Structural change in the stylised facts in transition

Has India Emerged? Business Cycle Facts from a Transitioning Economy by Chetan Ghate, Radhika Pandey, and Ila Patnaik.

Did the Indian capital controls work as a tool of macroeconomic policy?

A new working paper has been released: Did the Indian capital controls work as a tool of macroeconomic policy?

The abstract of this paper reads: In 2010 and 2011, there has been a fresh wave of interest in capital controls. India is one of the few large countries with a complex system of capital controls, and hence offers an opportunity to assess the extent to which these help achieve goals of macroeconomic and financial policy. We find that the capital controls were associated with poor governance, were unable to sustain the erstwhile exchange rate regime, and did not support financial stability. India's experience is thus inconsistent with the revisionist view of capital controls. Macroeconomic policy in India has moved away from the erstwhile strategies, towards greater exchange rate flexibility combined with capital account liberalisation.

Our stock of papers is here.

8th conference of NIPFP-DEA Research Program

The Program is up on the website. The full set of papers and slideshows will trickle in within a day or three.

How to measure inflation in India

Ila Patnaik, Giovanni Veronese and I have a paper titled How to Measure Inflation in India?. The abstract reads:

What is the best inflation measure in India? What inflation measure is most relevant for monetary policy making in India? Questions of timeliness, weights in the price index, accuracy of food price measurement, and inclusion of services prices are relevant to the choice of measure. We show that under present conditions of measurement, the Consumer Price Index for Industrial Workers (CPI-IW) is preferable to either the Wholesale Price Index or the GDP deflator.

You may like to see our stock of papers.

Inflation measurement in India may just get significantly better, with the release of the new CPI. The paper should help in evaluating this new CPI and in evaluating its applications.

Research meeting on DSGE

link

Three new papers

The first is an entry titled India which is forthcoming in Elseviers Encyclopaedia of Financial Globalisation, edited by Gerard Caprio. It's our attempt at a bird's eye view of what is known, and not known, about India's financial globalisation.

The second is a treatment of exchange rates and monetary policy and inflation. There are two well understood phenomena: the `exchange rate passthrough' (or how prices in India go up when the rupee depreciates) and the `monetary policy transmission' (or how prices in India go down when RBI raises rates). This paper views these two in a unified fashion. The main finding is that the channel through which monetary tightening influences domestic prices is mainly through the consequent exchange rate appreciation.

The third is about explaining the process of firms becoming multinationals. The conventional story told (the Helpman-Melitz-Yeaple model) is one where firms self-select themselves to become MNCs, where more efficient firms export and the most efficient firms become MNCs. This story is well suited for manufacturing, where costs of transportation are important, where it's efficient for an Indian firm to make widgets in the UK so as to avoid the costs of transportation of shipping to the UK. But this story does not help us think about services which are `weightless'. We think we have a story which helps us understand MNCs in services, and when we go test this with data for Indian software companies, it seems to work. Our approach yields the opposite prediction: that less productive software companies are
more likely to become MNCs.

Our stock of papers is at: http://macrofinance.nipfp.org.in/papers.html.

Talk on US financial regulatory reform, by Viral Acharya

Viral Acharya will do a talk Recent developments in financial regulatory policy in the United States: Review and Critique at NIPFP (1st floor conference room) at 4:30 PM on Monday the 20th of December. All are invited. The talk will be followed by snacks on the lawns of NIPFP.

This will draw upon the work of many scholars at the NYU Stern School of Business, which has given two books: Restoring financial stability: How to repair a failed system (Viral V. Acharya, Matthew Richardson, 2009) and Regulating Wall Street: The Dodd-Frank Act and the new architecture of global finance (Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, Ingo Walter, 2010).