Negative Interest Rates: A symptom of the crisis or instrument for recovery C.P. Chandrasekhar

The failure of the macroeconomic stance of shifting away from fiscal policy to an almost exclusive reliance on monetary policy has led to the phenomenon of negative rates in countries other than the United States, and the first sign of even a partial recovery in that country has been enough to set off a reversal. negative_interest_rates (Download the full text in PDF format) (This article was originally published in the Economic & Political Weekly, March 25, 2017 vol. LII no. 12)

Once More on “The Humbug of Finance” Prabhat Patnaik

The renowned economist Joan Robinson had referred to the view that the government’s budget should always be balanced, as the “humbug of finance” (Robinson 1962), namely as a false proposition with no theoretical merit which was nonetheless promoted by finance capital. These days of course the insistence is not exactly on balancing the budget as was the case during the pre-second world war years. A certain amount of fiscal deficit relative to GDP, usually 3 percent, is considered “permissible”, though it is not clear what is so sacrosanct about the figure 3 and why 3 is better than zero. But…

Review of Kenneth S. Rogoff – The Curse of Cash Jayati Ghosh

  Published by :Princeton University Press 2016     ISBN-10: 0691172137        ISBN-13: 978-0691172132 Kenneth Rogoff is among the more prolific and topical of US economists – and certainly no less controversial for all that. As former Chief Economist of the IMF, Rogoff was famously embroiled in a debate with Joseph Stiglitz, former Chief Economist of the World Bank, on the merits of and concerns about globalisation (of which he has been a fervent supporter). Subsequently, he has waded into many issues of current concern with a mix of theoretical and empirical analysis and strong policy conclusions. Perhaps unremarkably given the state of…

Review Of Kenneth S. Rogoff – The Curse Of Cash Jayati Ghosh

Age of Uncertainty C.P. Chandrasekhar and Jayati Ghosh

With the US Federal Reserve deciding to exit the era of low interest rates even when growth in the rest of the world economy falters or remains sluggish, economic uncertainty intensifies. Age_Uncertainty (Download the full text in PDF format) (This article was originally published in the Business Line on December 19, 2016)

An Overburdened Instrument C. P. Chandrasekhar

On August 9, RBI Governor Raghuram Rajan released the last bi-monthly monetary policy statement that would be drafted under his leadership. No changes were made: the benchmark ‘repo’ rate was kept at 6.5 per cent, the cash reserve ratio at 4 per cent and the Statutory Liquidity Ratio at 21.5 per cent. According to the RBI, growth in this fiscal is projected at 7.6 per cent because of the beneficial effects of the good monsoon and the expansionary effects of the implementation of the 7th Pay Commissions recommendations. So growth is not an immediate problem. But, in the view of…

No Clue to the Future C.P. Chandrasekhar

Meeting in mid-April on the side lines of the spring sessions of the World Bank and the International Monetary Fund at Washington D.C., Finance Ministers of the G20 countries seemed overcome by a combined sense of despair and fear about the state of the world economy. The Communiqué issued after the meeting describes that state thus: “Growth remains modest and uneven, and downside risks and uncertainties to the global outlook persist against the backdrop of continued financial volatility, challenges faced by commodity exporters and low inflation.” When translated that seems to say the recovery is yet to occur and the…

The Phenomenon of Negative Interest Rates Prabhat Patnaik

One is witnessing the emergence of a strange and unprecedented phenomenon in the advanced capitalist world, namely the charging of negative interest rates. The European Central Bank reduced its deposit rate to -0.1 percent in June 2014, and since then it has reduced this rate further, to-0.2 percent in September 2014, -0.3 percent in December 2015, and to -0.4 percent in March 2016. And apart from the ECB, four other national central banks, those of Switzerland, Japan, Denmark, and Sweden, have also reduced interest rates on certain parts of their deposits to negative levels. In addition the ECB has also…

The Impacts of the 2008 Global Financial Crisis on Developing Countries: The case of the 15 most affected countries Hasan Comert and Esra Nur Ugurlu

[Working Paper No. 03/2015] From their analysis of the impact of the recent global crisis, the authors show that the trade channel was the most important mechanism in the transmission of the crisis from advanced economies to developing countries. WP_03_2015 (Download the full text in PDF format)