This is article highlighting the contribution of Prof. Rajan to the debate “Whether Central Bank’s in developed countries should evaluate the global impact of their policies, though they are accountable to domestic lawmakers only?”
This is specially relevant in post-2008-Crisis. QE flushed the Dollars in US Economy, which following the gradient found its way to the developing Economy, chasing higher returns on investment. The hot money did lifted ships in the Developing economy, but some like Brazil had to struggle hard to control the capital flow.
But May 2013 statement from FED created the ripples in entire global finance. Hot money started to rush back to US shores and developing-market currencies were in free fall. Before Prof Rajan took the reins of RBI the Rupee had dropped to 69 /$. Though dramatically it has by now stabilized at 60-61 level. In fact in-between RBI had to intervene in market to halt the soaring Rupee. We are now at a health reserves level of 310 billion $.
Rajan’s argument becomes very imposing now.