Archive for October 5th, 2010

What would Irving Fisher say on Fed policy?

October 5, 2010

Well not really Irving Fisher but his analysis. He gave us the famous equation – Nominal interest rate = Real interest rate + expected inflation. With nominal rate at zero and expected to remain there, the interplay between inflation and rela interest rate would be very important.

In this short paper. William T. Gavin of St Louis Fed plots fed funds rate and expected inflation. He says:

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Navi Mumbai Airport — an economic perspective

October 5, 2010

Navi Mumbai Airport is in news for all the wrong reasons – another instance of crucial infrastructure project delay, environmental concerns, political parties divided on the airport etc. Just recently, the Ministry of Environment asked CIDCO (the nodal agency reposnsible for development of Navi Mumbai) to draw the plan again. There were some errors.

However, the project is of a lot of interest  for people interested in  Indian infrastructure. The project shows once again how our infrastructure projects are mired with controbversy and delay. One has been hearing about the new airport for some years now but nothing has hapenned so far.

 What is also disappoininting is lack of any study to understand the issues. Even if there is, it is hardly put up on any website. So, if you go through websites of CIDCO, Ministry of EnvironmentPlanning Commission’s Infrastructure Secretariat etc you just don’t find anything useful. After searching Ministry’s website, you just get this useful information. It talks about coastal regulational zone (CRZ):

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WPI Inflation: A historical perspective..

October 5, 2010

Deepak Mohanty gives another fab speech on the topic. He is so good as he brings so much food for though on several monetary issues.  He covers several sub-topics in inflation. First the new WPI series (2004-05), historical movement of WPI inflation and policy measures and finally factors that drive WPI inflation.

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RBI’s Working Group on Operating Procedure of Monetary Policy

October 5, 2010

THis is going to be a very important working group.

In the first quarter review of monetary policy in July 2010, RBI said a working group will be formed which would lok at the entire monetary policy framework. The group has been announced and has great minds. The group would look at following issues:

The terms of reference of the Working Group finalised in the light of comments received in response to the Reserve Bank’s press release of September 13,  2010 are:

(i) to survey the operating procedures of major central banks;

(ii) to review the current operating procedure of monetary policy in India, in particular, the Liquidity Adjustment Facility (LAF);

(iii)  to examine the operation of the LAF with regard to:

a. the width of the corridor
b. the frequency and timing of auctions
c. the maturity period of repo and reverse repo operations;

(iv) to assess the role of the Bank Rate;

(v) to examine the role of standing facilities such as the export credit refinance; and

(vi) to suggest changes to the current operating procedure of monetary policy in India in the light of international practices and domestic experience, with particular reference to:

a) whether there should be a corridor at all

b) if so, whether its width should be fixed or variable under specified conditions

c) if so, what instruments/mechanisms may be necessary to enable the corridor to function efficiently

It would be chaired by RBI ED -Deepak Mohanty.  The report would be an interesting reading. Highly awaited.


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