He also advocated stronger and well-capitalised multilateral institutions, as also better international safety nets. Speaking on the issue of 'Going Bust for Growth' at the Economic Club of New York, Rajan said "The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector.
Speaking about the reasons for why it is so hard for the world to restore pre-Great Recession growth rates, Rajan said, "How does one offset weak household and government demand if debt write-downs are off the table?

"Ideally, the response would be to incentives investment and job creation through low interest rates and tax incentives. But if final demand from consumers is likely to be very weak for a considerable period of time because of debt overhang, the real return on new investment may collapse."

"Hence, central banks have embarked on unconventional monetary policy (UMP), which would directly lower long rates.”


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