Wednesday, October 15, 2008

Recommended Readings

1. Kenneth Arrow argues that a main cause of the financial crisis is asymmetric information. A new NBER working paper by Gary Gorton makes the same argument. 2. Brad Setser sees little evidence of the nightmare scenario I mentioned last night (i.e., China broadly redirecting its monetary policy away from foreign exchange interventions):

China’s trade surplus remains very large – and that it is still adding to its reserves at a fast clip. ... And while there is good reason to think that the growth in Russian and GCC foreign assets is poised sharply, evidence that China’s surplus is about to fall remains, for now, rather thin.
3. On VoxEU, Virginie Coudert and Mathieu Gex provide empirical evidence showing that correlations do, in fact, go to one in financial crises. 4. Check out all the economic data on tap for tomorrow. If it's half as bad as today's data, we could be in for a truly wild day on the markets (even by today's standards). If tomorrow's data is really bad, then all I can say is: God help us.


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Another great reading.

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