Article;
World-Bank Watchful as Fed Signals Tighter Policy
Comment;
If emerging markets fear
tight monetary policy by the Fed, then, they should use loose monetary policy
at home as is expected by the RBI... Why we are making it an issue? Can’t we
help ourselves? In INDIA, especially, the real problem is inflation. Many
argued, including Joseph Stiglitz, that we should use capital controls, when
the Fed started QE, to avoid bubbles and inflation in the economy but we did
not follow and now inflation is still a problem… Moreover CAD is a concern and
all the capital inflows, in the past, could not make the Indian-Currency strong
because of loose fiscal policy in the past. Fiscal policy in INDIA has
crowded-out monetary policy from action and, now, when the RBI is not ready to
come-down and we hear the government saying it will take charge of growth.
Monetary policy is a signal how the fiscal policy should work and not the other
way around, just how we did when the Great-Recession began. Both the monetary
and fiscal policies aimed at improving growth during recession. Their target
was and should be same. The government, too, should take low and stable
inflation seriously…
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