Raghuram Rajan

Raghuram Rajan

Raghuram Rajan in 2004
Born	(1963-02-03) 3 February 1963 Bhopal, India
Nationality	Indian
Institution	University of Chicago
Field	Financial economics
Alma mater	IIT Delhi (B.Tech.) IIM Ahmedabad (MBA) MIT (PhD)
Awards	2003 Fischer Black Prize 2010 Financial Times and Goldman Sachs Business Book of the Year Award
Information at IDEAS/RePEc

Raghuram Govind Rajan (born 3 February 1963) is an Indian economist who serves as the Chief Economic Adviser to the Government of India. He also serves as Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. Rajan is also a visiting professor for the World Bank, Federal Reserve Board, and Swedish Parliamentary Commission. He formerly served as the president of the American Finance Association and was the chief economist of the International Monetary Fund (IMF). Rajan's previous work with the Indian government includes his helmsmanship of a Planning Commission-appointed committee on financial reforms, and as honorary economic adviser to Prime Minister Manmohan Singh.

Early life

Raghuram Rajan was born to an Indian diplomat in Bhopal in 1963 to a Tamil family. Till his 7th class he was abroad and then studied his rest of schooling in Delhi. In 1985, he graduated from the Indian Institute of Technology, Delhi with a bachelor's degree in electrical engineering, and he completed the Post Graduate Diploma in Business Administration at the Indian Institute of Management Ahmedabad in 1987. Rajan was a gold medalist in IIT Delhi and IIM Ahmedabad. He received a PhD in management from the Massachusetts Institute of Technology (MIT) in 1991 for his thesis titled "Essays on Banking".

Career

After graduation, Rajan joined the Booth School of Business at the University of Chicago. He was then appointed as the youngest-ever Economic Counselor and Director of Research (chief economist) at the International Monetary Fund (IMF) from October 2003 to December 2006. In 2003, he was also the inaugural recipient of the Fischer Black Prize awarded by the American Finance Association for contributions to the theory and practice of finance by an economist under age 40. The Center for Financial Studies (CFS) has awarded the 5th Deutsche Bank Prize in Financial Economics to Raghuram G. Rajan for his highly influential contributions in a remarkably broad range of areas in financial economics.

In 2005, at a celebration honoring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to

(take) risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks.[...] But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialize, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimized.

The response to Rajan's paper at the time was negative. For example, former U.S. Treasury Secretary and former Harvard President Lawrence Summers called the warnings “misguided” and Rajan himself a "luddite". However, following the 2008 economic crisis, Rajan's views came to be seen as prescient; by January 2009, The Wall Street Journal proclaimed that now, "few are dismissing his ideas." In fact, Rajan was extensively interviewed on the global crisis for the Academy Award winning documentary film Inside Job.

In November 2008, Indian Prime Minister Manmohan Singh appointed Rajan as an honorary economic adviser. That same year, a high-level committee on financial reforms, headed by Rajan, submitted its final report to the Planning Commission.

In April 2009, Rajan penned a guest column for The Economist, in which he proposed a regulatory system that might minimize boom–bust financial cycles. In 2010, he was featured on Foreign Policy magazine's FP Top 100 Global Thinkers, and again in 2012. In a 2011 poll in The Economist, Rajan was ranked by his peers as the economist with "the most important ideas for a post-crisis world".

Replacing Kaushik Basu, Rajan was appointed as Chief Economic Advisor to the Ministry of Finance, Government of India on 10 August 2012. He also prepared his very first Economic Survey for India for the year 2013-14, on the 27th of February. Rajan is in the running for the next RBI Governor of India.

Economic and political views

Rajan wrote in May 2012 that the causes of the ongoing economic crises in the U.S. and Europe in the 2008–2012 period were substantially due to workforce competitiveness issues in the globalization era, which politicians attempted to "paper-over" with easy credit. He proposed supply-side solutions of a long-term structural or national competitiveness nature: "The industrial countries should treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades...Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies. In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track. In southern Europe, by contrast, it means removing the regulations that protect firms and workers from competition and shrinking the government's presence in a number of areas, in the process eliminating unnecessary, unproductive jobs."

Debates with other economists

During May 2012, Rajan and Paul Krugman expressed alternate views on how to reinvigorate the economies in the U.S. and Europe, with Krugman mentioning Rajan by name in an opinion editorial. In an article in Foreign Affairs magazine, Rajan had advocated structural or supply-side reforms to improve competitiveness of the workforce to better adapt to globalization, while also supporting fiscal austerity measures (e.g., raising taxes and cutting spending). Rajan conceded that austerity could slow economies in the short-run and cause significant "pain" for certain constituencies. Krugman rejected this view, advocating instead traditional Keynesian fiscal stimulus (e.g., spending and investment) and monetary stimulus, arguing the primary factor slowing the developed economies was a general shortfall in demand across all sectors of the economy, not structural or supply-side factors that affected particular sectors. This debate occurred against the backdrop of a significant "austerity vs. stimulus" debate occurring at the time, with some economists arguing one side or the other or a combination of both strategies.

Publications

• Saving Capitalism from the Capitalists, was co-authored with fellow Chicago Booth professor Luigi Zingales and published in 2004.
• Fault Lines: How Hidden Fractures Still Threaten the World Economy, published in 2010, has won the Financial Times and Goldman Sachs Business Book of the Year Award for 2010.
• He has also published numerous articles in top-tier finance and economics journals including the American Economic Review, Journal of Economic Perspectives, Journal of Political Economy, Journal of Financial Economics, Journal of Finance and Oxford Review of Economic Policy.
• The True Lessons of the Recession; The West Can’t Borrow and Spend Its Way to Recovery by Rajan in May/June 2012 Foreign Affairs
• Several of Dr. Rajan's opinion editorials are available at: Rajan-Project Syndicate Opinion Editorials

References

Business positions
Preceded by Kaushik Basu	Chief Economic Adviser 2012-present	Succeeded by {{{after}}}
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