Europe and Emerging Asian Economies seek Advice from Professors Hughes Hallett and Rajan
by Jocelyn Rappaport
School of Public Policy professors influence and impact international policy. This is readily seen in Professor Andrew Hughes Hallett's work in Europe and in Professor Ramkishen Rajan's work in Asia. Because of their respected and relevant research governments and institutions seek them out to provide economic analysis and advice. Hughes Hallett's focus is Europe's economy while Rajan focuses his research and consultation on macroeconomic issues and policies in emerging Asia.
Professor Andrew Hughes Hallett sits on the Council of Economic Advisors to the Government of Scotland. This is a small advisory body that was set up as part of the process of recreating a parliament and regional government in Scotland for the first time since 1707. The council has the responsibility for advising the First Minister and his cabinet on the direction of the economy, its prospects, and what can be done to improve economic performance given the policy instruments available under the devolution settlement with the United Kingdom government. Hughes Hallett has taken the lead on setting priorities for growth, designing policy initiatives to increase productivity and competitiveness, and assessing the potential of the life sciences sector for expansion. He is now advising the First Minister on how to design a new and separate fiscal system (taxation, spending and borrowing). "There is a window of opportunity here given the unsettled state of British politics, and if changes are made it will be the first major constitutional change for the UK in over a century," says Hughes Hallett. The first steps have already appeared with the recommendations of the United Kingdom government's Calman Commission, to which Hughes Hallett was also an advisor, which argued that a limited degree of tax autonomy should now be introduced. Both leading political parties have agreed.
Hughes Hallett has also been working on the design and implementation of fiscal surveillance (budget oversight and restraint) mechanisms for governments of countries in a currency union. He states that this may look like closing the barn door after the horse has bolted in some European economies, but it will remain a major problem for the future in all of them. Some of his work is with the fiscal affairs department of the European Central Bank and involves using cash data on a government's fiscal position (as opposed to the accruals data usually used, according to Hughes Hallett) in order to forecast slippage from the current plan, and using the information which that data offers to design early intervention measures of various types to minimize the cost of making corrections. This project builds on his earlier work for the European Commission that focused on the case for and advantages of debt targeting rules as a monitoring device to aid fiscal discipline.
The Central Bank of the Netherlands (the Dutch Fed) retained Hughes Hallettt in 2009 to conduct a review of the effectiveness of their research and how that research is used to guide policy decisions/recommendations. This review occurs every seven years and it contributes not only to how their research programs are constructed and run and their hiring and publication strategies, but also to how the flows of information to or from the policy departments and up to the executive board are managed and policy is determined.
In addition to these three specific examples of Hughes Hallett's policy work involving government in the past few years, he has advised the Dutch Finance Minister/Deputy Prime Minister on the achievements gained from introducing the Euro and the next steps that should be taken. He advised the European Commission on the advantages of a debt targeting system to underpin fiscal and monetary credibility, and the United Kingdom government on aspects of the Euro system as part of their review of whether to join. Hughes Hallett also had a contract to help the European Commission design for the conversion rates of the old currencies into the Euro, and he has worked with the IMF on the design of fiscal policy rules and on structural reform questions.
Professor Ramkishen Rajan's work is also impressive. One focus of his research has been motivated by currency and financial crises that have plagued the global economy. "These crises can be particularly damaging to emerging economies with large numbers of people living below the poverty line and little or no social protection," says Rajan.
His many papers, books, book chapters, and op-eds are important resources for a variety of institutions. His paper "How Best to Manage New Style Currency Crises?" which appeared in the Journal of International Development provides insight in combining policy adjustment and financing for a country to manage a new-style crisis. The Office of Regional Economic Integration (OREI) at the Asian Development Bank (ADB) used a version of this framework in their presentations to regional policymakers on the policy options and tradeoffs when tackling financial crises. After being a visiting consultant at the OREI-ADB, Rajan expanded on these themes of crisis management and prevention in his book, Exchange Rates, Currency Crisis and Monetary Cooperation in Asia (Palgrave-MacMillan, 2009).
The United Nations-ESCAP engaged Rajan as a consultant in 2009 to advise them on their research on capital flows and financial vulnerability indicators to try to ascertain which countries might be potentially vulnerable to future crises. This past January, UN-ESCAP published a policy alert entitled "India's FDI Flows: Trying to Make Sense of the Numbers" which reflects Rajan's work on India's foreign direct investment (FDI). Rajan has been appointed a non-resident senior fellow and joint program coordinator of macroeconomics and finance at the Institute of Southeast Asian Studies in Singapore to help develop their research agenda, with emphasis on Southeast Asia and India.
Rajan's research also focuses on issues relating to exchange rate policies and options for small and open economies in Asia and elsewhere. Rajan's book (co-authored with Tony Cavoli of the University of Southern Australia), Exchange Rate Regimes and Macroeconomic Management in Asia, (Hong Kong University Press, 2009) is devoted to issues related to exchange rate and monetary policy and financial integration in Asia. Rajan has been very involved in discussions in the region on steps Asian economies might take to enhance regional monetary and financial cooperation as a means of reducing their susceptibility to booms and busts in capital flows. He has consulted and written extensively in this area for the Asian Development Bank.
According to Rajan, the fast-growing Asian economies are especially dependent on foreign direct investment (FDI) as a source of finance, employment and technology. With Rabin Hattari of theWorld Bank, he has investigated trends, patterns, and determinants of FDI flows to and from emerging Asian economies. This investigation appears to be the first detailed study of FDI flows between emerging Asian economies at the bilateral level.
The Asian Development Bank in Tokyo offered Rajan research fellowships in 2007 and 2010 in part because of his research of Asian economic policymakers facilitating intra-regional investment flows by investing in better telecommunications capabilities to boost cross-border informational flows. Rajan was also commissioned by the Asia Pacific Economic Cooperation Secretariat in 2009 to write a major report on the trends and determinants of cross-border FDI flows including the impact of political risk. In further recognition of the importance of his works in these areas, Rajan has been offered competitive research fellowships from the Hong Kong Institute for Monetary Research (the academic wing of Hong Kong's monetary authority) in 2009 and an upcoming one in 2010 to continue his research on cross-border mergers and acquisitions in developing Asia.
After participating in numerous workshops and policy debates in and on India, Rajan wrote the book, Monetary, Investment and Trade Issues in India (Oxford University Press, 2009). The book explores various aspects of monetary, exchange rate, trade and investment issues and policies in India. In addition to research and consulting, Rajan is very active in the media. He currently writes a bi-weekly column on macro and financial issues in Asia for the Financial Express, one of India's oldest and most widely circulated financial newspapers.
Not only do Hughes Hallett and Rajan research and advise, they also help explain economic concepts and policies within an historical framework. Both publish several scientific papers a year and their academic research is cited worldwide. Hughes Hallett and Rajan are researchers and educators who with their insight and guidance have an important effect on economic policy.