Monday, April 1, 2013

India’s new monetary politics

...................It is well accepted that the conduct of monetary policy has to be handed to technocrats who take a longer view, rather than politicians with incentives to think for the short term. It is precisely such operational independence that provides a buffer against what economists call the time-inconsistency problem, which in practical terms often means increasing tolerance for inflation in pursuit of growth. Such inflationary bias will be minimized only when there is minimal government leverage over monetary policy................

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