ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Avinash PersaudSubscribe to Avinash Persaud

Strange and Worrying International Market Liquidity

There seems to be a rise in illusory liquidity in international markets, which appears to be plentiful in quiet times, but vanishes at other times. “Flash crashes” are more frequent. Reforms that have made banks safer have contributed to this, leading to a withdrawal of short-term market participants, and causing long-term investors to act short term. There seems to be a trade-off between day-to-day liquidity and what I call “systemic liquidity.”

Delinking Housing Cycles, Banking Crises, and Recession

The nexus of housing boom-busts, banking crises, and economic cycles is not unique to the last crisis and has been increasingly present in each of the major banking crises since the break-up of Bretton Woods in the early 1970s. Housing is a politically charged issue. A safer housing market, via planned fiscal intervention to steady supply, would do more to make the financial system safer than all of the other recent initiatives put together. Cheaper finance without cheaper homes only deepens housing inequality.

Dampening the Global Risk Appetite Cycle

International capital flows come in only two modes: feast or famine. The policy response to both situations has been primarily via exchange and capital controls--both have their consequences. Macro-prudential tools may represent a more flexible, less discriminatory alternative to capital controls. These tools of macroeconomic policy, though already in place, are not used as they should be, that is, to directly address the risk-appetite cycle of international capital.

Greece: Strophe and Antistrophe

The Greek tragedy contains more than its fair share of irony. Perhaps the biggest irony of all is that in the drafting of the Maastricht Treaty on Economic and Monetary Union in the late 1990s, it was Germany that insisted on the “no bailout” clause. A Greek default in 2010 would have avoided...

The Rupee, Its Valuation and the Missing Trade Surpluses

The rupee is one of the most undervalued currencies in the world. According to the International Monetary Fund (IMF), if you were to take a basket of goods bought in India, the exchange rate that would make that basket equivalent in price in India and abroad is Rs 18.5 per dollar. This makes the...

Central Banks and the New Macro-Prudential Toolkit

The new macro-prudential toolkit has its share of problems. It tends to be pro-cyclical, despite being aware that bank lending to booming sectors also concentrates risk, as the global financial crisis has shown. The emphasis of macro-prudential policy must take into account the nature of risk and its location in order to effectively guide markets by aiming at risk-managing the system at a macroeconomic level, as opposed to the tendency of using individual risk-based micro-prudential policies.

Is Central Bank Independence Necessarily a Good Thing?

On 2 May 1997, the British Labour Party won a landslide election victory, sweeping away 18 years of Conservative rule. Rather like today’s Congress-led government in New Delhi, the air of “l’ancien regime” hung over the last few years of John Major’s government. Previously seen as having a safe...


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