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

Articles by K SubramanianSubscribe to K Subramanian

Corporate Responsibility for Bhopal

Union Carbide Corporation managed to wrangle out of the Bhopal gas tragedy by exploiting a loophole in the Foreign Exchange Regulation Act. If governments are not vigilant, other companies, ushered for “Make in India”, would do the same.

Forward Guidance in Retreat

One among the many ingredients of the verbal soup dished out by United States Federal Reserve to help the economy regain its health in the years after the 2008 crisis was FG (forward guidance), linked closely to QE (quantitative easing). But the Fed soon found itself in an expectation trap and emergent economies found themselves trapped by it. This article explains FG's short and tumultuous life and why it may be headed towards a well-deserved end.

Wither on the Vine?

This is with reference to your editorial entitled “Fall of the Left” (EPW, 7 June 2014).

Hot Air from Jackson Hole

The 2013 Jackson Hole symposium lacked the star power of earlier years with US Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi keeping away. From the viewpoint of developing economies, the most relevant paper was presented by Helene Rey of the London Business School. She not only raised critical issues generally glossed over by neoclassical and monetarist economists, but also cautioned against the hegemonic role of the Fed.

The Love and Loathing of Libor

What lies at the heart of the interest rate fi xing in the Libor scandal? A survey of the growth of the Libor market and how the incentive to fi x rates grew with the explosion of derivatives.

Rupee's Travails

There is a tendency in official circles to link the rupee’s current problems to the crisis in Greece and the eurozone. India will no doubt feel a contagion effect but the deeper problem is that the economy and the rupee are beginning to pay the price for the excessive dependence on capital infl ows, especially from foreign institutional investors and external commercial borrowings. It will not do to blame the Greek crisis for the rupee’s problems.

Deregulation or Destabilisation?

It seems that the Reserve Bank of India has taken a silos approach in deciding to deregulate the interest rate on savings bank accounts. The decision is likely to unsettle the banks, leaving the deposit holder no better than before.

Efficient Market Hypothesis: The Model That Failed

The assumption of the efficient market hypothesis is that the price of a financial asset reflects all available information that is relevant to its value. The players are rational and all information is available in the public domain. But the recent global financial crisis has brought out the failure of the EMH and there is valid theoretical criticism of the hypothesis. How did the EMH flourish and self-destruct?

Treason of the Clergy?

For years, the International Monetary Fund has advocated capital account convertibility in order to attract capital inflows and achieve growth in developing countries. The Fund's economists have long worked to include CAC in their reform-cum-adjustment programmes. The IMF research report released recently has led to the view that the organisation has reversed its position on CAC. However, a closer look at the fine print reveals the caveats, conditions and contexts within which it has embedded the suggested capital controls.

Battle against the Prime Lending Rate

The prime lending rate and the benchmark PLR, on which banks are expected to base their lending rates, have failed to achieve the desired effect of efficiency in credit allocation and competitive pricing of bank loans. The Reserve Bank of India working group that reviewed the BPLR now recommends a "base rate" that will not in any way deal more effectively with the problem of a lack of transparency nor will it better reflect costs. Unfortunately, the working group did not take up any of the larger issues faced by our banks in their lending strategies. It falls back on a simplistic accounting approach and leaves out the imponderables in estimating banks' costs.

Burial of a Controversy: The IMF, the US and the Renminbi

The United States has tried hard in recent years to make China revalue its currency. It dragged the International Monetary Fund into this campaign and attempted to make the Washington-based institution carry out "surveillance" of the exchange rate of member-countries. The campaign was formally buried recently, due in no small measure to the US need to bring China into efforts to end the global slump.


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