Offering Solutions to Financial Crises in Emerging Economies

Posted: November 8, 2010 at 1:01 am, Last Updated: November 8, 2010 at 9:07 am

By Jocelyn Rappaport

Ramkishen Rajan

Financial crises are never welcome, but for the world’s most fragile, emerging economies, they can be especially dire.

Ramkishen Rajan, associate professor of public policy, focuses his research and consultation on macroeconomic issues and policies in these kinds of emerging economies in Asia. Oftentimes, his work is motivated by currency and financial crises that have plagued the global economy.

“These crises can be particularly damaging to emerging economies with large numbers of people living below the poverty line and little or no social protection,” says Rajan.

His paper “How Best to Manage New Style Currency Crises?” appeared in the Journal of International Development and provides insight into combining policy adjustment and financing for a country to manage a new-style crisis.

The Office of Regional Economic Integration at the Asian Development Bank used a version of this framework in its presentations to regional policymakers on the policy options and tradeoffs when tackling financial crises. After being a visiting consultant at this office, Rajan expanded on these themes of crisis management and prevention in his book, “Exchange Rates, Currency Crisis and Monetary Cooperation in Asia” (Palgrave-MacMillan, 2009).

The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) engaged Rajan as a consultant in 2009 for advice on its research on capital flows and financial vulnerability indicators to try to ascertain which countries might be vulnerable to future crises.

In January 2010, UNESCAP published a policy alert titled “India’s FDI Flows: Trying to Make Sense of the Numbers,” which reflects Rajan’s work on India’s foreign direct investment (FDI). FDI involves a long-term economic involvement of one country into another. Rajan was appointed a nonresident senior fellow and joint program coordinator of macroeconomics and finance at the Institute of Southeast Asian Studies in Singapore to help develop its research agenda with an emphasis on Southeast Asia and India.

Rajan’s research also focuses on issues relating to exchange rate policies and options for small and open economies in Asia and elsewhere. Rajan’s book (cowritten with Tony Cavoli of the University of Southern Australia), “Exchange Rate Regimes and Macroeconomic Management in Asia” (Hong Kong University Press, 2009), is devoted to issues related to exchange rate and monetary policy and financial integration in Asia.

Rajan has been involved in discussions on the steps Asian economies might take to enhance regional monetary and financial cooperation as a means of reducing their susceptibility to booms and busts in capital flows. He has consulted and written extensively in this area for the Asian Development Bank.

According to Rajan, the fast-growing Asian economies are especially dependent on FDI as a source of finance, employment and technology. With Rabin Hattari of the World Bank, he has investigated trends, patterns and determinants of FDI flows to and from emerging Asian economies. This investigation appears to be the first detailed study of FDI flows between emerging Asian economies at the bilateral level.

The Asian Development Bank in Tokyo offered Rajan research fellowships in 2007 and 2010 in part because of his research into Asian economic policymakers facilitating intra-regional investment flows by investing in better telecommunications capabilities to boost cross-border informational flows.

Rajan was also commissioned by the Asia Pacific Economic Cooperation Secretariat in 2009 to write a major report on the trends and determinants of cross-border FDI flows, including the effect of political risk. In further recognition of the importance of his work in these areas, Rajan has been offered competitive research fellowships from the Hong Kong Institute for Monetary Research (the academic wing of Hong Kong’s monetary authority) in 2009 and one in 2010 to continue his research on cross-border mergers and acquisitions in developing Asia.

After participating in numerous workshops and policy debates in and on India, Rajan wrote “Monetary, Investment and Trade Issues in India” (Oxford University Press, 2009). The book explores various aspects of monetary, exchange rate, trade and investment issues and policies in India.

In addition to research and consulting, Rajan writes a biweekly column on macro and financial issues in Asia for the Financial Express, one of India’s oldest and most widely circulated financial newspapers.

Rajan, who is the co-director of Mason’s Center for Emerging Market Policies, joined Mason in 2006. Prior to that he was on the faculty of the School of Economics at the University of Adelaide for five years, and he continues to be a visiting faculty member.

He is also currently a senior research fellow at the Claremont Institute for Economic Policy Studies at Claremont Graduate University, and is an associate at Mason’s Center for Global Studies. He has held one-year visiting positions at the LKY School of Public Policy at the National University of Singapore and at the Department of Economics at Claremont McKenna College.

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