Emerging Economies and Global Financial Safety: Insights from India

IMF Blog, May 16, 2016

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iMFdirect
May 16, 2016
Raghuram Rajan is charged with monetary stability in one of the world’s leading emerging economies as Governor of the Reserve Bank of India.

Sudden stops or withdrawals of money out of a country can trigger dramatic overnight changes in a country's economic and financial fortunes, whether triggered from without or within.
To prepare for sudden stops or withdrawals of money out of a country, Rajan says you can build reserves, so if money flows out you have enough to protect the value of your currency, or protect you from a bank run.
If people think you have enough reserves they may not head for exit.

People are more influenced by innovations in advanced economy policies, and more likely to believe they are appropriate.
Policy innovations from emerging economies are more attributed to the crankiness of the governor or the government, rather than based on a well thought-out policy given the current economic environment.

Listen to this podcast interview with the policymaker as he discusses why countries need a global financial safety net in an era of potential dramatic overnight changes in a country's economic and financial fortunes, whether triggered from without or within.
You can listen to the provocative podcast here:

Source: Emerging Economies and Global Financial Safety: Insights from India (iMFdirect), May 16, 2016.