A case to forge new economic bonds

Abstract

Reserve Bank of India Governor Raghuram Rajan has repeatedly stressed down the past few weeks the need for more global cooperation in unwinding of unconventional monetary policy. And more recently, Mario Draghi, President of the European Central Bank, recognised the need for such global cooperation, but advised emerging markets to undertake much needed structural reforms and budget consolidation. The need for global cooperation in a fast integrating world is not new. In 1967, Sir John Hicks had already observed about the limitations of a national central bank in the face of world financial markets. Ben Bernanke’s, famous ‘savings glut’ hypothesis in 2005 also underlined the interconnection of financial markets and global integration. The impact of such integration on developing countries was perhaps best articulated in August 1999 by Bimal Jalan, who had successfully guided the Indian economy through the Asian crisis of 1997, and stressed that the new financial architecture is “too heavily weighted in favour of industrial countries”.

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