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Lekha Chakraborty



Articles by Lekha Chakraborty

Is Climate Change a Fiscal or Monetary Policy Challenge?

18 days ago

Lekha Chakraborty(Professor, NIPFP, and Member of Governing Board, International Institute of Public Finance, Munich)
Climate change is about risks and uncertainty. How well the monetary policy stance can incorporate such risks and uncertainties is questioned by many economists. There is a broad consensus among economists that fiscal policy is capable of dealing with the climate crisis but monetary policy is not, due to the latter’s lack of tools. It is widely acknowledged that public finance commitments are essential to lowering carbon emissions. Public finance interventions—through taxation to reduce carbon prints or through public expenditure to support green energy and technology—have proven to be effective in reducing emissions. However, such empirical evidence is absent in the

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Why “Output Gap” Is Inadequate

January 4, 2021

By Lekha Chakraborty and Amandeep Kaur[1]
The macroeconomic uncertainty during the Covid-19 pandemic is hard to measure. Economists and policymakers use the “output gap” variable to capture “slack.” It is a deviation between potential output and actual output, which is a standard representation of a “cycle.” The potential output is an unobserved variable. There is an increasing concern about the way we measure potential output—decomposing the output into trends and cycles. This is because the business cycle is not always a “cycle.” Sometimes, the “cycle is the trend.”[2]
When macroeconomic crises and recessions tend to “permanently” push down the level of a country’s GDP, it is inappropriate to assume that output will bounce back to previous levels. The notion of the output gap is

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Why “Output Gap” Is Inadequate

January 4, 2021

By Lekha Chakraborty and Amandeep Kaur[1]
The macroeconomic uncertainty during the Covid-19 pandemic is hard to measure. Economists and policymakers use the “output gap” variable to capture “slack.” It is a deviation between potential output and actual output, which is a standard representation of a “cycle.” The potential output is an unobserved variable. There is an increasing concern about the way we measure potential output—decomposing the output into trends and cycles. This is because the business cycle is not always a “cycle.” Sometimes, the “cycle is the trend.”[2]
When macroeconomic crises and recessions tend to “permanently” push down the level of a country’s GDP, it is inappropriate to assume that output will bounce back to previous levels. The notion of the output gap is

Read More »

The Reserve Bank’s Pandemic Predicament

June 24, 2020

By Lekha Chakraborty and Harikrishnan S
As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, these are extraordinary times, and we need to respond with “whatever it takes” to deal with the pandemic. Over the past few days, our hope for systematically “flattening the curve” by containing the COVID-19 pandemic and moving to a quick V-shaped or U-shaped recovery is waning[i]. Evidence is increasingly pointing towards the situation worsening to a dual crisis — a public health crisis and a macroeconomic crisis — like never before.
The IMF projections substantiate that the drag of the pandemic on global growth could be to the extent of -3%. This is a major revision in the global growth rate over a very short period of time. The IMF highlighted that “the Great

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The Reserve Bank’s Pandemic Predicament

June 24, 2020

By Lekha Chakraborty and Harikrishnan S
As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, these are extraordinary times, and we need to respond with “whatever it takes” to deal with the pandemic. Over the past few days, our hope for systematically “flattening the curve” by containing the COVID-19 pandemic and moving to a quick V-shaped or U-shaped recovery is waning[i]. Evidence is increasingly pointing towards the situation worsening to a dual crisis — a public health crisis and a macroeconomic crisis — like never before.
The IMF projections substantiate that the drag of the pandemic on global growth could be to the extent of -3%. This is a major revision in the global growth rate over a very short period of time. The IMF highlighted that “the Great

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The Political Economy of Lockdown in India

June 2, 2020

By Harikrishnan S and Lekha Chakraborty
As predictable as it can be, the Indian Prime Minister announced lockdown at 8 PM on March 24th 2020, giving the country and its 1.3 billion people all of four hours to get ready, evoking memories of the demonetisation announcement and the midnight launch of the GST! This was done by invoking the National Disaster Management Act of 2005. While many analysts lauded the communication strategy of the leader “directly” speaking to the people as political decisiveness, our contention is that it was a clear case of using a “command and control” strategy instead of co-operative federalism, which the government had been taking pains to highlight that it believed in. The manner in which we are getting out of the lockdown, with an ad hoc and arbitrary

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India’s Unexplored “Bill of Rights”: A Tool for Gender-Sensitive Public Policy

March 3, 2017

The Justice Verma Committee submitted its report on January 23, 2013. In addition to recommendations for reforming laws related to sexual violence, harassment, and trafficking, it provided a comprehensive framework for gender justice through a proposed “Bill of Rights.” The Verma Committee’s recommendations are still waiting to be transformed into public policy.
We must not forget that this document represents an intense 30 days of work in response to a brutal gang rape of a young student in the heart of the nation’s capital in a public transport vehicle in the late evening of December 16, 2012. She was returning home with her friend after watching “Life of Pi.”
The power of this report is the acknowledgment (in the very first line of the report) that this brutal event represents a

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