| WASHINGTON, April 10
WASHINGTON, April 10 The head of India's central
bank ran into a wall of resistance on Thursday when he urged
some counterparts in developed economies to more formally
consider the effects their domestic stimulus has on emerging
Alongside central bankers from the United States, Europe,
and Brazil, Raghuram Rajan took the stage at a high-profile
event here to list his proposals for better monetary cooperation
and a global "safety net" that could provide funds for countries
in case of economic emergency.
He has grown increasingly vocal for change given how hard
the currencies and stocks of emerging economies such as India
have been rocked by big shifts in capital flows brought on by
the unprecedented monetary accommodation in rich nations.
"All I'm calling for is we should examine the situation and
spillover effects, by all means empirically, to the extent we
can," Rajan, governor of the Reserve Bank of India, said after
giving a speech at the Brookings Institution.
Emerging markets absorbed a flood of investment in the wake
of the global recession as central banks in developed nations
sharply depressed interest rates, sending investors scrambling
for higher yields in countries like Turkey, Argentina and India.
While the Bank of Japan and the European Central Bank could
pump even more cash into global markets with pending bond-buying
plans, the U.S. Federal Reserve began this year to slow its
money printing, causing headaches for policymakers like Rajan
who saw emerging currencies tumble last year when the Fed first
indicated bond purchases would be tapered.
Citing an International Monetary Fund report published on
Tuesday, Rajan said the message is: "Industrial countries are
going to do what they have to do. Emerging markets have to
"I think we need language which is more even handed," added
Rajan, a former IMF chief economist. "It's not that emerging
markets have infinite ability to adjust and so we should keep
that in mind going forward."
Seated next to him on the stage, ECB Vice President Vitor
Constancio slightly shook his head.
"I would not subscribe to the criticisms," he said, adding
that emerging economies were much closer to full employment than
Constancio said past efforts at global coordination failed
in part because emerging-market economies refused to accept that
their currencies would have to appreciate in the face of policy
easing in the developed world.
The euro zone meanwhile is struggling with high unemployment
and low inflation, and last week opened the door to more
stimulus. Advanced economies must "do the utmost to sustain
aggregate demand and growth," Constancio said.
Charles Evans, president of the Federal Reserve Bank of
Chicago, said low inflation is a serious problem globally.
"If policymakers fail to get on top of this emerging risk
before too long, I'm not sure anyone is going to come out of
this too well," he said, seated next to Rajan. While the Fed
pays some attention to its effects on emerging markets, its
focus is the United States, Evans added.
While Rajan appeared to make little headway on global
cooperation, his call for a better system of emergency funds was
more warmly received.
He proposed a multilateral body provide cash to central
banks that would ease pressures on countries to build up
currency reserves as defenses against any sudden outflows. Such
a plan has previously been proposed by the IMF and discussed by
(Additional reporting by Jason Lange and Jan Strupczewski in
Washington and Suvashree Dey Choudhury in Mumbai; Editing by