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A theory is appropriate as long as it fits into the fact; when a theory doesn't fit in the fact, it's wise to walk with the fact.

Friday, March 8, 2013

Vague monetary policy stance by BB?

Professor M A Taslim finds a misleading concept (so-called 'productive sectors') in BB's monetary policy statement while defending its rapid credit growth to the economy and its marginal impact on inflation development.The main argument pointed out by Professor Taslim is that 'if the economy is working at full capacity, a flow of additional credit to investment in 'productive sectors' will exert inflationary pressures as surely as additional credit spent on consumer goods'. Though he didn't provide any empirical evidence for his argument (except an US example in early 1900s), it is still a strong theoretical debate that requires further thought by the monetary authority. Hope, they feel it!

Link of the article.  

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