40th anniversary of China’s economic reform and the 70th anniversary of its central bank: Some perspectives

Yi Gang, Governor of the People’s Bank of China, gives a speech on the twin anniversaries:

This year marks the 40th anniversary of the reform and opening-up and the 70th anniversary of the founding of the People’s Bank of China (PBC). As components of China’s tremendous achievements in the progress of the reform and opening-up, historic changes in the financial sector have taken place in the past four decades, and a modern financial market system has been broadly established which, adapting to the socialist market economy with Chinese
characteristics, is vital and internationally competitive.

And over the past 70 years, under the leadership of the Communist Party of China (CPC), the PBC has made extensive exploration and innovation, overcome formidable obstacles, pioneered in the promotion of financial development, reform and opening-up at different times, kept creating new prospects for the financial sector, and made significant contributions to China’s economic and social development.

In China it is clear. Central Bank functions under the aegis of the Government and there is no quarrel over central bank independence. The markets do not even care whether the central bank is any independent or not.

Gang lists several changes which have gone in the 40 years in financial sector. Useful speech as we know little of the developments in China..

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2008-18: A decade where mainstream academic world and mainstream policy world went own ways..

JW Mason gives a nice overview of macroeconomic research in the decade:

He says the macro research may not have changed in academic world but in policy world there are sure changes.

Has economics changed since the crisis? As usual, the answer is: It depends. If we look at the macroeconomic theory of PhD programs and top journals, the answer is clearly, no. Macroeconomic theory remains the same self-contained, abstract art form that it has been for the past twenty-five years. But despite its hegemony over the peak institutions of academic economics, this mainstream is not the only mainstream. The economics of the mainstream policy world (central bankers, Treasury staffers, Financial Times editorialists), only intermittently attentive to the journals in the best times, has gone its own way; the pieties of a decade ago have much less of a hold today. And within the elite academic world, there’s plenty of empirical work that responds to the developments of the past ten years, even if it doesn’t — yet — add up to any alternative vision.

For a socialist, it’s probably a mistake to see economists primarily as either carriers of valuable technical expertise or systematic expositors of capitalist ideology. They are participants in public debates just like anyone else. The profession as the whole is more often found trailing after political developments than advancing them.

……

Many critics were disappointed the crisis of a 2008 did not lead to an intellectual revolution on the scale of the 1930s. It’s true that it didn’t. But the image of stasis you’d get from looking at the top journals and textbooks isn’t the whole picture — the most interesting conversations are happening somewhere else. For a generation, leftists in economics have struggled to change the profession, some by launching attacks (often well aimed, but ignored) from the outside, others by trying to make radical ideas parsable in the orthodox language. One lesson of the past decade is that both groups got it backward.

Keynes famously wrote that “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” It’s a good line. But in recent years the relationship seems to have been more the other way round. If we want to change the economics profession, we need to start changing the world. Economics will follow.

Hmm..

This line-  the image of stasis you’d get from looking at the top journals and textbooks isn’t the whole picture, the most interesting conversations are happening somewhere else – is quite true. You get far more ideas reading newspapers and blogs (most of which ironically are written by top academicians) than reading journals and textbooks..

Bank Underground Blog’s Christmas Quiz

Nice quiz  on the blog.

I fared too poorly to tell my score 😦

 

North and South Koreas try break ground on future railway project

The two Koreas are trying to work towards peace via the Railways:

A South Korean delegation crossed the heavily guarded border into North Korea on Wednesday as the two countries held a symbolic groundbreaking ceremony for an ambitious project to modernize North Korean roads and railways.

The ceremony, which took place in the North Korean border town of Kaesong, came after the Koreas conducted a joint survey on sections of the North’s railway system that they someday hope to link with the South. The project is one of the several peace gestures to which North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed at a historic summit in April.

A nine-car South Korean train carrying about 100 people — including government officials, lawmakers and aging relatives separated by the 1950-53 Korean War — rolled into Kaesong’s Panmun Station. The train was carrying a slogan on its side which read: “Let’s open an era of peace and prosperity together — reconnection of South-North railways and roads.

