Archive for August 8th, 2011

Comparing Fiscal Councils to Central banks

August 8, 2011

One often repeated suggestion is to have independent fiscal councils like independent central banks. Latter have been very good in forming credible mon pol and delivering low inflation most of the times. Similar could be done for fiscal policy which has so far been highly discretionary, time inconsistent, elections dependent etc. The same ills were seen for mon pol earlier which was turned around by central banks. This could be done for fiscal policy as well with delegation to a fiscal council which is like a central bank for fiscal policy.

That simple!

Not really says Simon Wren-Lewis. He points how fiscal policy is far more complicated and fiscal councils can never be as effective as central banks.

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What determines yields of India’s State government bonds?

August 8, 2011

A trio of RBI econs write this nice paper on the topic.

India has developed its State government bond market (nicely called as State Development Loans) and now states also meet their deficits via this bond market system like the central government. This state governments started issuing bonds through auctions in 2006-07.  There is some nice history to the overall developments in state bond markets:

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