Former Bangladesh Bank (BB) governor Dr. Atiur Rahman has said the central banks in the emerging market economies should be more transparent and sensitive to public interests as well as champion of financial inclusion.
He said the monetary policy, pursued by Bangladesh Bank (BB) following global financial crisis, has been prudent in terms of encouraging socially-responsible inclusive finance to productive sectors without compromising its core job of fighting inflation.
Dr. Atiur said these while delivering a special talk at the Business School of Sacred Heart University (SHU) in the US on Wednesday. Moderated by Professor Khawja Mamun, the talk attracted a large number of participants, including faculty members and students of SHU and visiting delegates of Dhaka University (DU).
The faculty members included, among others, SHU Senior Vice President James M. Barquinero, Dean John Chalykoff and Professor Lucjan T. Orlowski, and Professor Shibli Rubayat Islam, Dean, Faculty of Business Studies of DU.
Dr. Atiur said the core objective of monetary policy in an emerging market economy like Bangladesh is to maintain price stability. "This can be achieved directly by fixing interest rate and exchange rate or indirectly by influencing real macro variables (growth and inflation) through manipulating money supply and interest rate. But there are complementary objectives of it as well." Indeed, the central bank of an emerging market tries to achieve both inflation and growth objectives by making prudent monetary policy, he observed.
Unlike the central banks of the developed economies, which resort to large-scale quantitative easing, BB went for managing price stability and providing credit support responsibly for productive activities, said Dr. Atiur.
He further said BB took extra measures to direct socially-responsible financing to the under-banked and under-served sectors, like - agriculture and SMEs.
Simultaneously it pushed for massive digitization of payment systems including technology-based financial initiatives, like - mobile financial services and agent-banking, he stated.
"While central banks of the advanced economies mostly helicoptered 'quantitatively eased money', BB took money in bullock-carts to the ground." The outcome of this innovative monetary policy has been stable higher GDP growth and gradually falling inflation despite global financial crises, leading to desired social cohesion and enhanced empowerment of the disadvantaged segments of population, the former BB governor said.
He also observed that the central banks of the emerging markets ought to enhance their capacities to manage various global uncertainties by positioning themselves as knowledge institutions.