Eswar S. Prasad

Eswar S. Prasad
Cornell University | CU

About

273
Publications
40,618
Reads
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13,853
Citations
Introduction
Additional affiliations
August 2008 - present
The Brookings Institution
Position
  • Senior Fellow and New Century Chair in International Economics

Publications

Publications (273)
Article
New and evolving financial technologies, including the advent of cryptocurrencies and central bank digital currencies (CBDCs), will make cross-border payments cheaper and quicker. However, reduced frictions in global capital flows could also result in more capital flow and exchange rate volatility, which is of particular concern for emerging market...
Article
China's remarkable run of persistently high growth in recent decades is all the more stunning in light of the country's low levels of financial and institutional development, state-dominated economy, and nondemocratic government. Notwithstanding the inefficient and risky growth model, the government has maneuvered the economy around various stresse...
Article
Full-text available
Bitcoin and its peers have set off a technological revolution that will transform money, finance, and society. However, the future of cryptocurrencies as financial assets is far from certain – as can be seen from Bitcoin’s halving in value in six months since November 2021; the total value of all cryptocurrencies fell from $3 trillion to $1.3 trill...
Article
We analyze shifts in the structure of China’s capital outflows over the past decade. The composition of gross outflows has shifted from accumulation of foreign exchange reserves by the central bank to non-official outflows. Unlocking the enormous pool of domestic savings could have a significant impact on global financial markets as China continues...
Article
Full-text available
We provide new evidence on the cyclicality of employers' real labor costs using BLS establishment-job data for 1982-2018. Average straight-time wages have become countercyclical since the financial crisis and the subsequent Great Recession. So have benefit expenditures and overall labor costs, as well as major benefit expenditures, including health...
Article
Using country-level and institution-level data, we find the "coming wave" of emerging-market (EM) investors systematically over- or underweight their equity portfolio holdings in a way that reflects the influences of past capital and trade flows from a foreign country. We interpret this finding as support for the information endowment hypothesis of...
Chapter
This chapter provides an analytical foundation for a discussion of currency concepts. It describes terms such as capital account convertibility, exchange rate flexibility, and purchasing power parity. It also explains the differences between an international currency, one that is used widely in international trade and finance transactions, and a re...
Article
In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained and the share of food expenditures in total consumpti...
Article
Distributional consequences typically receive limited attention in economic models that analyze the effects of monetary and financial sector policies. These consequences deserve more attention as financial markets are incomplete, imperfect, and economic agents’ access to them is often limited. This limits households’ ability to insure against house...
Article
This paper evaluates the prospects for the renminbi’s role as an international currency and the implications for global financial markets. Although the People’s Republic of China (PRC) does not have either an open capital account or a flexible exchange rate, the renminbi has attained considerable traction as an international currency on account of...
Article
Private investors from emerging market economies are increasingly putting their funds in overseas assets. Understanding the volumes and patterns of the various outflows — sovereign and private — and analyzing what influences them will help shed light on how the landscape of international capital flows is likely to change as emerging market economie...
Article
Rebalancing growth patterns of Asian economies is an important component of the overall rebalancing effort that will be required in the world economy. This chapter provides an empirical characterization of the composition of GDP levels and growth rates for the key emerging markets and other developing economies in Asia. To examine the global implic...
Article
Popular discussions about the prospects of China's currency, the renminbi, range from the view that it is on the threshold of becoming the dominant global reserve currency to the concern that rapid capital account opening poses serious risks for China. A number of recent academic studies have pointed to the renminbi's rising importance in the inter...
Article
1. Introduction China's rising prominence in the world economy has meant that the efficacy of its macroeconomic management has taken on considerable importance, not just from a domestic perspective but also from broader regional and international perspectives. In this paper, we review the functioning of one of the key tools of macroeconomic managem...
Article
Full-text available
We analyze three related but distinct concepts concerning the renminbi's role in the global monetary system: (i) "internationalization" of the currency; (ii) currency convertibility; and (iii) reserve currency status. Their sequencing in relation to other policy goals such as financial sector reforms and exchange rate flexibility will affect their...
Article
Full-text available
I document that emerging markets have cast off their "original sin" – their external liabilities are no longer dominated by foreign-currency debt and have instead shifted sharply towards direct investment and portfolio equity. Their external assets are increasingly concentrated in foreign exchange reserves held in advanced economy government bonds....
Book
Full-text available
This report was written by The Committee on International Economic Policy and Reform, a non-partisan and non-ideological group of independent experts, comprised of academics and former government and central bank officials. The objective of the group is to analyze global monetary and financial problems, offer systematic analysis and advance reform...
Book
The rapid spread and far-reaching impact of the global financial crisis have highlighted the need for strengthening financial systems in advanced economies and emerging markets. Emerging markets face particular challenges in developing their nascent financial systems and making them resilient to domestic and external shocks. Financial reforms are c...
