The few emerging economies that have avoided booms and busts have done so by adhering to sound policy frameworks.
Politicians know that structural reforms - to increase competition, foster innovation, and drive institutional change - are the way to tackle structural impediments to growth. But they know that while the pain from reform is immediate, gains are typically delayed and their beneficiaries uncertain.
The idea was never for me to be a career bureaucrat or career technocrat; it was more about where I could implement ideas and reform programs.
It is the central bank governor, unlike other regulators or government secretaries, who has command over significant policy levers and has to occasionally disagree with the most powerful people in the country.
A monopoly is like running on firm ground. Nothing compels you to move, but if you do, you move forward. The faster you run, the more scenery you see - so you have some incentive to run fast.
In emerging markets, slow growth in the advanced economies has shut down a traditional development path: export-led growth. As a result, emerging markets have had to rely once again on domestic demand. This is always a difficult task, given the temptation to over-stimulate.
Indian cricket fans are manic-depressive in their treatment of their favorite teams. They elevate players to god-like status when their team performs well, ignoring obvious weaknesses; but when it loses, as any team must, the fall is equally steep, and every weakness is dissected.
The more that everyone has access to the same educational opportunities, the more society will tend to accept some receiving disproportionate rewards. After all, they themselves have a chance to be winners.
Endorsing unconventional monetary policies unquestioningly is tantamount to saying that it is acceptable to distort asset prices if there are other domestic constraints on growth.
Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.
Ultimately, in the long run we need to immunise our system from being overly responsive to fluctuations in the exchange rate; that is, people should, by and large, be reasonably hedged, or they should borrow more in domestic currency rather than foreign currency.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
If developed countries' citizens want to feel slightly better about their economies' slow growth and high unemployment, they should contemplate how much worse matters could be without the institutions that they have.
Strong government doesn't mean simply military power or an efficient intelligence apparatus. Instead, it should mean effective, fair administration - in other words, 'good governance.'
Instead of abandoning competition and giving banks protected monopolies once again, the public would be better served by making it easier to close banks when they get into trouble. Instead of making banking boring, let us make it a normal industry, susceptible to destruction in the face of creativity.
The American political scientist Francis Fukuyama has argued that liberal democracies, with their political freedom and economic success, have three important pillars: a strong government, the rule of law, and democratic accountability. I would add a fourth: free markets.
I don't think policy makers surprise unnecessarily. You don't pick surprise as a part of your policy. Markets value a certain amount of predictability. But there are certain areas where surprise is a tool.
The first step to prescribing the right medicine is to recognize the cause of the illness. And, when it comes to what is ailing the global economy, extreme monetary easing has been more cause than cure. The sooner we recognize that, the stronger and more sustainable the global economic recovery will be.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
To ensure stable and sustainable economic growth, world leaders must re-examine the international rules of the monetary game, with advanced and emerging economies alike adopting more mutually beneficial monetary policies.
