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Seminar on Monetary transmission in Low-Income Countries: Effectiveness and Policy Implications
By Ms. Prachi Mishra, Senior economist, Economic Advisory Council to PM of India (On leave from IMF)
10.09.2012, IFMR, Chennai
Monetary transmission mechanism describes how policy-induced changes in the nominal money stock or the short-term nominal interest rate impact real variables such as aggregate output and employment. This was the topic of a seminar given at the IFMR Business School by eminent economist Ms. Prachi Mishra. The seminar was attended by the president of IFMR, faculty members, Ph.D. scholars and both first and second year MBA students. The salient points of the talk were description of characteristics of an ideal monetary transmission mechanism and the pre-conditions required for the development of the same based on what is prevalent in advanced economies, various channels of such transmission and how these differ across developed and developing countries, and common features of a relatively weak transmission mechanism across low income economies. An ideal monetary transmission mechanism is based on the effective functioning of six channels namely short term interbank interest rate, bank lending, exchange rate, long term interest rate, asset and balance sheet. Some of the pre-conditions for development of these transmission channels include strong institutional environment and well defined property rights, independence of the central bank, liquidity of government securities and term structure of interest rates, high international capital mobility, a floating exchange rate and well-developed securities markets. Through a series of econometric evidence, it was empirically shown that compared to advanced economies, developing and low income countries substantially lag behind in several of these pre-conditions such as exchange rate flexibility, degree of financial integration, banking sector competitiveness, central bank credibility, and financial depth. A simple model was used to demonstrate that in conditions of uncertainty such as those characterizing developing and low-income economies, pursuing aggressive monetary policy may not be suitable, though it may be beneficial in economies with much less uncertainties, such as the developed countries. In this context, desirability of an inflation targeting framework, foreign exchange interventions to stabilize the exchange rate as well as prudence of capital account restrictions in developing and low income countries were discussed at length through active participation from the faculty members and students. The seminar concluded with the implication that while the existing monetary transmission models may work for advanced economies, the same may not be suitable for developing countries and hence there is a need to rethink the way monetary policies are implemented in these countries.
What is synonymous to an evening filled with laughter, warmth and non-stop dance? For IFMRians it was the Fresher's Eve with the theme “Mismatch”. With preparations going around for a week, the juniors gave a pleasant surprise to the seniors through outstanding performances, be it songs or dances, while the seniors reverted with great music to groove to and superb oration. To add up to the spice of the evening, special rounds of dedications were conducted where people could dedicate songs to the ones who hold a special niche in their college life. Now the important question, which fresher party is complete without a Mr. and Ms. Fresher? Obviously the answer is none so through a series of question answer rounds, finally the names of Hasitha and Krishnan were etched on the crowns of Ms. and Mr. Fresher. Both were given a memento and a gift pack. The prize winning session did not end here, accolades were given for being the best dancer (male and female), best singer and best dressed. But the real fun started when the in-house DJ, Asad, got everyone on the floor. For what seemed like an unending night, the seniors and juniors kept dancing till they dropped, keeping aside all boundaries of formality. Granting us a great break from academics and a treasure of priceless moments, the Fresher's Eve ended with vivacious hearts and a stronger senior junior symbiosis.
“ Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.”-Donald Trump
Finquizitive was a two tier event with the first round being an elimination round. Five teams overcame this seemingly insurmountable barrier to progress to the next round. This round comprised of several sub-rounds, with some focusing on the intricacies of the financial market while others focused on the relationships between various financial items and different stock markets of the world. The audio-visual round made the teams put on their thinking caps and come up with fascinating answers. While the teams slogged it out to win the crown, it was the audience who had all the fun, as they got rewarded with chocolates for every correct answer they gave. This finance filled evening ended with Team 1, comprising of Hasitha and Manoj emerging as the winner followed up by Team 2, comprising of Chintam Ashish and Chandrapu Siddhanth.
Onam- a celebration of homecoming of the legendary Emperor Mahabali and in today's era represented as the harvest festival borne in God's own country, Kerala. But at IFMR, Chennai it spelt much more than that. It displayed the rich blend of cultures, the true essence of sharing and the joy of team work. The fest started with the hard work of current batches in making Pookalam, bringing forth the true sense of Festival of Rain flowers,as Onam is called, and adorning the college entrance with a majestic creation of flowers. As the onam zeal started flowing through the dusky day, students got ready to welcome the festival with full vigour and warmth. While girls personified beauty in sarees and traditional dresses, boys matched up too. Traditional “munds” were a common sight among them,encasing rich cultural attachment. Each student helped the other in looking his/her best and in contributing in whichever way possible to the celebrations. Classes started with a warm wish from faculty members which received a loud response simply echoing the ecstasy people felt. The sweetness of Keralites was well reflected by the distribution of sweets throughout the batch which not only added to the fervor but spread congeniality too. Onam may be the festival of Malayalis but it surely saw a huge enthusiasm from people from all states and religions. To find happiness in small things,to share warmth and to look beyond ourselves,beyond realms of cultural differences is what Onam taught us. It taught us to care for others and to put in the best effort for things which matter in our lives; one of the many lessons of Life at IFMR.
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