Author: Sourabh Gupta, Samuels International
On 2 November, on the sidelines of the G20 leaders meeting in Cannes, Zhang Tao, director general of the international department of the People’s Bank of China (PBoC), averred that China’s foreign exchange management strategy was based on ‘the principle of safety, liquidity and adding value’.
Given the US$271 billion in reserve losses presumed to have accrued during the 2003-2010 period as a result of the US dollar’s depreciation, this notion of ‘safety’ appears to be a rather elastic one. Read more…
Author: Christopher Findlay, University of Adelaide
The way ahead in the European debt crisis appears to lie in refinancing the debt held by those countries whose sovereign bond spreads are widening and who are at risk of default: but who will pay?
Read more…
Author: Huw McKay, Westpac and ANU
The Australian economy presents a conundrum for both policymakers and outside observers.
Despite a spectacular effort in evading the worst of the 2008/09 downturn and an impressive recovery trajectory in the labour market through 2010, a striking undercurrent of pessimism has emerged. Read more…
Author: Shankaran Nambiar, Manipal International University
The recent downgrade of the United States’ credit worthiness by Standard & Poor (S&P) rocked financial markets around the world, Malaysia’s included.
Yet a strange sense of confidence pervades Malaysia’s market observers. The impact of the downgrade by S&P from a rating of AAA to AA-plus is thought to have limited impact on the Malaysian economy.
Read more…
Author: Ronald McKinnon, Stanford University
In reforming the international monetary system, exchange rates usually get primary attention front and center — such as in numerous meetings of the Group of 20. Indeed, at the G20 meeting in November 2010, President Obama attacked China for not appreciating its currency.
But China’s monetary policy has been oriented toward keeping the renminbi-dollar rate stable since 1994, which served China well as a nominal anchor for its domestic price level and to smooth exchange relationships with its smaller neighbours. Read more…
Author: Lex Rieffel, Brookings Institution
In a primer on sovereign debt restructuring published eight years ago, I noted that ‘None of the mature democracies in the world have come close to a sovereign default in the Bretton Woods era’.
What was true then is not true now, and the world is worse off because of it. Read more…
Author: Pravakar Sahoo, IEG
In its latest monetary policy review, the Reserve Bank of India (RBI), continuing with its tight monetary policy, revised policy rates upwards for the eleventh consecutive time.
Both the repo rate and the reverse repo rates went up by 50 basis points to 8 per cent (from 7.5 per cent) and 7 per cent (from 6.5 per cent) respectively. Read more…
Author: Nurhisham Hussein, Economics Malaysia
An interesting experiment is going on in Malaysia. The administration of Prime Minister Najib Razak has embarked on an economic transformation plan that marks a clear departure from the development plans of Malaysia’s past.
In years past Malaysia’s development plans, while ostensibly focusing on economic growth and structural changes, had been in actuality little more than budget priorities for the federal government. Read more…
Author: R Kohli, ICIER
A combination of structural and cyclical factors has triggered a new wave of portfolio capital flows into emerging market economies.
Incorporating the fresh lessons learnt from the 2008 crisis, the policy toolkit of emerging markets economies has now been expanded to include capital controls. Read more…
Author: Arvind Subramanian, PIIE
With the United States throwing its support behind Christine Lagarde for the post of Managing Director of the International Monetary Fund, the search for a new chief is all over.
Although the French magistrate’s continuing investigating of Lagarde’s role in the Bernard Tapie affair is unfortunate. Read more…
Author: Cyn-Young Park, ADB
The global financial crisis has prompted a wide range of policy responses and long-overdue reform initiatives, implemented by an unprecedented degree of intergovernmental policy coordination to build a collective response — not just between large, advanced economies but with strong participation from emerging market economies, too.
The world economy has turned a corner, but the challenges it faces remain daunting. Read more…
Author: Mauricio Mesquita Moreira, IDB
In December 2004, during an official visit from President Hu Jintao, and amid great euphoria, Brazil signed a Memorandum of Understanding, granting China eagerly sought market economy status.
It was sold as a sign of great confidence in the benefits of the relationship and as part of a bargain whereby China would … well, that was never very clear (although there was talk of China accepting to talk about Brazil’s aspirations for a seat in the UN Security Council).
Almost seven years later, this euphoria has turned into unease. It became clear that the impact of China’s emergence is much more complex and nuanced than initially thought. Read more…
Author: Barry Carin, CIGI
The G20 is again in the news following the February 2011 Finance Ministers’ meeting with media coverage dominated by news that leaders agreed on a ‘list of indicators to identify and reduce trade imbalances.’
This development comes under France’s G20 presidency, which inherits an unfinished agenda from past G20 summits. Read more…
Author: Pravakar Sahoo, IEG
The forthcoming budget for the Indian finance minister is going to be tough to balance. He is juggling a number of issues: inflation is the most important, but containing the fiscal deficit, current account deficit, slowdown of manufacturing output, declining FDI inflows and sustaining growth are also major challenges. Absence of a serious effort at reducing the fiscal deficit and current account deficit implies a growing risk of adverse change in market sentiment, which would lead to an increase in inflation, high interest rates and low private and public investment, thereby hurting growth.
Since 2007–08, the fiscal deficit has increased to around 6.5 to 7 per cent of India’s GDP, subsequently leading to a combined federal and state deficit of over 10 per cent of GDP in 2009–10. The actual numbers are higher, by at least 1 per cent, as some items were kept off the balance sheet. Read more…
Author: Savita Shankar and Mukul G. Asher, NUS
The recent developments in the Indian microfinance sector, particularly in Andhra Pradesh (AP), have been disconcerting. Within a relatively short period, a sector heralded as representing a commercially viable solution to the problems of financial inclusion, poverty reduction and female empowerment is now being accused of various improprieties. Microfinance institutions (MFIs) are now being criticised as detrimental to improving the lives of low income individuals.
Recent developments involve some of the borrowers from MFIs being over-extended, resulting in repayment problems; including coercive collection methods in some cases. Read more…
