Current Research:
A Filtered Perspective on the Indian Economy: Business Cycles in India
Policy Corridor as Monetary Policy Tool: An Evaluation of Inflation Targeting Countries (with Dr. Ganesh Manjhi, IIT Jodhpur)
Economics of Implementing NEP 2020, with Dr. Devayani Tirthali, Teachers College, Columbia University.
Optimal Monetary Policy in the presence of Informal Labor Markets (with Catalina Granda Carvajal, Universidad de Antioquia in Medellín (Colombia))
Segmented Markets and Monetary Transmission in Developing countries, (with Mohammed Ait Lahcen, Washington University in St. Louis & University of Basel)
Macroeconomics of affirmative action: The case of caste based reservations in India.
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Peer Reviewed Publications:
The Multidisciplinary University in NEP 2020: A Conceptual Roadmap, Education & Society, Forthcoming (Co-author Dr. Devayani Tirthali)
NEP 2020 focuses on multi-disciplinarity, cross-disciplinarity, as well as interdisciplinarity in higher education. It envisages all universities and colleges as multidisciplinary institutions fostering interdisciplinary holistic education and research. This paper discusses the distinction between these terms and their implications for the existing structure of universities, colleges, and the research ecosystem. How do we transform the existing system and structures of higher education in India to achieve these objectives? With a multidisciplinary perspective, the co-authors - one an educationist and other an economist- take a look at the teaching and learning philosophy underlying these changes to outline the resource implications and arrive at a production function of education.
Economic Justice in Post-Covid India: A Macroeconomic Perspective, in Fazli & Kundu Ed., Reimagining Prosperity: Social and Economic Development in Post-COVID India, Palgrave Macmillan Singapore, January 2023. (local copy)
The COVID-19 pandemic and the subsequent blanket lockdown wreaked havoc on substantial segments of the population in India through unemployment and income loss, only highlighting the lack of institutional structures and policies that should allow vulnerable sections of the society to insure themselves against aggregate as well as idiosyncratic shocks. In this paper, I argue that the variations in the capacity to better one’s life conditional on some socio-economic division a person belongs to makes such divisions ‘fault lines. They constitute structural weaknesses in the economy leaving out millions of people without the capability to participate in the economy meaningfully and remuneratively. I provide evidence of disproportionate impact of the pandemic along these fault lines and provide a policy framework to ensure economic justice and prosperity to all in the post COVID economy. I also highlight importance of an interdisciplinary approach to policy making given the complex nature of the problem.
Monetary shocks and Market Segmentation: A Short Run Analysis of Demonetisation, Economic and Political Weekly, Vol. 57, Issue No. 46, 26 November, 2022.
This article uses a short-term macroeconomic model in Williamson (2009) featuring goods and financial market segmentation to analyse the effect of such a shock in an economy with substantial informality and cash dependence. The households with access to formal financial markets experience an increase in consumption and those without such access experience a decline. Optimization Solution
Impact of Policy Shock, The Book Review, October 2018.
Review of "Demonetisation and Black Economy" by C. Rammanohar Reddy, Orient BlackSwan, 2017.
On Monetary Economics, Economic and Political Weekly, Vol. 53, Issue No. 28, July 14, 2018.
Review of “Monetary Policy in India: A Modern Macroeconomic Perspective” edited by Chetan Ghate and Kenneth M Kletzer, Springer, 2016
Demonetisation through Segmented Markets: Some Theoretical Perspectives, Economic and Political Weekly, Vol. 52, Issue No. 9, 04 Mar, 2017.
Also published as:
``Demonetisation through Segmented Markets: Some Theoretical Perspectives’’, in R. Ramakumar (Eds.), Note‐bandi: Demonetisation and India’s Elusive Chase for Black Money, Oxford University Press, December 2017.
The decision to demonetise 86% of India’s currency has been widely and substantially debated by notable scholars of political science and economics. This article wishes to add to that debate, by focusing on macroeconomic theory and how the policy decision affects the organised and unorganised sectors of the Indian economy—provided certain assumptions remain in place. The following analysis is based on the money-multiplier theory and the segmented markets model of economic and monetary policy analysis.
The Deadweight Loss of Diwali: A Developing Country Perspective on Economics of Giftgiving (with Ajit Gaikwad, M.U. College of Commerce), Economics Bulletin, Vol. 37 No. 1 pp. 530-538, 2017
Using survey responses of undergraduate students from a college in India, we conducted an empirical analysis of efficiency of non-monetary gifts exchanged on the occasion of Diwali similar to analysis for Christmas in Waldfogel (1993). We found an average deadweight loss of 15% on all gifts, with gifts of accessories and electronic goods showing a lower loss compared to other types of gifts. We also found that lesser the generational distance between the person gifting and the receiver, lower is the deadweight loss. In addition, there is weak evidence supporting differences in valuation of gifts based on closeness of familial ties as understood in this cultural context. We, however, did not find any systematic difference in valuation of gifts by gender of the recipients.
