Archive for March 27th, 2019

Is it time for India’s own version of the US Fed’s Operation Twist?

March 27, 2019

Niranjan Rajyadhaksha’s new piece in Mint asks whether India needs to do its version of Operation Twist:


How granting women property rights is itself a financial innovation..

March 27, 2019

Moshe Hazan, David Weiss and Hosny Zoabi in this interesting research show how property rights given to women lead to economic changes:

Historically, women have had property rights in South-Western Coast of India. It has been shown they have much better socio-economic status compared to other women. It will be interesting to explore whether local financial markets were also impacted due to these property rights.

Comments on dangers of recent amendments to Kenya’s Banking Act

March 27, 2019

Dr Patrick Njoroge, Governor of the Central Bank of Kenya talks about recent changes in Kenya’s Banking Act.

These changes are likely to reverse many years of hard work to curb black money, money laundering and so on. What is worse is that these changes were enacted without keeping the central bank in loop:

On October 1, 2018, following the coming into force of Section 65 of the Finance Act (2018) the Banking Act was amended to include a new Section 33C. In one stroke, Kenya was on the brink of rolling back key instruments in the fight against corruption, money laundering, and financing of terrorism, bringing to nought the hard-fought gains. The amendment refers directly to cash transactions but has far-reaching implications.

Has CBK acted to implement the Amendment? Yes, CBK first saw the amendment after it had become effective, but embarked on understanding and implementing it. To be clear, CBK had not been made aware or otherwise consulted in formulating the amendments, so we had no lead time.

  • The Amendment requires bringing together a variety of requirements in the Banking Act and other laws on deposits and withdrawals. Requirements set by banks for their customers, their terms and conditions, would also need to be wrapped in (including ATM limits, hours for accessing the bank).
  • POCAMLA also has requirements on cash transactions, and these will conflict with  the Amendment.
  • Similarly by treaty, Kenya is subject to the resolutions of the UN Security Council, including on aspects of cash transactions. The amendment would conflict with that.
  • The Amendment does not ensure the safety and soundness of bank transactions. In addition, it does not allow the needed flexibility even in cases of “clear and present” danger.

Governments continue to undermine central bank autonomy..

The return of the policy that shall not be named: Principles of Industrial Policy

March 27, 2019

What a title of a research paper: The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy!

IMF economists Reda Cherif and Fuad Hasanov in this research paper:

Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated. Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.

Hmm.. Looks like a good read.

Gulzar had earlier posted that industrial policy is coming back:


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