Raghuram Rajan is charged with monetary stability in one of the world’s leading emerging economies as Governor of the Reserve Bank of India.
Listen to this podcast interview with the policymaker as he discusses why countries need a global financial safety net in an era of potential dramatic overnight changes in a country’s economic and financial fortunes, whether triggered from without or within.
To prepare for sudden stops or withdrawals of money out of a country, Rajan says you can build reserves, so if money flows out you have enough to protect the value of your currency, or protect you from a bank run. If people think you have enough reserves they may not head for exit.
Rajan also tackles the subtle differences in the views on innovative policies: people are more influenced by innovations in advanced economy policies, and more likely to believe they are appropriate, while policy innovations from emerging economies are more attributed to the crankiness of the governor or the government, rather than based on a well thought-out policy given the current economic environment.
You can listen to the provocative podcast here:
Filed under: International Monetary Fund