Atiur advocates for global coordination to ensure price stability16 April 2014
BSS, Dhaka :
Bangladesh Bank (BB) Governor Dr Atiur Rahman advocated for effective global coordination for ensuring price stability, which is the prime objective of the monetary policies of the central banks around the world.
The governor was speaking at a seminar of the International Monetary Fund (IMF) on unorthodox monetary policy in Jack Morton Auditorium of George Washington University, Washington, DC on Sunday, a BB press release said here Monday.
The seminar was opened by IMF Managing Director Christine Lagarde and participated by panelists Professor John Taylor of Stanford University, Professor Takatoshi Ito of University of Tokyo and Professor Charles Calomiris of Columbia University. The panel discussion was moderated by Basel based Bank of International Settlement (BIS) Jaime Caruana.
Dr Rahman said monetary policies should be somewhat unorthodox and mindful about helping uphold and bolster financial stability as financial stability is a crucially important requirement for price stability.
Unorthodox monetary policy refers to any policy undertaken, usually by central banks, that operates outside the usual parameters for influencing either the price or the quantity of money in an economy. In 2009, the Federal Reserve, European Central Bank and Bank of England among others implemented forms of unorthodox monetary policy.
"The emerging economies are always haunted by the destabilizing pressures of the spillovers of imbalances in macroeconomic policies of large advanced economies," Dr Rahman said.
So, he continues, price stability, the primary objective of monetary policy, does not occur in isolation and depends on stability in other parts of its environment.
Citing that small, open and emerging economies often vulnerable to external influences, the governor said effective global coordination for ensuring financial stability and liquidity growth in line with the global output growth are needed to reduce such external influences.
Dr Rahman also suggested building up defenses in advance to weather out the wind of financial instability even if it begins blowing strongly.
Sharing his own experience in Bangladesh, the governor said inclusive financing has become an effective instrument of promoting both output stability and financial stability.
"Inclusive financing does this by diversifying asset portfolios and deposit bases of financing institutions amongst myriad small new inclusion clients, reducing credit and liquidity risks and generating inclusive growth," he explained.
He said the policy campaign for financial inclusion reflected in many major areas of economy including 6 plus percent growth, stable exchange rate, falling inflation and trade deficit, fast declining poverty and constant improvement of social development indicators.