They were greeted by North Koreans including Ri Son Gwon, who leads an agency which handles inter-Korean affairs. Representatives from China, Russia and Mongolia were also present, as were officials from the United Nations including Armida Alisjahbana, executive secretary of the UN’s Economic and Social Commission for Asia and the Pacific.

However Seoul has stressed that peace possible only when North denuclearizes. The earlier similar peace ways did not make progress due to North’s continued insistence on nuclear weapons and tests…

Germany mulls introducing mosque tax for Muslims like the church tax for catholics

Did not know that some of the European countries collect church taxes.

Germany which is one of these countries plans to introduce a mosque tax:

Lawmakers from Germany’s grand coalition government said on Wednesday that they were considering introducing a “mosque tax” for German Muslims, similar to the church taxes that German Christians pay.

Thorsten Frei, a member of Chancellor Angela Merkel’s Christian Democrats (CDU) told Die Weltdaily that a mosque tax was “an important step” that would allow “Islam in Germany to emancipate itself from foreign states.”

In Germany, church taxes are collected from practicing Catholics and Protestants in order to fund church activities. They are collected by the state and then transferred to religious authorities.

In the absence of a similar tax, mosques in Germany are reliant upon donations, raising concerns about possible financing by foreign organizations and governments, which has sometimes prompted questions about the promotion of fundamentalist ideologies. For example, there has been growing concern about the influence of the Turkish-Islamic Union for Religious Affairs (DITIB), an arm of the Turkish government based in Germany.

Nice bit..

“A Noteworthy Woman”: Viola Desmond who featured on Canada’s $10 note..

An interesting way of honoring noteworthy women is by featuring them on currency notes!

Carolyn Wilkins of Bank of Canada in this speech does this really well:

Thank you all for being here for the opening of A Noteworthy Woman, our temporary exhibition about the imagery on Canada’s new $10 bank note. The process to choose the first Canadian woman to be featured on a regular bank note was exciting, and it inspired many. We received more than 26,000 submissions.

This exhibition retraces our journey with Canadians to collect ideas. It tells the story of the 12 amazing women who, in the end, were considered for the honour, and of Viola Desmond and her lasting legacy as a human rights icon in Canada.

The artifacts in the exhibit are evocative reminders of Viola Desmond’s life and the time in which she lived. The focus has, of course, been on that day in a movie theatre in Nova Scotia in 1946. A successful business woman was denied a seat downstairs, was arrested and jailed, then ultimately convicted and fined for doing what was right in a system that was wrong.

Yet, that day in the theatre was not the first time Viola Desmond had experienced systemic racism. She had always dreamed of opening her own beauty salon, but the 1930s was not a time when a woman-and especially a black woman-could easily succeed. Nova Scotia beauty schools would not accept her, so Viola trained in Montréal and the United States. She then returned to Halifax to open her own studio in 1937, during the depths of the Great Depression. Viola Desmond had been an inspiration for years before she bought that fateful movie ticket.

Our exhibition includes mementos from Viola Desmond’s business and seats from the movie theatre where her public battle began.

More poignant still is Viola Desmond’s free pardon, granted in 2010 by the government of Nova Scotia, which recognized that she was innocent of the conviction that had remained on her record for 63 years. She never got to see justice served. It is a pleasure and honour to have Wanda Robson here today to share this moment dedicated to her sister.

The exhibition also highlights other design features of the vertical $10 note, which centre on the theme of human rights and social justice. You will find an image of an eagle feather, an excerpt from the Charter of Rights and Freedomsand an image of the Canadian Museum for Human Rights, where Wanda Robson spent the first new $10 note 10 days ago.

We could not leave out of the exhibition the important stories of the 11 inspirational women who were also considered for the bank note. These remarkable women overcame barriers, created significant change and left Canada better because of their contributions.

Soon, many Canadians will carry a Viola Desmond note in their wallets. But the lessons of her life must continue to be told. That’s why I’m glad that, through this exhibition, people will be able to learn more about her history, and Canada’s history. It is by interpreting our past that we inform our future.

Hmm…

Post-Brexit, will Paris emerge as an international financial centre?

My new piece in Moneycontrol. I discuss whether Post-Brexit, Paris will emerge as an international finance centre.

