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: Few can equal his expertise in the macroeconomics of emerging markets and transition economies. Guillermo Calvo, Director of the Programme in Economic Policy Management, at Columbia University, Research Associate at the National Bureau of Economic Research, and the author of Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy, was in the capital to deliver the Sixth Annual India Policy Forum Lecture. Sarika Malhotra caught up with him to get an idea on how India is placed amidst the crisis.
Even as crises originate in industrialised countries, emerging economies pay the price. How do you view the current crisis in this light?
It is not exactly the same case now as it used to be, because emerging markets are ripe. India has been hit by trade shock, with exports’ values falling. But from the view of the financial sector, the shock to emerging markets has been much less than it was in 1998. Latin American countries, especially those who had controlled the current account deficit and de-dollarised their economies, are doing quite well. Emerging markets can do much to protect themselves. India has decided to control capital movement, which is not the only thing to do. You can protect yourself also by structuring your financial system in a way that there are no foreign exchange debts.
Do you think G20 will play a bigger role than G8 in shaping international finance?
I am somewhat sceptical because politics is local — politicians who go these summits are voted by their constituencies back home, and they come together only at these events. So when you have a big crisis, they try find a solution, and once the crisis subsides they return and continue their political fights. I am surprised by the things they have achieved —like strengthening the IMF and the amount of money that they were able to facilitate for such projects. Which is not good enough — why not talk about a new regulatory system, coordination across the countries. Are they doing that?
How are the BRICs placed in the recovery path?
The BRIC countries still are heavily dependent on the US, directly or indirectly. They are big and dynamic enough to be part of G20 and amidst the crisis, they have a bigger role in setting up the agenda. The BRICs have a considerable presence of making the problems of emerging markets take a more prominent position on the discussion...
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