Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Predicting the bubble bursts

11:03 AM Reporter: Baris Sanli 0 Responses

On June 14th 2009, a blog claimed Shangai Composite index to collapse between 17th July-27th July. It didn't happen. But the bubble burst after a week. Swiss scientist claims they have a mechanism to capture the inflating bubbles.

Ref:
http://www.technologyreview.com/blog/arxiv/24023/?nlid=2294
http://www.technologyreview.com/blog/arxiv/23839/#comment-212835
http://arxiv.org/abs/0907.1827
http://www.er.ethz.ch/fco/

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Oil shocks and Recessions

7:57 PM Reporter: Baris Sanli 0 Responses

I found the following website and report quite useful for understanding oil shocks followed by recessions. Here is a list of my key points:

1. "the drops in overall spending that were caused by higher oil prices proved to be the knockout punch for an economy that was already wobbly"
2."The fact that the biggest drop in output didn't occur until well after the oil price went up, and resulted not from the oil price itself but instead from the interaction with other factors and the dynamic forces unleashed when the overall level of economic activity began to decline, is also exactly the same pattern we saw in each of the previous recessions."
3."Was the oil shock of 2007-08 the sole cause of the recession? Certainly not. But did it make a material contribution? In my opinion, the answer unquestionably is yes."

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Predicting using Google Insight

7:23 PM Reporter: Baris Sanli 0 Responses
If you are making forecasts, new and timely statistics are extremely important. You will also know that generally, new data come up with a lag. For example in Turkey it takes not less than 2 months for us to see crucial data. This recent article at Google Research will probably help us, all.
The paper by Varian and Choi can be downloaded from here. The mechanism is clever yet simple: use the normalized searched volumes from Google Insight to correlate with the real data like house sales, cars and etc.
Although I use some other data for Turkey, let me show you the effect of recent tax break on auto.

The tax break has been revealed on 16th March 2009 and the search volume is given above (keyword:oto, region: Turkey). The effect is close to %67. According to this article, the actual sale figures raise by 100%.

http://googleresearch.blogspot.com/2009/04/predicting-present-with-google-trends.html
http://google.com/googleblogs/pdfs/google_predicting_the_present.pdf
http://www.hurriyet.com.tr/ekonomi/11470037.asp

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A new financial system?

11:20 AM Reporter: Baris Sanli 0 Responses
Nowadays when making oil price forecasts, one should also consider how the dollar's value will change. Before the G20 in London, interesting discussions are going on.

For example read this from WSJ:

"China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy."

China is not alone, Stiglitz says :"The dollar reserve system is part of the problem," Joseph Stiglitz, the Columbia University economist, said in a speech in Shanghai last week, because it meant so much of the world's cash was funneled into the U.S. "We need a global reserve system," he said in the speech. (WSJ)


Now check the currency reserves of nations:


If there are concerns about dollar's long term future (we do not expect any radical changes in the short term), oil's value in terms of other commodities may stay same but in terms of dollars oil prices may rise.





WSJ : China Takes Aim at Dollar
Chinese Central Bank : Reform the International Monetary System


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