Articles by Ashima Goyal

To understand the appropriate regulatory response to a financial crisis, we start from the basic market failures that justify regulation in financial markets. Regulation that induces better outcomes by creating correct incentives for market participants is the key to reform. A combination of micro- and macro-prudential regulation can moderate pro-cyclicality, information failure and market power. Global prudential standards can push financial firms to choose safe over risky strategies, by removing the moral hazard from bailouts, and assuring firms that competitors will not adopt risky strategies either. Universal application of basic standards can prevent regulatory arbitrage. A pure principles-based regulatory approach may be too flexible, but principle-based rules retain sufficient operational flexibility and universality.

Aaditya Mattoo and Arvind Subramanian ("India and Bretton Woods II", EPW, 8 November 2008) offer useful suggestions for India's stance in global groups such as at the g-20. Subramanian ("Preventing and Responding to the Crisis of 2018", EPW, 10 January 2009) does the same for India's macro-policy responses following the financial crisis. But the arguments of the two sets of proposals are inconsistent. Mattoo and Subramanian want India to support a proposal to give the World Trade Organisation enforcement powers against undervalued exchange rates, but Subramanian wants India to follow self-insurance as China did. The reason for the inconsistency may be the authors' preference for India to follow the United States' interests in international negotiations, but to follow its own interests when domestic policy is involved.

Forging New Links Economic Policy Modelling for India by V Pandit and K Krishnamurthy (eds); Oxford University Press, New Delhi, 2002;
ASHIMA GOYAL This book aims to demonstrate the effective application of econometric methodology to modelling for Indian policy analysis. While the focus is largely on various dimensions of monetary policy, the methodologies vary over structural modelling, optimal control simulation models, time series analysis, and almost ideal demand systems. Although a complex and rapidly changing Indian macroeconomy has yet to be satisfactorily mapped, the various models give snapshots from differing perspectives that help to build up a composite picture.

As an analysis of previous budgets reveals that there has always been a wide divergence between the government's promises and its performance. Overall there is very little connection between planned and actual growth in allocations to different sectors, and large fluctuations in allocations to agriculture. A worrying factor with regard to the current budget is the large reliance on extra-budgetary resources for the plan when these have not materialised in the past few years.

Rupee Reversals More on Real Exchange Rate, Fiscal Deficits and Capital Flows ASHIMA GOYAL It is instructive to link the comment the Lal, Bery and Pant (2003) (LBP from now on) paper has provoked with the excitement about the recent rupee reversals. The LBP paper got attention maybe partly because it suggested a reversal of a policy theme which has been dominant through the 1990s