 

Central Bank of Seychelles celebrates 40th anniversary

The Central Bank of Seychelles was established on 1st Dec 1978 as Seychelles Monetary Authority:

Central Banking in the Seychelles started as far back as 1936, with the establishment of the Seychelles Currency Board, similar to other British colonies of the time. The Seychelles Notes Ordinance and the Coinage Ordinance of 1936 bestowed the responsibility for the issue and redemption of Seychelles currency on the Colonial Secretary and later, with the Financial Secretary, acting as Currency Commissioner.

…..

The weaknesses of the Currency Board were uncovered by its inability to adapt and assume control over a rapid expansion of the domestic banking sector in the seventies brought about a by a boom in tourism. With the Board having no mandate to undertake monetary policy, adherence to a fixed exchange rate regime, implied that the domestic money supply would fluctuate according to the flows of external capital. This situation was as expected not favourable to stable and sustainable economic development. As a result, in August 1976, an International Monetary Fund (IMF) Mission at the invitation of the Seychelles government undertook a study of the financial system and recommended structural and operational improvements in the Currency Board system.

Following IMF recommendations the government firmly decided to create a central banking institution to regulate money supply, to supervise the banking system and generally to foster financial conditions conducive to orderly and balanced development. . However, given the rudimentary structure of the financial system and the lack of local expertise, it was decided that, as an interim step, a Monetary Authority be set up, with the establishment of a fully fledged Central Bank planned for a later date. Hence, on November 24, 1978 the Seychelles Monetary Authority Decree was enacted and the Seychelles Monetary Authority (SMA) was founded under this decree on December 1, 1978. All the responsibilities, as well as the assets and liabilities of the Currency Fund established under the Seychelles Currency Act, 1974 were transferred to the Authority.

The SMA functioned very much like a Central Bank. The 1978 Decree empowered it with the necessary tools to enable it to achieve its objectives. These included (but were not limited to) the issue of currency, the management of external reserves, banker and lender of last resort to government and commercial banks and inspection of banks and other financial institutions. The most important difference with its predecessor was that the Authority was given the responsibility for monetary policy, thus enabling it to set monetary instruments such as interest rates and credit controls to achieve certain desired objectives. However, the 1978 Decree provided for a Board of Directors comprising of three members; one of whom was the Permanent Secretary of Finance; another being the Accountant-General; and the third being any person as may be appointed by the President. This was to ensure that the Authority consult closely the government, mainly the Department of Finance, in its capacity as Financial and Economic Advisor.

On the 40th anniversary, the central bank organised an exhibition and its Governor Ms Caroline Abel said:

As Panjim turns 175..

Fascinating piece in Scroll on completion of 175 years of Goa’s Capital – Panjim.

Panjim occupied a key position in the Portuguese empire – it was the urbs prima, the primary city, in the Estado da Índia Portuguesa (Portuguese state of India) from 1843. Its rich history has made it a melting pot of cultures and identities, and bequeathed it a unique socio-cultural fabric with “wonderful dualities”.

It is to celebrate this complex heritage on the occasion of the city’s 175th anniversary that the Serendipity Arts Festival is hosting an art exhibition titled Panjim 175. The exhibition, curated by Menezes and Swati Salgaocar, is being held at the old Public Works Department complex near the old and new Patto bridges in Sao Tome.

The theme of confluence runs through many of the works. The iconic mermaid that “represents Panjim in many ways” figures prominently in the works of Nishant Saldanha and Shilpa Mayenkar Naik. A poster by Saldanha, in vivid colours, shows the mermaid surrounded by Goa’s tropical flowers. Naik’s work is an azulejo (a painted, tin-glazed, ceramic tile), in which the mermaid is seen in front of one of Panjim’s most iconic buildings – the old Goa Medical College.

…..

Menezes describes the old Public Works Department complex as a “keystone crossroads”, connecting the new as well as old parts of the city. This over-100-year-old structure on the banks of the Mandovi opens up to the Latin quarter of Panjim – Fontainhas – and has an old-world charm. But it is now possibly going to be pulled down in a bid to make Panjim a “smart city”, a move Menezes describes as a “cultural crime”.

