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

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Gloomy Global Outlook

The synchronised monetary tightening and external sector shocks will hurt global growth.

To Loot or Not to Loot?

Konya is a province in Turkey. On 6 July 2022, about an hour before I started writing this article, a murder news hit the Turkish pages of the internet: “In Konya City Hospital, a patient shot and killed a cardiologist and his secretary today.” Whether the assassin died by suicide or the private...

Can Growth Be Sustained?

Slump in consumption, surging prices, and slow growth in key sectors are likely to stall the recovery.

A Horse Race among the Alternative Taylor Rule Specifications

The paper estimates a slew of augmented Taylor rule specifications using call and treasury bill rates. After accounting for break points, we calculate the output gap based on a single-index dynamic factor extracted from monthly high-frequency indicators that are representative of broad sectoral activity. In our study, we found that interest rates in India are mostly in line with the augmented Taylor rule specifications after the Reserve Bank of India started using flexible inflation targeting.

Spiralling Prices

It is a clear case of the government doing too little too late.

Is the Economy Heading towards Stagflation?

Erratic fiscal and monetary policies tend to slow down growth and fuel inflation.

Inflation, Debt Sustainability, and Government Borrowing in the Time of the Pandemic

Public borrowing is essential to garner resources to combat the current pandemic. The ability to do so and adhere to the standard norms of debt sustainability will be harder for developing economies as compared to the developed, due to constraints, both structural and policy-induced. High food infl ation and the adoption of infl ation targeting will impose severe constraints on the ability to expand borrowing and maintain low levels of debt-to-GDP. In such a situation, governments must either rethink monetary policy and/or allow for debt ratios to rise.

RBI’s Efforts towards ‘Pandexit’ Go beyond Policy Measures

In a proactive move, the Reserve Bank of India rescued the economy with its innovative—blended conventional and unconventional—monetary policy measures. Low-interest rates, aligning targeted liquidity, and granting moratorium coupled with forbearance to enable banks to restructure loans, mandated the Kamath panel to work out modalities to restructure corporate sector loans. After affirming stability and orderliness of the financial sector throughout the crisis period, it rightly signalled descent towards normalisation paving for pandexit manoeuvring the tool of variable reverse repo rate.

Worrisome Trends in Inflation and Unemployment

Both the problems will further hurt the disadvantaged groups and push more people into poverty.

Inflation and Terms-of-trade

This paper argues that, over the longer run, the intertemporal path of inflation in an economy is affected by secular changes in the inter-sectoral terms-of-trade, which in turn, is closely linked to the stages of structural change. This linkage is investigated through simple devices of consumer choice and growth. Results imply that monetary authorities’ inflation targets should optimally account for such secular changes in the terms-of-trade, over and above the terms-of-trade shocks observed typically in developing economies.

Evolving Contours of Monetary Policy

Monetary policy has emerged as an important tool of economic policy both in developed and developing economies. The monetary and financial system is far more complex today than it has been in the past. Financial intermediation has reached a high level of sophistication, which has itself become a source of concern. The impact of monetary policy action can be transmitted through a variety of channels, some of which though recognised in the past, have become more important. While the traditional issues such as the objectives of monetary policy and the possible trade-off among them remain relevant, they need to be related to the far-reaching changes in the institutional environment at home and abroad. The changing objectives of monetary policy, newly evolving instruments of monetary control and the transmission mechanism and issues related to autonomy in the pursuit of monetary policy are examined.

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