ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

StabilitySubscribe to Stability

COVID-19 and Insolvency Law

The World Development Report (WDR), 2022 highlights the relevance of adopting effective strategies for maintaining the financial stability of a nation in the wake of COVID-19. The pandemic resulted in the shrinking of the world gross domestic product by 3% and increased global poverty after a long...

Capital Account Management in India

India has been subject to capricious capital flows since its integration with the global capital markets in the early 1990s. In a bid to balance diverse objectives, India, like many other emerging markets, has resorted to active management of various types of capital flows. This paper finds that while the calibrated liberalisation approach resulted in altering the composition of capital flows towards more stable flows, and has helped India to negotiate the "Trilemma," the use of sporadic capital account management measures in the face of surge or stop of capital flows has not been very effective in achieving their objectives of reducing external vulnerability or mitigating macro-prudential risks.

Monetary Policy Dilemmas at the Current Juncture

Monetary policies in advanced economies and emerging markets face quite different challenges at the current juncture. In the advanced countries, current dilemmas derive from the normalisation of unconventional monetary policies. The short-term dilemma is to determine when to start exiting extraordinary policies and selecting appropriate tools, as conventional tools may not be very relevant during this phase. The medium- to long-term challenges relate to the sequencing, pace and mechanics of normalisation. Monetary policy in emerging markets needs to cope with the familiar dilemmas of fiscal dominance, the growth-inflation trade-off and the "impossible trinity." With fiscal parameters in control, and food and commodity prices subdued, the chief dilemma currently confronting emerging markets involves a trade-off between targeting divergent domestic and external cycles. Although they are now better placed to absorb a sudden stop, the impact is likely to be differential, with those with weaker macroeconomic parameters suffering greater pain.

Should Financial Stability Be Assigned to Public Policy?

In the light of the experience with the severe financial crises of the 1990s, the responsibility for financial stability has implicitly been assigned to public policy, overturning, in a sense, the dominant paradigm until then of regarding financial development, including stability, as a function best performed by the financial markets. This paper undertakes a critical examination of this assignment, its magnitude and quality, by questioning its analytical underpinnings. The paper examines the search for the appropriate international financial architecture as the virtuous approach to the assignment and concludes that the identification of international standards and codes for adoption by countries may be a suboptimal approach. On the other hand, establishment of an international bankruptcy mechanism holds promise of filling a major gap in the efforts to strengthen the international financial architecture.
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