Refuting RBI’s governor and former International Monetary Fund (IMF)’s chief economist- Raghuram Rajan’s charges of quantitative easing in the West setting the stage for another crisis by triggering a savings glut in emerging markets, former chairman of the US Federal Reserve Ben Bernanke said that it was wrong to link currency wars undertaken by exporting nations with monetary measures taken by countries to address the spillover effect of quantitative easing.
He asserted the need for central bankers to remain clear and transparent in policymaking and highlighted the pre-requisite of an independent and responsible central bank for India. Ben Bernanke also made a strong case for inflation targeting and transparency in monetary policy - a move which RBI has been cautious over.
He further averred that monetary policy benefits from clarity and transparency and helps people know to central bank’s targeted interest, particularly in countries where inflation is high. He also took pot shots at the governor, by saying that being in favour of inflation target does not mean that you should ignore everything else.
Bernanke claimed he wanted to take Rajan to task for ignoring money. He said unconventional policies like the US Fed’s of increasing money supply increased demand in the economy, whereas exchange rate interventions like the tariffs of the 1930s were demand diverting.
Rajan had on Thursday called for more global coordination in monetary policy and the creation of a global "safety net" administered by a multilateral agency such as the International Monetary Fund (IMF). According to Guv, this would avoid the impact of measures like the sudden expansion of global dollar supply and its withdrawal as the US Fed did, which threw emerging economies into a tailspin.
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