Letters: Rajan makes his point

Apropos the report "Bernanke cold to Rajan remedy" (April 12), it is no surprise that the co-operation suggestion made by Reserve Bank of India Governor Raghuram Rajan did not find much support. For one, the big crisis has been met and managed; the US Federal Reserve's taper will actually reduce the asset bubble risk in the US. In any event, bigger economies protect their turf fiercely except when they need smaller economies to pitch in during a crises. Globally, central banks also try to protect their independence from the government, and fear that the position may weaken if they begin to act keeping other economies' needs in mind. The irony is that Rajan himself was (still is?) a big supporter of the Chicago School theory that central banks should have only one, or a hugely over-riding, objective of managing inflation. This suggestion was strongly made by a committee headed by him on financial sector reforms. For the same person to pitch for a globally co-ordinated monetary policy action that will act as a safety net in protecting jobs, growth and providing exchange rate stability, is a sign that he has indeed become wiser after becoming a prime actor and not a mere advisor, analyst or commentator.

P Datta Kolkata

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