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Rakesh Mohan

Bio: Rakesh Mohan is an academic researcher from International Monetary Fund. The author has contributed to research in topics: Monetary policy & Financial market. The author has an hindex of 15, co-authored 51 publications receiving 673 citations. Previous affiliations of Rakesh Mohan include Asian Development Bank Institute.


Papers
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TL;DR: In this article, the authors reviewed the overall macroeconomic performance in India since independence, then drew likely prospects for the coming five years and finally concluded with some issues that need to be addressed for sustaining the growth of the Indian economy.
Abstract: The theme selected for the conference is befitting in the present context as we grapple with issues and challenges for sustaining the elevated growth momentum that we have now achieved. This has assumed added contemporary significance in the wake of expected moderation in global growth due to a projected slowdown in the US and some other advanced economies. Whereas emerging markets, including India have so far not been greatly affected by the financial turbulence in advanced economies, the increasing global uncertainties need to be watched and guarded against appropriately. Although our growth process continues to be dominated by domestic factors, we need to recognise some changing global patterns, which could have implications for the macroeconomic prospects of the Indian economy. Accordingly, in my address, I would first review the overall macroeconomic performance in India since independence, then draw likely prospects for the coming five years and finally conclude with some issues that need to be addressed for sustaining the growth of the Indian economy.

50 citations

Journal ArticleDOI
TL;DR: The authors assesses external sector and monetary management policies and finds the outcome can be attributed to judicious use of a menu of options such as management of the capital account; restrictions on access of financial intermediaries to external borrowings vis-a-vis non-financial corporate entities; flexibility in exchange rate movements with capacity to intervene in times of excessive volatility; building up of reserves; strengthening of the financial sector; pre-emptive tightening of norms in sectors with high credit growth; and refinements in the institutional framework for monetary policy.
Abstract: Large capital inflows are often followed by credit and investment booms, inflation, real exchange rate misalignments, current account imbalances and financial sector weaknesses culminating in financial crisis and long-term output losses. While India has received large capital flows since 1993-94, macroeconomic price and financial stability has been maintained in a high growth environment. What explains this desirable outcome? This paper assesses external sector and monetary management policies and finds the outcome can be attributed to judicious use of a menu of options such as management of the capital account; restrictions on access of financial intermediaries to external borrowings vis-a-vis non-financial corporate entities; flexibility in exchange rate movements with capacity to intervene in times of excessive volatility; building up of reserves; strengthening of the financial sector; pre-emptive tightening of norms in sectors with high credit growth; and refinements in the institutional framework for monetary policy. As a result of this approach, growth in monetary/credit aggregates was contained amid growth in the real economy, structural transformation and financial deepening. Inflation was contained even as growth accelerated; financial stability was maintained even as the global economic environment experienced a series of financial crises. The impossible trinity was achieved by maintaining an open but managed capital account and a flexible exchange rate with management of volatility. Rather than relying on a single instrument, many instruments were used in coordination since the Reserve Bank’s jurisdiction over both monetary policy and the regulation of financial institutions permitted the use of various policy instruments. Key lessons from the Indian experience are that monetary policy needs to move away from price stability/inflation targeting objective, central banks need multiple instruments and capital account management has to be countercyclical.

45 citations

01 Jan 2009
TL;DR: In this paper, the authors identify the causes of the current crisis accurately so that they can then find appropriate immediate crisis resolution measures and mechanisms; understand the differences among countries on how they are being impacted; and, finally, think of the longer term implications for monetary policy and financial regulatory mechanisms.
Abstract: RBI Monthly Bulletin May 2009 879 The intensification of the global financial crisis, following the bankruptcy of Lehman Brothers in September 2008, has made the current economic and financial environment a very difficult time for the world economy, the global financial system and for central banks. The fall out of the current global financial crisis could be an epoch changing one for central banks and financial regulatory systems. It is, therefore, very important that we identify the causes of the current crisis accurately so that we can then find, first, appropriate immediate crisis resolution measures and mechanisms; second, understand the differences among countries on how they are being impacted; and, finally, think of the longer term implications for monetary policy and financial regulatory mechanisms.

36 citations

Journal Article
TL;DR: In this paper, the authors argue that despite the ills that have accompanied this process of urbanisation, the world appears to have coped relatively well with the large-scale increase in urban population of recent years; it is equally possible for urbanising economies in Asia to replicate the experience of developed economies.
Abstract: It is expected that in the coming years, most Asian countries will undergo a similar fast-paced urbanisation that Latin America experienced in the last half century. Despite the ills that have accompanied this process of urbanisation, the world, as this article argues, appears to have coped relatively well with the large-scale increase in urban population of recent years; it is equally possible for urbanising economies in Asia to replicate the experience of developed economies. For this to happen, it is essential that all aspects of city management, including the fostering of a professionalised workforce, are strengthened. This, in turn, would increase the creditworthiness of city governments and help attract the investment necessary for vital urban infrastructure projects. In an increasingly interconnected world, decentralised governance would ideally assist the practice of prudent macroeconomic and trade policies essential for ensuring a continuous access to international capital markets.

