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The chapter contains a methodology for formalized evaluation of the role of the Central Bank of the Russian Federation (Bank of Russia) in ensuring monetary and financial sustainability with the help of the monetary policy transmission mechanism and its inflation target regime. The significance of the research of the Bank of Russia operations to ensure financial sustainability is due to a number of circumstances: the uniqueness of the Bank of Russia that appeared only 27 years ago and experienced several devastating events related to the 1998 financial crisis, the global financial crisis of 2008–2009, and the stagnation of the Russian economy in 2014–2016, as well as high volatility of world prices for Russian commodity exports and the latest contra-Russian sanctions that significantly affected the volatility of the Russian ruble. Taking into account all the above, the issue of the Bank of Russia’s effective activities in the long run is aggravated by the fact that there are still more open questions than proven relationships of causes and effects regarding the potential of specific monetary policy instruments in the context of low-growth and high-volatility environment. The modeling of the Bank of Russia strategic and operational targets has been based on the parameters’ dependencies presented by the money (credit) multiplier in the interpretation of G. Schinasi (2006) and on the instability of stable economy hypothesis of H. Minsky (2008). As a result, there have been established the marginal levels of definite indicators of the banking system performance that could allow the Bank of Russia to ensure financial sustainability in the low-growth and high-volatility environment.

This essay aims to analyze the process of structural adjustment in developing countries. Its focus is on macroeconomic stabilization in the short‐term, but the analysis is situated in a wider context to consider how it relates to the implications of structural reform in the medium‐term and the prospects for economic growth in the long‐term.

The paper begins by setting out the contours of the orthodox, the Keynesian and the heterodox perspectives on stabilization and adjustment to highlight the differences. Such different perspectives on macroeconomic theory and policy, it suggests, are attributable to differences in objectives, assumptions and beliefs. These are made explicit.

The paper argues that the relationship between stabilization and growth is characterized by inter‐connections rather than trade‐offs and suggests that outcomes depend on modes of adjustment. It also provides a macroeconomic analysis of government deficits and public finances, which are critical in the process of adjustment. This highlights the macroeconomic significance of government deficits and points to the fallacies of deficit fetishism based on accounting frameworks. The intersection of economics and politics in the design and implementation of macroeconomic policies is also explored.

Going beyond a critique of orthodox stabilization programmes, it shows that there are alternatives in macro‐management for economies in crisis, for which it is necessary to shift the focus from the financial to the real economy, from the short‐term to the long‐term, and from equilibrium to development.

The paper develops a heterodox perspective on the macroeconomics of structural adjustment and public finances. And, it sets out an alternative framework which straddles time horizons, to understand the restructuring of economies over time.

A spectre is hunting embryonic African monetary zones: the European Monetary Union crisis. The purpose of this paper is to assess real, monetary and fiscal policy convergence within the proposed WAM and EAM zones. The introduction of common currencies in West and East Africa is facing stiff challenges in the timing of monetary convergence, the imperative of central bankers to apply common modeling and forecasting methods of monetary policy transmission, as well as the requirements of common structural and institutional characteristics among candidate states.

In the analysis: monetary policy targets inflation and financial dynamics of depth, efficiency, activity and size; real sector policy targets economic performance in terms of GDP growth at macro and micro levels; while, fiscal policy targets debt-to-GDP and deficit-to-GDP ratios. A dynamic panel GMM estimation with data from different non-overlapping intervals is employed. The implied rate of convergence and the time required to achieve full (100 percent) convergence are then computed from the estimations.

Findings suggest overwhelming lack of convergence: initial conditions for financial development are different across countries; fundamental characteristics as common monetary policy initiatives and IMF-backed financial reform programs are implemented differently across countries; there is remarkable evidence of cross-country variations in structural characteristics of macroeconomic performance; institutional cross-country differences could also be responsible for the deficiency in convergence within the potential monetary zones; absence of fiscal policy convergence and no potential for eliminating idiosyncratic fiscal shocks due to business cycle incoherence.

As a policy implication, heterogeneous structural and institutional characteristics across countries are giving rise to different levels and patterns of financial intermediary development. Thus, member states should work towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of convergence in monetary, real and fiscal policies. This could be done by stringently monitoring the implementation of existing common initiatives and/or the adoption of new reforms programs.

It is one of the few attempts to investigate the issue of convergence within the proposed WAM and EAM unions.

