idea how well this initiative will turn out with guest bloggers i guess am too risk averse for allowing guest posters to alter el i hope they prove me wrong here is how you can contribute to el2 this may be amended if need be i will accept discussions of interesting research and interesting discussions of research that means it can also be rejected i may make a few small editorial corrections to the text there needs to be a link to an ideas page the research needs to be recent and in working paper form this means it needs to be in open access nber and cepr are ok and unpublished you cannot discuss your own research this is not voxeu you need to submit your text under your real name it can be published anonymously though send me an email with your write up mention if you want it under a pseudonym or your real name i let you know about my decision as soon as i can help make this a lively and interesting blog posted by economic logician at 9 58 am 1 comment email this blogthis share to x share to facebook share to pinterest labels blog policy home subscribe to posts atom about me economic logician i discuss recent research in economics and various events from an economic perspective as the name of the blog indicates i plan on adding posts approximately every workday with some exceptions for example when i travel view my complete profile pages home submissions subscribe to posts atom posts all comments atom all comments search this blog last comments loading economic logic loading popular posts 30 days introducing economic logic too a solution to sovereign debt dilution appropriate aid subsidy levels are homeowners delusional about the value of their home blog archive 2014 3 january 3 a solution to sovereign debt dilution appropriate aid subsidy levels are homeowners delusional about the value of their 2013 1 december 1 labels author h economicus 2 author jason vrooman 1 blog policy 1 financial markets 1 health 1 housing 1 international markets 1 subsidies 1 all papers discussed here simple theme theme images by billnoll powered by blogger