Plurality in Teaching Macroeconomics Rohit Azad

For vibrant policy making, an open-minded academic engagement between contrasting viewpoints is needed in macroeconomic education. However, there does not even exist a textbook that contrasts these contesting ideas in a tractable manner. This pedagogical paper is an attempt to plug that gap by presenting a comparative study across different traditions in macroeconomics in a unified framework, which can be developed into a semester-long intermediate-level course. Plurality_Teaching_Macroeconomics  (Download the full text in PDF format) (This article was originally posted in the Economic & Political Weekly on March 30, 2018.)  

Can Banking Recover? Jayati Ghosh

The bank frauds involving Punjab National Bank (PNB) and the companies associated with businessmen Nirav Modi and Mehul Choksi as well as the Rotomac case couldn’t have come at a worse time. The Indian banking system is already reeling under the pressure of growing NPAs, or non-performing assets (less politely known as loans that are not going to be repaid), which will touch nearly ₹10 lakh crore by March this year. This does not include the ₹6 lakh crore already written-off. This has already caused a slowdown in disbursal of bank credit, in turn affecting productive investment. Failure at many…

An Asian Crisis Now? C.P. Chandrasekhar

While the world’s attention is focussed on the continuing crisis in Europe and its global fall-out, another crisis is brewing in Asia. More than one Southeast Asian country, among those that were overcome by financial crises in 1997, has seen a substantial accumulation of private debt, especially household debt. In some, debt levels are high enough to fear a financial collapse. This has come as a surprise, given the resilience they showed at the time of the global crisis of 2008. Worst off is South Korea, the rags to riches miracle that is now a member of the OECD, the…

Credit to Small Enterprises: The silent crisis Jayati Ghosh

A new BIS working paper by Cecchetti and Kharroubi makes a point that is becoming more widely known, especially after the continuing financial crises experienced globally since 2008. This is that the level of financial development is good only up to a point, after which it becomes a drag on growth. In fact, the authors argue that when the focus is on advanced economies, a fast-growing financial sector is actually detrimental to aggregate productivity growth. This is explained by the authors on the grounds that, because the financial sector competes with the rest of the economy for scarce resources, financial booms are not, in general,…

Shadow Banking in China C P Chandrasekhar and Jayati Ghosh

On October 10, the Chinese government announced that it will increase its stakes in the four largest commercial banks, which are already largely public-owned. The move is designed to ''support the healthy operations and development of key state-owned financial institutions and stabilise the share prices of state-owned commercial banks''. But why was this move considered necessary at all? In the period just before this, investors were dumping Chinese bank shares, anticipating a slowing down not just of the economy as a whole, but in particular the property market, which had experienced a bubble of massive proportions. But the underlying concern…

Corporate and Cooperative Solutions for the Agrarian Crisis in Developing Countries Sripad Motiram and Vamsi Vakulabharanam

This article discusses credit and marketing arrangements for small farmers in developing countries. The authors draw on the mixed experience with agricultural cooperatives in developing countries to present the design of a credit and marketing cooperative. The authors argue that in conjunction with other state policies, this arrangement works better for small farmers than other alternatives, in particular corporate ones. Agrarian_Crisis_Developing_Countries (Download the full text in PDF format)

Banking FDI in Latin America: An Economic Coup Sukanya Bose

Since the mid-1990s, foreign direct investment into the banking industry in many emerging market economies has been growing at an unprecedented scale. The paper examines the consequences of this phenomenon on banking sector's efficiency, credit aggregates, and stability in the context of the Latin American economies. Banking_FDI (Download the full text in PDF format)  

Japanese Economic Recovery and the Macroeconomic Policy Mix Sukanya Bose

Japanese macroeconomic policy during the prolonged depression of the 1990s has been the reverse of what Keynes had recommended as the anti-deflationary strategy. The paper explores the three main pillars of macroeconomic policy for the Japanese economy in the recent years: financial policy, fiscal policy and monetary policy. japanese_recovery (Download the full text in PDF format)