Archive for July 19th, 2021

52 years of Bank Nationalisation: Time to move ahead

July 19, 2021

On 19 July 1969, Indian government nationalised 14 banks.

Tamal Bandyopadhyay in Business Standard says:

Nationalisation has served its purpose. It’s time to move ahead, keeping majority ownership of the government in a few banks to serve people.

Tamal has posted a free version of the article on Linkedin.

70 years of Central Bank of Sri Lanka: 1950-2020

July 19, 2021

Central Bank Sri Lanka (CBSL) completed its 70 years in 2020.

CBSL released a special publication commemorating the 70 years. As of now the publication is available on sale. The central bank has put up volumes of earlier anniversaries on the website.

The Central Bank of Sri Lanka (CBSL) has published a special publication on the history of currency used in Sri Lanka, titled “The 70 Year Journey of Currency Issue and Management” co-authored by Retired Director Communications of CBSL, Ms. Shellomi H Gunawardena and Retired Senior Manager of CBSL, Mr. W M K Weerakoon.

The authors have utilized their years of experience at the Currency Department of CBSL, in compiling this publication, to be used as a reference for bankers, students, numismatists, and others who would be interested in the history pertaining to currency in Sri Lanka. The book carries attractive colour illustrations of currency notes and coins used in Sri Lanka from ancient times with historical narratives, which also provide a glimpse of the political, economic and cultural background of the country over the past 70 years.

The publication consists of 7 chapters. Chapter 1 provides a historical account of the formation of the CBSL and its role in currency issue and management. Chapter 2 describes the currency notes and coins that were in circulation at around the time the CBSL was established. Chapter 3 discusses currency coins issued by CBSL and Chapter 4 discusses currency notes issued by the Central Bank. Chapter 5 comprises commemorative notes and coins issued by the CBSL, which also includes a special section on the coin series issued to represent the 25 Administrative Districts of Sri Lanka. Security features of currency notes are discussed in Chapter 6 while Chapter 7 covers the legal framework within which currency is issued and managed in Sri Lanka.

The publication, in English, is available for purchase by individuals and bookshops at Rs. 1,000 per copy, at the Publication Sales Counter of the Economic History Museum (EHM), located at the Central Point Building, Chatham Street, Colombo 1.


The European Central Bank moves beyond price stability

July 19, 2021

My new piece in Moneycontrol on the changes in ECB’s policy as announced in its strategy review.

Financial Dollarization in Emerging Markets: Efficient Risk Sharing or Prescription for Disaster?

July 19, 2021

Lawrence Christiano, Hüsnü Dalgic & Armen Nurbekyan in this NBER paper:

A European and Rawlsian view on inequality, inclusive growth and monetary policy

July 19, 2021

Olli Rehn, Governor of the Bank of Finland, in this speech quotes Rawls to justify low for long interest rate policy of central banks:

In the euro area, national policies determine labour market outcomes. However, monetary policy can support full employment without prejudice to price stability. In the presence of a flattened Phillips curve, policies aiming at full employment are likely to have a moderate inflationary impact in the short term. Under such circumstances, monetary policy can also help us get closer to full employment.

In fact, considerations about labour-income and wealth inequality strengthen the case for a “lower for longer” strategy, when monetary policy is constrained by the effective lower bound. This is to my understanding in line with considerations that featured prominently in the Federal Reserve’s recent framework review and have contributed also to the new ECB monetary policy strategy, of which President Christine Lagarde informed the public earlier today.

So, let me ask, on the basis of these reflections: what should one as a central banker think about inequality and inclusive growth in the making of monetary policy? In my view, the philosophy of John Rawls is a most helpful guide here. One of his key insights, or one of his three principles of a just society, is that inequalities are acceptable only in case that they benefit the less well-off members of the society.

That is by no means a carte blanche for e.g. advocating tax cuts that benefit the richest or believing in some trickle-down theory of economic growth. But it implies that as the main impact of monetary policy in the proximity of effective lower bound has been to raise output and employment, and thus reduce income inequality by helping create millions of jobs and enhance the income of the previously unemployed and other less well-off members of the society, even if it had limited negative side-effects on wealth inequality, then the policy has been in line with the pursuit of a just society.

Linking Rawlsian thinking to monetary policy is interesting…

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