“The early map of Panjim looks like Manhattan, as it is built on the grid, [it had] place for sidewalks for people to walk,” said Menezes. “They [the city planners] were aware of the European drainage system – they had a very advanced, state-of-the-art thinking. It is particularly a galling, upsetting movement that in the 21st century all this is destroyed in the name of the ‘smart city’.”

Not just Smart cities. Anything with the name smart as a prefix – smart phone, smart shopping, smart banking etc – is anything but smart…

Understanding Exchange Rates and Why They Are Important

Nice piece by Adam Hamilton of RBA:

Exchange rates are important to Australia’s economy because they affect trade and financial flows between Australia and other countries. They also affect how the Reserve Bank conducts monetary policy. This article outlines how exchange rates are measured, the different types of exchange rate regimes, the factors that influence the exchange rate and how changes in the exchange rate affect the economy.

 

The evolving scope and content of central bank speeches

Pierre Siklos, Samantha St. Amand and Joanna Wajda on the topic:

There is an ongoing debate regarding how far central bankers, as unelected technocrats, should go outside of their remit when communicating in public fora. This column uses a machine-learning algorithm to assess the topics of speeches by officials at the US Federal Reserve and Bank of Canada over the last two decades. It concludes that the topics of central bankers’ speeches have not significantly widened in scope relative to their mandate documents.

….

The analysis reveals no clear deviation in the scope of central bankers’ speeches from their mandate over the past two decades. While the speeches by officials at the BoC have expanded in scope relative to the text of its mandate documents, the outlying topics are clearly related to how central bankers interpret incoming information about the economy. In general, much of the variation in speech content at these central banks can be explained by individual central bankers and key economic events. One exception is discussion of education and inequality by Fed officials, which has increased over the past decade, potentially related to efforts to improve public engagement. 

Whether or not central banks should be discussing these issues in public fora is an important debate for governments, central bank watchers, and the general public. The analysis in our paper informs this debate by identifying which topics of discussion are prominent in central bankers’ speeches and measuring the weight of these topics among all their public addresses. In future work, it may be fruitful to explore whether the topics discussed by central bankers can affect the credibility of and trust in these institutions.

 

Remembering former PM Chaudhary Charan Singh in times of farm loan waivers (wonderful archives on his life and works..)

Interesting piece by Praveen Dhanda (HT Cheri). It was 116th birthday of former PM Chaudhary Charan Singh on 23 Dec recently.

Though 23 December is observed as ‘Kisan Diwas’ to commemorate the birth anniversary of Chaudhary Charan Singh, the fifth Prime Minister of India, also sometimes called the ‘champion of India’s peasants’, both the day and the leader remain obscure in the public discourse at large.

However, as Indian politics veers towards addressing rural distress and farmers’ anger, it is increasingly important to rescue Singh from obscurity.

Charan Singh’s politics and ideas were informed by a deeper appreciation of the problems of agriculturists. For instance, the manifestos written by him did not promise easy solutions such as loan waivers, but rather chalked out a complex and sophisticated blueprint for the Indian economy keeping the interests of agriculturists and other small producers at the core. Despite his political swings, Singh’s policy proposals were almost always informed by his deeper thinking on developmental questions.

We clearly know little about this era and our farmer Prime Minister.

I also came across these amazing digital archives on the person (HT Amit Bhasole) whose grandson Harsh Singh Lohit has painfully put up his works and speeches.

The 2008 crisis: transpacific or transatlantic (savings glut or European Banking glut?)

Nice paper by Robert N McCauley of BIS.

There are two broad hypothesis which are responsible for the 2008 crisis: Savings glut of Asian economies or Banking glut of European economies:

This study analyses two hypotheses that ascribe the 2008 US financial crisis to capital inflows.

The Asian savings glut hypothesis posits that net inflows into high-grade US public bonds from countries running current account surpluses led to the housing boom and bust. An excess of savings over investment abroad led to an excess of US investment over savings.

The European banking glut hypothesis holds that gross inflows into private bonds led to the boom. Leveraging-up by European banks enabled the leveraging-up of US households.

They show the European story fits the data and trends better than Asian story. Hence, more of a European banking problem:

Gross flows from Europe better matched US mortgage market trends towards private credit risk, floating interest rates and narrow spreads. What is more, European banks produced, not just invested in, US mortgage-backed securities. Their US securities affiliates held huge exposures to such securities that deserve recognition. Furthermore, European banks’ leveraging-up also provided credit that enabled housing booms in Ireland and Spain. These findings favour the European banking glut hypothesis.