36 citations


Cited by
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Journal ArticleDOI
TL;DR: In this paper, the authors investigate the relationship between declines in trade costs, imports of intermediate inputs, and domestic firm product scope, and find that lower input tariffs account on average for 31% of the new products introduced by domestic firms.
Abstract: New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from India to investigate the relationship between declines in trade costs, imports of intermediate inputs, and domestic firm product scope. We estimate substantial gains from trade through access to new imported inputs. Moreover, we find that lower input tariffs account on average for 31% of the new products introduced by domestic firms. This effect is driven to a large extent by increased firm access to new input varieties that were unavailable prior to the trade liberalization.

1,171 citations

Posted Content
TL;DR: In this article, the authors present a new set of integrated poverty and inequality estimates for India and Indian states for 1987-88, 1993-94 and 1999-2000, and show that poverty decline in the 1990s proceeded more or less in line with earlier trends.
Abstract: This paper presents a new set of integrated poverty and inequality estimates for India and Indian states for 1987-88, 1993-94 and 1999-2000. The poverty estimates are broadly consistent with independent evidence on per-capita expenditure, state domestic product and real agricultural wages. They show that poverty decline in the 1990s proceeded more or less in line with earlier trends. Regional disparities increased in the 1990s, with the southern and western regions doing much better than the northern and eastern regions. Economic inequality also increased within states, especially within urban areas, and between urban and rural areas. We briefly examine other development indicators, relating for instance to health and education. Most indicators have continued to improve in the nineties, but social progress has followed very diverse patterns, ranging from accelerated progress in some fields to slowdown and even regression in others. We find no support for sweeping claims that the nineties have been a period of "unprecedented improvement" or "widespread impoverishment".

624 citations

01 Jan 2009
TL;DR: In this paper, the authors make a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected and make their origins in economic policies followed in a number of countries in the 1990s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets.
Abstract: This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets. In the U.S., the interaction among the Fed’s monetary stance, global real interest rates, credit market distortions, and financial innovation created the toxic mix of conditions making the U.S. the epicenter of the global financial crisis. Outside the U.S., exchange rate and other economic policies followed by emerging markets such as China contributed to the United States’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble. *University of California, Berkeley, and Harvard University. Paper prepared for the Federal Reserve Bank of San Francisco Asia Economic Policy Conference, Santa Barbara, CA, October 18-20, 2009. Conference participants and especially discussant Ricardo Caballero offered helpful comments. We thank Alexandra Altman and Matteo Maggiori for outstanding research assistance. Financial support was provided by the Coleman Fung Risk Management Center at UC Berkeley and CEPREMAP.

515 citations

Journal ArticleDOI
TL;DR: In this article, the authors identify 26 episodes of public debt overhang, 20 of which lasted more than a decade, and the long duration of these episodes implies that the cumulative shortfall in output from such overhang is potentially massive, and these growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest.
Abstract: exceeds 90 percent of nominal GDP on a sustained basis. Such public debt overhang episodes are associated with lower growth than during other periods. Even more episodes are associated with lower growth than during other periods. Even more striking, among the 26 episodes we identify, 20 lasted more than a decade. The long striking, among the 26 episodes we identify, 20 lasted more than a decade. The long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that the cumulative shortfall business cycle recessions. The long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive. These growth-reducing effects of in output from debt overhang is potentially massive. These growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates, in that in eleven of the episodes, interest rates are not materially higher. rates, in that in eleven of the episodes, interest rates are not materially higher.

469 citations

Posted Content
TL;DR: Using the growth of fast-moving Indian states as a guide, the authors concluded that India may not revert to the pattern followed by other countries, despite reforms that have removed some policy impediments that contributed to India's distinctive path.
Abstract: India has followed an idiosyncratic pattern of development, certainly compared with other fast-growing Asian economies. While the importance of services rather than manufacturing is widely noted, within manufacturing India has emphasized skill-intensive rather than labor-intensive manufacturing, and industries with higher-than-average scale. Some of these distinctive patterns existed prior to the beginning of economic reforms in the 1980s, and stem from the idiosyncratic policies adopted after India's independence. Using the growth of fast-moving Indian states as a guide, we conclude that India may not revert to the pattern followed by other countries, despite reforms that have removed some policy impediments that contributed to India's distinctive path.

393 citations