Headline : Monetary economics in emerging markets needs a rethink
- In a recent speech titled ‘Global Risks and Policy Challenges facing Emerging Market Economies’, given by the RBI Governor Shaktikanta Das, he has emphasised on the need of rethinking on monetary economics in emerging markets.
About Monetary Policy
- Monetary policy is the process by which a central bank (Reserve Bank of India) manages money supply in the economy.
- The objectives of monetary policy include ensuring inflation targeting and price stability, full employment and stable economic growth.
Key Points of his Speech:
- Three major risks confronting emerging market economies (EMEs) in 2019:
- Weakening global growth and trade
- EMEs remain vulnerable to financial market volatility
- High volatility in international oil prices.
- The global financial crisis has exposed several limitations of conventional (example: open market operations) and unconventional monetary policy tools (example: credit easing, quantitative easing,), which brings a need of change in monetary economics in emerging markets.
- The unconventional monetary policies of advanced economies have resulted in risks and spillovers for the emerging markets.
- Monetary policy should have a direct impact on the real economy, spur investments, and maintain monetary and financial stability.
- He asserted on the out of the box thinking, including by challenging the conventional wisdom.
Note: These points can be used in mains answers