 

Ornithology and RBI MPC members: Moving from hawks/doves/owls to swans/canary/turkey…

Manas Chakravarty keeps coming up with amazing pieces. He wrote an interesting piece on economic consequences of Arvind Subramaniam’s grandchild.

Now he has written this piece on applying ornithology to RBI’s MPC members. These ornithology pieces are mostly centered around Governors and interesting to see them being applied to MPC members. I recently blogged about Rajiv Mailk piece hoping the new Governor is not a lame duck.

Manas moves onto the 6 MPC members and as a result many more birds:

Let’s start with Urjit Patel, the former governor, who left the RBI like a bat out of hell. A bat, though, is not a bird. This meeting was his swan song, which I suppose makes him a swan, though a rather unlikely one. Some have said a goose would be more appropriate because his goose was cooked, but the flaw in that reasoning is he wasn’t cooked but his goose was, although there’s some difference of opinion on that. The government, of course, has no doubt whatsoever that he was an albatross around its neck.

Ravindra Dholakia has been classified as a dove ever since we started giving them bird names and there’s no reason to change it now. I would merely like to emphasise he isn’t a turtle dove, since he doesn’t bill and coo, at least not in monetary policy meetings. The latest meeting however does open up the possibility of him being a wet hen since he ranted that ‘retaining the stance of calibrated tightening seems totally inconsistent and unjustified.’ He seems as mad as a wet hen against the decision to keep interest rates high.

There can be absolutely no doubt that Chetan Ghate is an owl. Only someone as wise as an owl could say ‘two interlaced variables pose the potential of un-anchoring inflationary expectations, and thereby making it difficult to ensure price stability on an enduring basis’ without batting an eyelid at the monetary policy meeting.

Some say Pami Dua is neither fish nor fowl, more of a dark horse really. But she might be a turkey, on the rather slender basis that she talks turkey. Thankfully, she survived the Thanksgiving cull.

What about Michael Patra? He’s traditionally been known as a hawk, although his enemies who want lower interest rates say he’s a loon, no doubt inspired by the ‘crazy as a loon’ idiom. But we don’t have loons in India. His statement at the monetary policy meet that it was ‘apposite to persevere with the stance of calibrated tightening to head off inflation pressures from potentially corroding the foundations of the growth path that is evolving over the medium-term’ may or may not make him as graceful as a swan, but there’s no doubt he’s in fine feather. A swan? Nah, not really, those are borrowed plumes, you can’t hide the hawk in him.

We come then to Viral Acharya. In the last monetary policy meeting, his eagle eye spotted a ‘divergence in the direction of price movements in data in key food items provided by the Department of Consumer Affairs (DCA) and realised food inflation for October.’ Such divergence, he said, is rarely observed. That firmly makes him an eagle.

Others say his famous speech on the independence of the RBI that so rattled the government was the canary in the coal mine. That makes him a canary, but it’s not known whether he sings like one at monetary policy meetings. Others believe that, given what the government thinks of him, he is most likely a sitting duck. On the other hand, the whole controversy may well be water off a duck’s back. Either way, he’ll be a duck.

Everyone is agog to know what Shaktikanta Das, the new RBI governor and chairman of the MPC, will be. But there is little doubt he’ll be cock of the walk, besides being happy as a lark.

Lastly, just in case anybody thought otherwise, this is of course a cock-and-bull story.

Phew..

 

Where are the Chinese economists? The surprising disparity between the economy and economists..

Prof Bruno Frey in this piece wonders that though Chinese economy is doing well, but we barely hear of Chinese economists:

China’s GNP is close to, or larger than, that of the US and the per-capita income gap between the countries is closing. Despite this, Chinese economists are absent from the rankings of top academic economists and none has received the Nobel Prize in Economics. This column offers several potential reasons for this, and also argues that the situation is likely to change in the future. Young scholars in particular may be well advised to take this into account, as their careers are likely to benefit if they link up to the Chinese academic market.

Hmm..Will it apply to India too in future?

