Monetary and regulatory authorities across the world should coordinate amongst themselves before formulating their stimulus exit strategies as the movement of capital across continents could present major challenges to policymakers, the Reserve Bank of India (RBI) said in latest report.
“The crisis has highlighted the need for an increased coordination of both monetary and fiscal policies, as well as the need for global coordination,” RBI report on Currency and Finance released on Thursday said.
There was a pressing need for international co-ordination of policy exits of systemically important countries.
“Lack of policy co-ordination in this respect could create adverse spillovers from one country to another through interest rate differentials,” it said.
RBI deputy governor Subir Gokarn cautioned that it will still take some time for the crisis to exit fully. “The crisis is not still put to rest. The uncertainties still persist...it will take some time to settle down,” Gokarn said while releasing the report.
“The crisis was transmitted through four channels — trade, financial, commodity prices and expectations channels,” the report said.