Archive for July 21st, 2009

Pushing Financial Inclusion in India

July 21, 2009

Dr KC Chakraborty after becoming Deputy Gov  at RBI gives his first presentation on financial inclusion. It gives a good overview on the status and issues on fin inclusion in India. It has some useful tables which can help in writing papers on fin inclusion status in India.

A welcome change from ppts from central bankers on crisis, recessions, policy responses etc.


A look at Swiss National Bank’s Monetary Policy Framework

July 21, 2009

I find reading through various central bank frameworks pretty interesting. There is so much diversity in their operations but goal is the same. I was reading this paper on Swiss National bank’s Mon Pol framework:

The practice of monetary policy has evolved a great deal since the early 1990s. This evolution was significantly influenced by rapid developments in the theory of monetary policy. A new consensus about ‘principles-based’ monetary policy appears to be emerging. It marries a firm long-term anchor for nominal stability, rooted in the original ideas behind inflation targeting, with short-term flexibility, based on a more discretionary and pragmatic approach to monetary policy. The SNB’s monetary policy framework – with a firm nominal anchor but with an emphasis on the need for flexibility – reflects, to a considerable degree, the emerging academic consensus about best-practice monetary policy. With its successful seven-year track record, it may serve as an interesting case study for a policy aiming at an intermediate position between full discretion and rigidly defined short-term inflation targeting.

A good paper on SNB mon pol framework. It is advocated as principles based framework.

I know these papers don’t really matter anymore. This crisis has really whitewashed it all. No matter how advanced/sophisticated what your mon pol framework was, this crisis has found it wanting. Infact the central bank targeted before the crisis for having a poor framework has emerged as the best-placed. But still, people wanting to know more about SNB mon pol framework can take a look.

Decoupling, recoupling and all that

July 21, 2009

Michael Dooley and Michael Hutchison have written a nice paper on the decoupling-recoupling rehypothesis:

We find that emerging markets appeared to be somewhat insulated from developments in U.S. financial markets from early 2007 to summer 2008. From that point on, however, emerging markets responded very strongly to the deteriorating situation in the U.S. financial system and real economy. Policy measures taken in emerging markets to insulate themselves from global financial developments proved inadequate in the face of the credit crunch and decline in international trade that followed the Lehman bankruptcy in September 2008.

All this is well-known by now. But it is still a good read.

Understanding Fiscal Space

July 21, 2009

We keep saying India does not have fiscal space to continue to spend more. But what does it exactly mean? Peter Heller of IMF has written a paper to explain the same. He says:

A number of factors have provoked the question of whether “fiscal space” can be created, in the context of IMF-supported programs, for spending on investments and social programs that are perceived as particularly meritorious…….

Yet the concept of “fiscal space” remains fuzzy—the term is now frequently used in current policy debates but without clarity as to its meaning. In what follows, I will provide a definition of this term, including its linkage to the concept of fiscal sustainability; describe alternative ways in which fiscal space can be created; indicate what approaches do not create fiscal space; note how the IMF can support appropriate efforts to create fiscal space; and, finally, discuss the relationship between the concept of fiscal space and that of absorptive capacity.

Read the paper for details.

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