Pakistan’s privatisation dilemma as it seeks IMF bailout: Lessons from its privatisation history

Interesting piece from Prof Kamal Munir (Strategy and Policy) of Cambridge Judge Business School.

Reluctantly seeking an IMF bailout for its balance-of-payments crisis, Imran Khan’s nascent government in Pakistan has already devalued its currency, hiked utility rates and imposed new taxes in an effort to be “ready” for IMF reforms. As if these measures were not enough to make the government sufficiently unpopular, it now faces demands to immediately privatise large loss-making state-owned enterprises.

For a few reasons, the government has so far been reluctant to sell these off. Two reasons stand out in particular. First, selling of these state-owned enterprises is likely to generate significant unemployment. Politically speaking, this would be a highly unpopular move, as Khan’s new government promised to create millions of jobs within five years. Second, given the outstanding debts of Pakistan’s state-owned enterprises, there will be few takers unless the government clears up the balance sheets first.

Whichever course the government takes, it would be foolish to ignore the lessons from Pakistan’s troubled history of previous privatisations – three spring to mind.

He points how the previous three privatisations – telecom, energy and banking – backfired. As there was limited competition in telecom and energy, all it did was to transfer a public monopoly to becoming a private monopoly. In banking, the banks made gains mainly by lending to government and not to other sectors.

The key lesson:

consistent with the general history of privatisation in Pakistan, banking privatisation was great for the new owners. Many got bargain basement deals – while doing little for the cause of national economic development.

Above all, the government should realise that in the absence of a broader national development policy, privatisations are not going to yield the desired benefits. Before contemplating any sell off, the government needs to first figure out the roles it needs various institutions to play and devise appropriate regulatory and monitoring frameworks.

Goals such as maximising the value of an enterprise before its sale or enhancing its profitability, should be supplanted by aims that are in line with a larger development plan. In order to avoid the mistakes of previous governments, longer-term goals must be prioritised.

Hmm..

Rearranging the name of Consumer Financial Protection Bureau..

Came across this interesting controversy over names. Mick Mulavney, the former chief of CFPB wanted to change or rearrange the name of the watchdog to BCFP:

Mulvaney, who was installed by President Donald Trump as acting director of the bureau in November 2017, had maintained that he was only following the statute in insisting that the agency be called the Bureau of Consumer Financial Protection, or BCFP. He also rearranged the letters in the lobby of the agency’s office building.

Sen. Elizabeth Warren (D-Mass) on Monday asked the CFPB inspector general to investigate Mulvaney’s name-change decision, which she said would cost the agency between $9 million and $19 million, citing news reports.

Warren helped set up the bureau during the Obama administration in the wake of the financial crisis,

The new chief has decided to continue with CFPB:

Kathy Kraninger, the new director of the Consumer Financial Protection Bureau, is reversing the name change that her predecessor, Mick Mulvaney, tried to impose on the agency, according to an internal email Wednesday.

“I care much more about what we do than what we are called,” Kraninger wrote in the all-hands email, which was originally obtained by the consumer group Allied Progress. “As of December 17, 2018, I have officially halted all ongoing efforts to make changes to existing products and materials related to the name correction initiative.”

Kraninger’s decision to distance herself from Mulvaney, her former boss at the Office of Management and Budget who was just named acting White House chief of staff, came just a week after she was sworn in to lead the bureau.

Kraninger said that for reports, legal filings and other official business, the agency will use Mulvaney’s preferred name. “The name ‘Consumer Financial Protection Bureau’ and the existing CFPB logo will continue to be used on all other materials,” she said.

Hmm,

This reminds me of another similar story in India. The proposed name for IDFC was actually IFDC with Finance ahead of Development. The Government decided to bring D ahead of F! Thankfully, this happened before the institution came up unlike CFPB..

 

RBI MPC Minutes: MPC would run the risk of being considered neither current nor relevant!

