We reflect on the issues raised by the recent faceoff between the Reserve Bank of India (RBI) and the Indian government over the short-term interest rate. Our conclusion is that the policy space must be enlarged and the set of outcomes specified in order for meaningful dialogue to be conducted between the two entities.
The case for financial liberalisation is founded on the neoclassical proposition that savings causes investment and that the interest rate tends to move to equate the two. We find little support for this thesis from the experience of India. Alternatively, we suggest that the Post Keynesian approach that includes the liquidity preferences of banks might be a fruitful way to examine the dynamics of an economy in transition.Interest rate liberalisation, banks' liquidity preference,
We offer an explanation, drawn from first principles, of the belief that the consumption needs of the asset-poor are best met by debt contracts, whereas equity arrangements are tailored to the financing requirements of poor entrepreneurs.
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AbstractPurpose -The purpose of this paper is to make a case for an international clearing house. Design/methodology/approach -The systems postulate is used: the whole is greater than the sum of the parts. Specifically, the 2007 Godley-Lavoie model is exploited. Findings -Domestic banking arrangements are institutionally fragile; they import stability from their central banks. In like manner, relations between central banks must be conducted under a common metric, a world money. Originality/value -The paper shows that a technical argument for a multilateral clearing house will not be found. The author teases "implicit dynamics" (Stephen Turnovsky) out of national income identities.
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