A change in monetary operating procedures provides a natural experiment which is used to evaluate, first, whether Indian monetary policy transmission is better when durable liquidity is in surplus or when it is in deficit; second whether it is better with interest rates as the policy instrument or quantity of money or a mixture of the two.

This study first shows that the period of analysis can be divided into two separate regimes one of liquidity surplus (2002–2010) and the other of deficit (2011–2019).This study then estimates separate structural vector auto-regressions (SVARs) for the financial and real sector, with relevant exogenous foreign, policy and other variables for each of the periods as well as SVARs for the whole period with alternative operating instruments.

Monetary transmission from the repo rate was better during the period the liquidity adjustment facility (LAF) was in surplus with the central bank in absorption mode denoting excess durable liquidity. Pass through was faster and the repo rate had a greater influence on other variables. The impact of the rate on output gap exceeds that on inflation. The weighted average call money rate was found to outperform others as the operating target. Monetary policy has evolved so that policy rates are more effective in transmission compared to money supply, but best results are when durable liquidity is also in surplus.

The results contribute to ongoing debates on the Indian monetary policy framework and give useful inputs for policy in emerging markets where research is scarce. They suggest keeping the LAF in deficit mode over 2011–19 was not optimal.

This chapter examines the issue of policy coordination as conceived by the Eurozone institutional setting. After having briefly recalled the meaning of fiscal and monetary policy coordination in the Keynesian and present paradigm, it describes the meaning of coordination inside the Eurozone: it emerges as a marked subordination of national fiscal policies to the objective of the stability of the common currency, in term of prices and interest rates. This feature generates two main fragilities to which the entire Euro Area is exposed: the first deriving from the role assigned to financial markets and the second one linked to the presence of external imbalances. Some reflections about the need to build up common policy institutions as a mean to grant stability and growth in the Eurozone are provided.

The international institutions, policymakers and governments are promoting green growth as a policy objective for global financial stability (FS) without sound empirical investigation. Therefore, the purpose of this study is to investigate whether the green economy would be successful in achieving its main objective i.e. stabilizing the world financial system because the investment stakes are too high for this green transition.

The study used the two-step system generalized method of moments (GMM) methodology on panel data of 90 countries for 6 years from 2010 to 2015 to investigate the impact of green growth economy on FS.

The results of the current study revealed that overall green growth enhanced FS in the country for both the short and long run. However, the social inclusive dimension of green growth was irrelevant in creating FS.

The results of the current study validate the growth-led finance hypothesis and encourage the policymakers to strengthen the policy initiative for green growth. Because green growth mitigates economic and environmental risk to create a stable financial environment. However, social inclusiveness needs to be explored through alternate paradigm in relevance to FS.

As per the author’s knowledge, it is a pioneer study to empirically investigate the impact of green growth on FS which would be useful in understanding the green growth and FS dynamics.

In the context of debate on competitive devaluation and trade imbalances, the purpose of this paper is to investigate the role of exchange rate misalignment as a determinant of trade imbalances in selected major trade surplus (Germany, China, Japan, Russia and KSA) and major trade deficit countries (USA, UK, France, India and Turkey).

The authors used a structural vector auto-regressive model on data from ten countries with the highest trade deficit and surplus. The period of analysis is from 2000 Q1 to 2016 Q1.

The key findings suggest that although exchange rate misalignment from equilibrium may have some implications for the current account balance for surplus and deficit countries, the effects observed were rather very mild and transitory. There was a heterogeneity in the response of the current account position to exchange rate misalignment in each country, concomitantly; the exchange rate misalignment shall not be seen as the sole responsible factor in the debate on global trade imbalances.

The research has profound implications in terms of exploring the notion of competitive devaluation and exchange rate misalignment as a cause of major global trade imbalances.

This study has important practical implications for the trade policy of major economies in the world. These are twofold. First, this study has analysed and reported on the degree of misalignment of exchange from its equilibrium values in the major trade surplus and deficit countries. Second, it has investigated the implications of any misalignment for the trade balance or respective economies.

There are important social implications as the notion of competitive devaluation and exchange rate–trade balance nexus has been heavily politicised. This study provides an empirical insight and an answer to these claims which have social and political implications.

There is a significant element of originality and contribution to the existing body of knowledge on the subject. In the context of debate on competitive devaluation this is the first study which has investigated whether the exchange rate has been misaligned from its equilibrium values (competitive devaluation) and whether there is some nexus between the real exchange rate misalignment and trade imbalances in under-analysis economies.