Article
Full-text available
This article provides a brief assessment of the resilience of emerging market countries in the face of the global financial crisis. It shows that emerging markets, as a group, weathered the crisis much better than the advanced countries and most of these economies have bounced back rapidly from the global recession. It tracks down the reasons for t...
Article
Full-text available
China’s household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped. We find that rising income uncertainty and pension reforms help explain both of these phenomena. Using a panel of Chinese households covering the period 1989-2006, we document that strong average income growth has been accompani...
Article
China's household saving rate has increased markedly since the mid-1990s and the age-saving profile has become U-shaped. Using a panel of urban Chinese households covering 1989-2006, we document a sharp increase in income uncertainty. While the permanent variance of household income was stable, the transitory variance rose sharply. Based on these e...
Article
Full-text available
This paper provides an overview of the complex conceptual and practical challenges that emerging market economies face as they attempt to reform their frameworks for financial regulation. These economies are striving to balance the quest for financial stability with the imperatives of financial development and broader financial inclusion. I argue t...
Article
Full-text available
In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. In this paper, we develop a two-sector two-good closed economy new Keynesian model to study the optimal choice of price index in markets with financial frictions. Financial frictions that limit credit-...
Article
Full-text available
China has maintained a phenomenal rate of growth over the last two decades (until very recently), with annual GDP growth averaging about 10 percent. What accounts for this impressive growth performance? How long is this growth pattern likely to last and what are the risks? This chapter attempts to address these questions by providing a critical eva...
Article
From 1995 to 2005, the average urban household savings rate in China rose by 7 percentage points, to about one-quarter of disposable income. Savings rates increased across all demographic groups, and the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high savings rates. We argue th...
Article
In theory, one of the main benefits of financial globalization is that it should allow for more efficient international risk sharing. In this paper, we provide an empirical evaluation of the patterns of risk sharing among different groups of countries and examine how international financial integration has affected the evolution of these patterns....
Article
Rebalancing growth patterns of Asian economies is an important component of the overall rebalancing effort that will be required in the world economy. In this paper, I provide an empirical characterization of the composition of GDP levels and growth rates for the key emerging markets and other developing economies in Asia. China has by far the lowe...
Article
There is a great deal of commonality of economic interests between the two countries, and it is these shared interests that should be the basis for a mutually beneficial economic relationship. In this article, I will lay out the key facets of this complicated bilateral relationship, present my prognosis for how this relationship is likely to evolve...
Article
Full-text available
Rezime: Literatura o koristima i troškovima finansijske globalizacije za zemlje u razvo- ju je naprasno porasla poslednjih godina, i to kroz mnoge, potpuno različite kanale sa raznovršnošću očigledno konfliktnih rezultata. Još uvek je malo snažnih dokaza o rastu- ćim koristima široke liberalizacije kapitalnog računa, ali veći broj skorijih radova u...
Article
This paper assesses the role of consumption and saving in Asia’s growth. It examines the composition of national saving, analyzes what forces drive saving rates, and draws policy conclusions from the analysis that are relevant for the economies in the region and which might play an important part in rebalancing global growth. The paper identifies a...
Article
The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefi...
Article
We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality and trade openness appear to help developing countries derive the benefits of globalizat...
Article
Full-text available
In this paper, I analyze India's approach to capital account liberalization through the lens of the new literature on financial globalization. India's authorities have taken a cautious and calibrated path to capital account opening, which has served the economy well in terms of reducing its vulnerability to crises. By now, the capital account has b...
Book
Financial globalization has made monetary policy formulation in emerging market economies increasingly complicated. This timely set of studies looks at the turmoil in global financial markets, which coupled with volatile inflation poses serious challenges for central banks in these countries. Featuring papers from the research frontier and front-li...
Article
Full-text available
China and the U.S. have a close but complicated economic relationship. This note provides a fuller picture of the tightening embrace between the two countries – in terms of flows of goods and services, financial capital and people – and discusses the potential flashpoints in this relationship. This bilateral relationship is important not just for t...
Article
This paper introduces a significant new collection of papers on monetary policy in emerging market economies, written by leading analysts and policy makers. Does existing economic theory provide lessons that are pertinent for designing effective monetary policy frameworks in emerging markets? What can be learned from cross-country studies and from...
Article
Economic theory has identified a number of channels through which openness to international financial flows could raise productivity growth. However, while there is a vast empirical literature analyzing the impact of financial openness on output growth, far less attention has been paid to its effects on productivity growth. We provide a comprehensi...

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