A Leviathan Central Bank: Modeling Seignorage in a Money Search Model, Economics Letters, 125(3), 386-391, December 2014.
This paper studies the nature of optimal monetary policy under a utility-maximizing monetary authority in a micro-founded model of money based on Lagos and Wright (2005). Such a monetary authority represents a monopoly private money supplier or situations where fiscal policy drives monetary policy and hence the name Leviathan. Under no commitment, I characterize an equilibrium with reputation con cerns. The centralized market interaction is modeled as an infinitely repeated game between the Leviathan monetary authority (a large player) and the economic agents (small players), where the size of the play- ers refers to the ability to influence aggregate outcomes. This large–small player dynamics pins down the equilibrium set of payoffs. Under the assumption that agents do not refuse to use money purely for co- ordination reasons, the one shot game has a unique Nash equilibrium with maximum inflation tax. The set of equilibria is considerably enlarged in the infinite repetition of the game and equilibria with a lower inflation tax can also be supported by providing appropriate incentives to the money supplier.
A Political Economy of State Spending in India, International Journal of Public Policy, Inderscience Enterprises Ltd, 2014, vol. 10(1/2/3), pages 27-83, 2014.
Research on state government spending in India shows that difference in political cohesiveness of the ruling political entity affects its spending choices. However, the evidence is not completely conclusive and there is a lack of a theoretical model backing the analysis. Also, economists and political scientists seem to prefer different econometric methods. To address these issues, I build a theoretical model of state government spending and test the resulting predictions using different econometric approaches thereby lending robustness to results. Based on the data for 17 Indian states over 20 years, I find that politically less cohesive governments spend more on education and less on agriculture than their more cohesive counterparts. There is some evidence on electoral cycles in health expenditure and a BJP or a Congress government means reduced social expenditure. Further, the lower are the credit constraints, as measured by higher credit deposit ratio, the lower is the probability of having a coalition government.
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Commentary on currnet policy issues:
Stuck in the classroom — students, teachers, NEP 2020, THE HINDU, December 18, 2024 (with Dr. Devayani Tirthali)
Increased classroom time runs the risk of students becoming passive recipients, affecting the vision of the NEP 2020.
Crypto came tumbling after, The Hindu, June 23, 2023
As crypto assets are digital assets, the rate of return is sensitive to changes in the global liquidity condition
Will the Greenback still be green?, The Hindu. May 8, 2023
The run of the U.S. dollar as an international reserve currency is far from over
Crypto came tumbling after, The Hindu, June 23, 2022
As crypto assets are digital assets, the rate of return is sensitive to changes in the global liquidity conditions
Inflation demands more fiscal than monetary action, The Mint, June 2, 2022.
Here I argue that policy corridor itself is a MPC tool and has already been moved up. Clubbed with repo rate increase it constitutes double tightening. So no more interest rate hike please.
To begin with, the UGC needs to get the credits right, The Hindu, April 9, 2022
Commentary on issues surrounding implementation of the New Education Policy in the context of the Four Year Undergraduate Proigrammes.
Is the crypto asset boom sustainable? The Hindu Parley podcast, Nov. 25, 2021.
Here I argue that cryptocurrency is actually not a currency but an asset and should be treated accordingly in policy responses.
RBI's Operation Twist to Play with Yields, The Mint, August 20, 2020.
In this article, I argue that lowering long term yileds at the cost of distorting interest rates may not be optimal at this point.
Bringing the focus back to informal sector, The Indian Express, May 28, 2020
In this article, Prof. Dhanmanjiri Sathe & I argue that informal sector is here to stay and could be harbinger of growth in post-COVID world.
Steer clear of policy shocks to achieve economic goals, The Mint, February 20, 2020.
In this article I argue for steering clear of policy shocks and propose several interventions that the Government could follow to put the Indian economy back on track.
Is banning cryptocurrencies the solution? , The Hindu Parley Podacst, August 2, 2019.
In this podcast, I argue against banning cryptocurrencies.
Can we please have the ₹1,000 currency note back? , The Mint, July 26, 2019.
In this article I discuss the efficency of the exisiting currency denomination structure in India and argue for reintroduction of Rs. 1000 currency note.
Demonetisation and Cattle Slaughter Ban May Have Exacerbated India’s Cyclical Agrarian Crisis, The Wire, July 7, 2017.
In this article, I argue that demonetisation destroyed rural incomes and the cattle slaughter ban choked off the farmer’s main source of emergency funding worsening the agrarian crisis.
