Archive for April 3rd, 2010

What do MPC members think?

April 3, 2010

 Mikael Apel, Carl Andreas Claussen and  Petra Lennartsdotter of Riksbank have written a nice insightful paper. Thanks to Alan Blinder, we have large volume of emerging literature on how monetary policy committees have evolved, are organised now etc.

This paper interviews Riksbank’s MPC members themselves on the various MPC and economic issues.

This paper reports and analyzes the results from a questionnaire sent to all present and former members of the Riksbank’s Executive Board, the monetary policy committee (MPC) of the Swedish central bank. The questions cover a number of issues discussed in the growing literature on monetary policy making by committees. The paper thus relates research to the views of practitioners in a way that has not been done before.

We find, among other things, that many members consider the six-person strong Riksbank MPC to be slightly too large, that it is very common that members have decided before the policy meeting how they will vote, and that members, when forming their opinions, consider input from the staff more important than input from their colleagues.

So hearing it from the horse’s mouth. A nice paper with many references on the issues as well.

Simple Dynamics of Inclusive Growth

April 3, 2010

RBI Deputy Governor Mr Subir Gokarn gives  a nice speech on how India can achieve inclusive  growth.

In what follows, I propose to view the issue of rapid and sustainable growth from three perspectives, based on a simple principle. The principle is that rapid, sustained and inclusive growth will take place when large numbers of people move from low-productivity jobs to high-productivity ones. Every single historical instance of this being achieved, cutting across time periods, regions, socio-political contexts and any other differentiator one might think of, validates this principle.

As for the three perspectives, I will first briefly tread over the by now well-known ground of long-term demographic projections. This is necessary to highlight just how massive the scale of the challenge is. I will then go over some numbers on employment and productivity, with the purpose of demonstrating just how significant the impact of the right kind of employment transitions on inclusive growth can be. Finally, I will offer some suggestions on the elements of a strategy that will facilitate the required transitions.

All the issues are pretty well-known. India will have a large number of people joining the workforce in next 10 years (120 mn or 28% of global increase compared to Chinese figure of 19 mn or 5% of global work force). So we can see it either as a challenge or opportunity.

Then the next issue is how to shift people from agriculture to higher value add sectors – industry and services. The speech has nice graphs and tables which showcase the huge opportunity for India. The difference in productivity between agri and non-agri is huge. So a shift of people would mean not just high growth but more inclusive one as well.

He suggest three strategies to achieve this:

  • creating a flexible employment environment in the manufacturing sector
  • creating the capacity to provide relevant basic and operational skills to people
  • and, creating a reliable safety net with the participation of employees, employers and the government

All these points have been raised in the past on numerous forums as well.

Overall, a nice crisp speech on the issue.

Central banks celebrating jubilees/anniversaries

April 3, 2010

I came across quite a few central banks celebrating their jubilees/anniversaries this year.

Nice time to reflect on monetary policy and challenges of financial stability.


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