##medies suggest themselves : less extreme monetary policies on all sides with some thought given to adverse spillover effects when setting policy, and better global safety nets to mitigate the need for countries to self - insure through reserve buffers. bis central bankers ’ speeches operationalizing coordination : some suggestions in an ideal world, umps such as qe or qee should be vetted by an independent multilateral agency for their spillover effects. for instance, following a complaint by an impacted country, the independent assessor could analyse the effects of such policies and come to a judgement on whether they follow the rules of the game. policies where the benefits are largely domestic, while the costs fall largely abroad, would be especially carefully scrutinized. and if the assessor deems the policy reduces global welfare, pressure should be applied to stop such policies. the problems with such an idealistic process are easy to see. where is such an impartial assessor to be found? and if a truly independent assessment came to the conclusion that certain policies were in violation, how would such a judgement be enforced? a more modest proposal perhaps then, it would be better to settle for a more modest proposal. central banks should not just worry about the immediate flows of capital to other countries from its policies, but the longer run reaction such as competitive easing or sustained exchange intervention that this would bring about. this would allow central banks to pay more attention to spillovers even while staying within their domestic mandate. at the same time, we should reduce the incentive for countries to engage in a repeat of substantial reserve accumulation by building stronger international safety nets. an interesting proposal from the imf is a liquidity line from the imf, where countries are pre - qualified by the imf and told ( perhaps privately ) how much of a line they would qualify for under current policy – with access limits revised every year after the article iv discussions and any curtailment becoming effective 6 months later. such a pushed line could overcome the problem that no country wants to approach the fund because of the associated stigma. conclusion the current non - system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector. it is not an industrial country problem, nor an emerging market problem, it is a problem of collective action. the sooner we recognize that, the more sustainable world growth we will have. bis central bankers ’ speeches

deepak mohanty : implementation of monetary policy in india speech by mr deepak mohanty, executive director of the reserve bank of india, at the bankers club, bhubaneswar, 15 march 2010. * * * the assistance provided by shri bhupal singh and shri binod b. bhoi is acknowledged. i thank the bankers club, bhubaneswar for providing me this opportunity to speak to you this evening. how does the reserve bank of india implement monetary policy? this is the question i would like to address. but before doing that i will briefly touch upon the objectives and framework of monetary policy, as they have evolved, to set the context for discussion on operational aspects of monetary policy. i will conclude with a discussion on the process of monetary policy formulation and communication. objectives and framework in india, the objectives of monetary policy evolved as maintaining price stability and ensuring adequate flow of credit to the productive sectors of the economy. with progressive liberalisation and increasing globalisation of the economy, maintaining orderly conditions in the financial markets emerged as an additional policy objective. thus, monetary policy in india endeavours to maintain a judicious balance between price stability, economic growth and financial stability. the monetary policy framework in india from the mid - 1980s till 1997 – 98 can be characterized as a monetary targeting framework on the lines recommended by chakravarty committee ( 1985 ). because of the reasonable stability of the money demand function, the annual growth in broad money ( m3 ) was used as an intermediate target of monetary policy to achieve the final objectives. monetary management involved working out m3 growth consistent with projected gdp growth and a tolerable level of inflation. in practice, however, the monetary targeting approach was used in a flexible manner with “ feedback ” from the developments in the real sector. for example, if the real gdp growth was expected to be higher, m3 projection was revised upwards. in the 1990s, the increasing market orientation of the financial system and greater capital inflows imparted instability to the money demand function. consequently, there was a shift to multiple indicators approach in the late 1990s. under this approach, interest rates or rates of return in different markets along with movements in currency, credit, fiscal position, trade, capital flows, inflation rate, exchange rate, refinancing and transactions in foreign exchange – available on a high frequency basis – are juxtaposed with output data for drawing policy perspectives. the multiple indicators approach continued to evolve and was