India tops the bill of the first OMFIF Bulletin after the summer break. Narendra Modi, the prime minister, has passed a milestone with agreement on the Goods and Services Tax amendment – a major achievement on its route towards a more market-orientated economy. After an unusually calm August for the European political economy, we are not taking our eye off the shifting financial patterns cross the Old Continent after the UK vote to leave the European Union. The September Bulletin marks the launch of a series of Focus reports on the changes among financial centres from the UK decision, starting with how Luxembourg is attempting to capitalise on new expansion opportunities. Nicolas Mackel, in charge of Luxembourg financial promotion, says the Grand Duchy can realise this aim by working with and not against the UK. John Mourmouras of the Bank of Greece and John Kornblum, a former US ambassador, weigh in with post-referendum commentaries, while Andrew Hunt unravels the symbiosis between expansion of European credit and European central banks’ Target-2 balances.
In another centrepiece report, we investigate the historical background to the last few years’ shift in central banks’ thinking on gold. The trend since 2008 for developed countries to conserve gold stocks, and emerging market economies to build up holdings, marks the latest phase of ‘The Seven Ages of Gold’ delineating specific periods of fluctuating central bank gold policies over the past two centuries. India, of course, is one of the great hubs for world gold investment. But there are three more general reasons for putting the subcontinent under the microscope – illustrated in different ways in articles by Meghnad Desai, Moorad Choudhry and Balamurali Radhakrishnan. First, the country is now out in front as the fastest growing of the five so-called Brics economies – along with Brazil, Russia, China and South Africa – a group that has hogged the headlines perhaps too many times in the past few years. Second, the Reserve Bank of India has a new governor, Urjit Patel, a low-key yet well regarded central banker who now has to show his spurs in taking over from the mercurial Raghuram Rajan. Patel has the task of building on Rajan’s promotion of monetary stability during an all-too-short three year term. Third, in helping guide its way along the path to a more market-orientated economy, India can benefit from a substantial boost in foreign exchange holdings, now at around $338bn. The country provides an enduring illustration of developing world central banks building up reserves as a form of self-insurance against financial crisis. This is a trend that is likely to continue, once the present phase of emerging market weakness is overcome. But, for reasons Ben Robinson explains, the pace may be slower than in the past.
In other emerging market coverage, David Tonge in Istanbul examines the aftermath of the failed military coup against Turkey’s President Recep Tayyip Erdoğan. Marsha Vande Berg in San Francisco believes Paul Romer, the new chief economist at the World Bank, can galvanise thinking on growth-generating cities in the developing world through the charter cities concept. Turning to the US elections, Darrell Delamaide investigates President Barack Obama’s economic legacy, and delves into Janet Yellen’s latest utterings on the next hike in US interest rates. Jan Mischke of McKinsey Global Institute sets down his precepts for correcting shortfalls in public investment through adjusting public accounting standards – a theme which McKinsey and OMFIF will be developing over the next few months. Mar Guðmundsson, governor of the Central Bank of Iceland, writes on the impact of global financial integration on monetary policy transmission in small open economies. David Marsh and Bhavin Patel describe the swirling debate on using nominal GDP or nominal income as a guideline for central banks seeking a new monetary lodestar. In our section on sustainable investment, Wang Yao of Beijing’s Central University of Finance and Economics outlines development of ‘responsible investment’ in China. We bring two book reviews: John Nugée dwells on Joseph Stiglitz’s gloomy thoughts on economic and monetary union in Europe, while William Keegan finds much to praise in Stuart Mackintosh’s study of global finance.