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India's central bank governor warns of global market 'crash'

Published on Aug 6, 2014 10:56 PM
 
Reserve Bank of India (RBI) governor Raghuram Rajan speaks during a news conference at RBI headquarters in Mumbai on August 5, 2014. Mr Rajan says global markets are at risk of a "crash" should investors start bailing out of risky assets created by the loose monetary policies of developed economies. -- PHOTO: AFP

MUMBAI (REUTERS) - India's central bank governor Raghuram Rajan says global markets are at risk of a "crash" should investors start bailing out of risky assets created by the loose monetary policies of developed economies.

The comments, carried in an interview with Central Banking Journal, reiterate Rajan's previous warnings that emerging markets were especially vulnerable to big shifts in capital flows brought on by the unprecedented monetary accommodation in rich nations.

The former chief economist at the International Monetary Fund compared the current global markets to the 1930s - a period marked by the Great Depression.

Mr Rajan said back then countries were engaged in a period of competitive devaluation, in a similar way to central banks now being engaged in ever more accommodative policies. "We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost," Mr Rajan said in an interview on the journal's website dated Wednesday.

 
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