Rajan Proposes Global Color-Coded System to Rate Monetary Policy

Indian central bank Governor Raghuram Rajan called for a new set of international rules to assess monetary policy that includes using color codes to rate how beneficial measures are to global welfare.

Rajan, speaking at an International Monetary Fund meeting in New Delhi, said policies seen as good for the world should be rated green, while those that should be used temporarily would be classified orange. Policies that should be avoided at all costs would be rated red, he said.

Rajan called for a group of “eminent academics with reasonable representation across the globe" to analyze and grade various policies. They would then be discussed at global forums such as the Group of 20, and eventually lead to possible changes of IMF rules or a new international agreement.

“The international community has a choice," Rajan, a former IMF chief economist, said on Saturday, according to prepared remarks. “We can pretend all is well with the global financial non-system and hope that nothing goes spectacularly wrong. Or we can start building a system for the integrated world of the 21st century."

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net. To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Sunil Jagtiani

By: Unni Krishnan

©2016 Bloomberg News