Reprinted by: Ideas for India
How India Can Reduce the Size of Its Black Economy: The Wire, February 15, 2017.
If the government is serious about addressing the black economy, fundamental changes in the structure and organisation of the economy and politics are required.
Reprinted by: Ideas for India, The Business Standard, The Indian Economist
Austerity or Fiscal Stimulus? On Modern Macroeconomics and the Importance of Context, Economic and Political Weekly, Vol - XLVIII No. 44, November 02, 2013.
This comment is on the article “Strange Defeat” by J W Mason and Arjun Jayadev (EPW, 10 August 2013).Though in general, the paper rightly points out the similarities in the New Keynesian and New Classical macroeconomics and the prescriptions that follow from them concerning austerity vs fiscal stimulus, it fails to high- light the importance of context in resolution of such debates. According to me the austerity issue in the European Union (EU) has to be treated differently from that in the United States (US) and it is certainly different in countries like India. There is a good amount of literature in modern macroeconomics itself that pro- vides justification for this approach.
Macroeconomics Curricula in India and the US, Economic and Political Weekly, VOL XLVIII, No. 13, March 31, 2012.
A response to “Some Thoughts on the Macroeconomics Curriculum in India” (EPW, 21 January 2012) distinguishes the various schools in contemporary macroeconomics, and surveys the teaching of the subject at the undergraduate level in the United States. It argues for greater flexibility for teachers in India to decide their curricula.
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Work in Progress:
Demonetization as a payments system shock under Goods and Financial Market Segmentation, Econonmic & Political Weekly, forthcoming.
A surprise demonetization, where certain or all denominations of currency notes cease to be legal tender on a short notice, can be understood as a severe payment system shock requiring agents to immediately shift to alternative payment mechanisms. I use a short-term macroeconomic model based on Willamson (2009) featuring goods and financial market segmentation to analyze the effect of such a shock in an economy with substantial informality and cash dependence. The quantitative characterization of the equilibrium dynamics using a deterministic example shows significant level as well as redistributive effects in the very short run. The households with access to formal financial markets experience an increase in consumption and those without such access experience a decline. Most of these effects come from differential access to formal financial markets as a consumption smoothing mechanism.
Competitive Supply of Money in a New Monetarist Model.
Whether currency can be efficiently provided by competitive money suppliers is arguably one of the fundamental questions in monetary theory. It is also one with practical relevance because of the emergence of multiple competing financial assets as well as competing cryptocurrencies as means of payments in certain class of transactions. In this paper, a dual currency version of Lagos and Wright (2005) money search model is used to explore the answer to this question. The environment is characterized by no commitment and the two money suppliers are incorporated as utility-maximizing players in the centralized market sub-period. This makes this sub-period an infinitely repeated game between two large players (money suppliers) and a small player (a continuum of agents), where size of the players refers to the ability to influence aggregate outcomes. The large-small player dynamics pins down the equilibrium set of payoffs. There are multiple equilibria but competition between the money suppliers allows the use of renegotiation proof-ness as an equilibrium selection mechanism. Accordingly, equilibrium featuring lowest inflation tax is weakly renegotiation proof, suggesting that better inflation outcome is possible in an environment with currency competition.
A Model to Teach Analysis of MonetaryPolicy Shocks in Developing Economies
The standard undergraduate textbook models in macroeconomics such as the IS-LM/AD-AS model used to analyze monetary policy changes are not disaggregated enough to understand the effects of monetary policy changes in developing economies typically characterized by substantial informality, and goods and financial markets segmentation. Teaching analysis of monetary policy shocks in a developing economy requires a model that can account for their complex economic structure- specifically the interaction of goods and financial market segmentation with the informal sector as these structural characteristics are much more central to these economies than the developed economies. Moreover, the informal sector employs more than half the labor force but contributes less than a third of the GDP implying any shock to this sector may not show up in the data. In this paper, I present a version of a segmented markets model based on Williamson (2009, 2011) that could be used as an effective alternative. I demonstrate the use of the framework with an example of an adverse monetary policy shock of demonetization- a substantial reduction in the availability of outside money- in a developing country setting. Such a model can be used in intermediate macroeconomics or policy oriented macroeconomics courses.
Firm Financing and Investment with Informal Credit: Do central banks in developing countries face inflation investment trade off?
This paper contributes a developing country perspective to the new emerging field of macrofinance in a small way. The paper looks at transmission of monetary policy shocks in an economy with a substantial informal financial sector and firms that face significant costs to raising finance from the formal sector either because of scarcity of collateral or limited enforcement. Such environment is a very typical stylized representation of many developing country economies including that of China and India.