Dr Ravindra Dholakia, MPC member does not mince words. His latest statement in the minutes of the MPC held in Dec-2018 is worth highlighting (HT: Avinash Tripathi for the pointer):

Drastic and sudden changes in external economic environment have taken place after the last meeting of MPC in October 2018. Should these changes evoke a response through an appropriate policy action? – yes, if they are not purely temporary and have reasonably long term impact on the economy. RBI’s own downward revision of the forecast of inflation 12 months ahead to a substantial extent in response to those developments, is a clear indication of their long-term impact on the economy. Thus, a policy response is called for. If there is no policy action in response to such a major favourable shock, MPC would run the risk of being considered neither current nor relevant!

With inflation forecast coming down by around 120 basis points and quarterly growth forecasts marginally revised downward opening up output gap going forward, there is hardly any justification in retaining calibrated tightening stance. In my opinion, this would be the right time to cut the rate and bring the unduly high real interest rates in the country back to around 2 per cent. It was, however, unfortunate that in October 2018, MPC had changed its stance to calibrated tightening with 5:1 majority despite my unsuccessful persuasion to maintain neutral stance. As a result, any rate cut is off the table for now and any such action would not be advisable at this point. The best we can do under the circumstance is to hold the rate, but change the stance to neutral to take care of all possible uncertainties. We should not deny any possibility of either a rate cut or a rate hike in the near future depending on data coming in.

43. More specific reasons for my vote on the rate and the stance are:

4 historians explain motivations behind their award winning writings..

Nice bit:

History delves into small corners and vast, sweeping places and eras, presenting new perspectives on what may be old issues or opening up new fields of research on questions that have not been fully considered.

Four members of the University of Virginia’s Corcoran Department of History have recently been honored for doing this through their research and writings.

• Fahad Bishara received the Peter Gonville Stein Award from the American Society for Legal History for his 2017 book, “A Sea of Debt: Law and Economic Life in the Western Indian Ocean, 1780-1950.”
• Cynthia Nicoletti received the American Society for Legal History’s Cromwell Book Prize for her 2017 book, “Secession on Trial: The Treason Prosecution of Jefferson Davis.”
• David Singerman won the inaugural 1500 Penn Prize of the Treasury Historical Association for his paper, “Science, Commodities, and Corruption in the Gilded Age.”
• Will Hitchcock’s 2018 book, “The Age of Eisenhower,” has been named one of the top 20 history books of the year by Amazon’s editorial board.

UVAToday asked each of them to describe their award-winning work.

All the featured histories look great reads…

Central Bankers and Ornithology: Hawks, doves, owls and lame ducks…

Rajeev Malik in this Mint piece:

Das should also take note of the following: First, differences in opinion will often exist. However, domain specialization doesn’t mean a licence to be selectively accountable, or to switch off the common sense approach to communication and consultation. Equally, governments cannot continue treating the RBI like a vacuum cleaner, to sort out the mess caused by, say, their delayed actions, policy mishaps, or unexpected outcomes of their shoddy implementation.

Second, central banking isn’t a popularity contest. Given the sweeping powers the current RBI Act gives to the government, it is only the strength of the spine of the RBI governor that prevents a government from bulldozing its way through with politically self-serving and reckless initiatives that could compromise long-term economic stability. The legality of an initiative isn’t the final word on deciding if it is responsible and in our long-term interest.

Third, central banks are prone to forecasting errors. This isn’t appreciated by those who don’t have to be accountable for forecasts, or by those blessed with selective amnesia about their own forecasts. Recall that the majority was singing the same worry in October when Brent oil prices were threatening to march towards $90-100 per barrel.

Separately, the RBI should review its forecasting track record and explain the misses to enhance its transparency and credibility. Also, liquidity management is one of the most basic jobs of a central bank. It is worth exploring why the RBI has often struggled with it and done a dissatisfying job of answering the concerns.

Finally, there has to be a greater focus on ensuring sustained macro stability, not just enjoy it as a lucky outcome. India’s growth is frequently interrupted by concerns about macro stability because policymakers rely heavily on optimistic assumptions and insufficient policy buffers. People in government pump up how big the Indian economy will be in 10-20 years, but there is no thoughtful assessment of how to get there.

RBI governors are kept on a tight leash by New Delhi via the typical initial appointment for a mere three years. It is up to Das to become a dove, a hawk, an owl or any other monetary bird, but hopefully not a lame duck.

Lame duck looks like a new addition to the ever growing list of tagging central bank governors as some bird type…