Sunday, September 28, 2008

Reads of the day

One of the important debates of the Paulson plan is revolving around how to assign a value to the toxic assets. Daniel Gros, director of the Center for European Policy Studies in Brussels, suggests using option theory.

While the real world is obviously much more complex, using simple game theory illustrates one of the problems of the Paulson bailout: If things will get back to normal, it is in the interest of a bank to skip the auctions and hold out until the value of its securities recovers.

What the Turkish Statistical Institute (TUIK/TURKSTAT) could do when they are bombarded with criticism over CPI, which in Turkey is as often as the Germans invade France.

BTW, critics such as Ercan Kumcu had a point when TURKSTAT changed the composition of the index arbitrarily and apparently without even informing the CBT back in March 2007. But some other critiques simply reflect the inherent nature of such indices- four such concerns are summarized over at Mike's Economics Blog.

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