Friday, July 27, 2012

Monetary Governance by Dr.A.Vasudevan ;Published by Academic Foundation ;  Pages 127;Price Rs.695/-


                                           Dr.Vasudevan is Adviser on monetary policy to the Central Bank of Nigeria. He held exalted positions in I M F  and had served in Reserve Bank of India in several capacities, including that of Executive Director. His book
   “ Central Banking for Emerging Market Economies ” is considered to be  the Bible for Central Bankers. He is a prolific writer and imparted a new shape, colour and content to the earlier drab R B I publications, like the Monthly Bulletins and several other Reports.

                                          The book under review tackles the problem of relevance of the role of money and banking, especially in the context of the global crisis that hit the economic world like a Tsunami. The author deals thoroughly with the challenges to governance of central banking ably assisted by his deep experience, thorough theoretical mastery combined with expertise in public policy in India, Nigeria and other nations and International organizations.

                                             In his Introduction, the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi writes. “His vast wealth of knowledge garnered from his days as a central bank researcher-cum-academic in India and Adviser to the Executive Director for India at the I M F  has been brought to bear in this veritable information book, in lucid style and with remarkable clarity of thinking”,

                                             Monetary governance deals with governance through sound economic policy just as political governance deals with political aspects of society. It has national as well as international dimensions. They both interact in the globalised world of economic business as well as ideas.   

                                               The discussions in G-20 led to the recognition of the idea of working out mechanisms that would bring out a standardized financial discipline the world over. The Financial Stability Board recommended International Standards and Codes in 12 areas. These have been accepted by the G-20 and the Multi-lateral Financial Institutions. The events leading to the global financial and economic crisis beginning with the middle of 2007 show that complacency together with the absence of thorough and regular monitoring of market place realities has been at the heart of the matter. The  crisis  opened a window of opportunity for Governments and Central Bankers to search for new space for policies and their implementation to promote national interests without jeopardizing  the interests of the rest of the world.

                                              This brief book has six chapters. The first chapter is devoted to explain the meaning of the term “ Monetary Governance”. It consists of international institutions and processes required for functioning of the tasks devolving on Central Banks and Governments to achieve specific objectives. Chapter Two deals with the institutional requirements –the institutional bodies that ensure growth,  price stability and improved income and wealth and finally distribution and promotion of human development. The architecture of monetary governance should ensure co-ordination of actions of Governments and Central Banks. The next chapter’s analysis is concerned with Governments and Central banks and Commercial Banks, Pension Fund Management Entities, Foreign Exchange Dealers and Operators, Mutual Funds, other Brokers. We have a cogent review of the functions of the Central Bank and the other players listed above. The economist calls for a thorough screening of all financial innovative products . The fourth chapter is dedicated to analytics and the international dimensions of monetary governance in detail from the point of view of emerging economies. What is imperative is good analytical framework of both fiscal and monetary authorities. The fifth chapter is about international dimension-- to the extent the major multi-lateral institutions represent the financial arm of international diplomacy-- the  IMF and the World Bank get involved. This is indicated by the high level of participation by Heads of States and Finance Ministers in G-20 meetings.There is a succinct analysis of the I M F and the World Bank and their important committees. The Development Committee has 26 members and deals with issues of development and transfer of financial resources, trade and global environment issues.

                                                Existing multi-lateral institutions and their operations, bye-laws and rules need to be reformed and a number of issues have to be resolved. Industrially emerging economies have to be committed to ensure that the financial and economic imbalances do not recur. International institutions should co-ordinate their activities for the common good across countries. The final chapter emphasizes that it has become imperative to ensure that both the domestic and international organizations, banks and other financial institutions are closely screened and regulated along with the setting up of sound supervisory systems. Sound monetary governance, with strong political commitment will act as a light at the end of the tunnel.

                                                 The volume is studded with copious references and is compulsory reading for all those connected with monetary policy and financial regulations, planners, economists, bankers and all students of banking.


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