monetary and banking policies from a gender economics present at a ion

8/6/2019 Monetary and Banking Policies From a Gender Economics Present at a Ion

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Monetary and Banking Policies froma Gender Economics Perspective

An Examination of the Indian Context


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IntroductionMonetary Policy remains an important tool in macroeconomic governanceof a country

However, standard studies of monetary and banking policy effects do havecertain shortcomings

One such shortcoming is the assumption that human agents in aneconomy are homogenous in character and experience the sameconsequences of macroeconomic policies

This assumption is particularly relevant in the context of a country s labourforce

An economy s labour force may be characterized by a number of divisionswhich may render characteristically differentiated

One such division is caused by gender


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Review of Literature (Slide 2)

o The overall effect of these factors is difficult to predictbut empirical evidence exists for gendered differencesin the labour force of middle and low income

countrieso Braunstein & Heintz (2008) find evidence that periods

of inflation reduction have a disproportionatelynegative effect on female employment

o Takthamanova & Sierminska themselves examine theevidence in 9 OECD countries. They find a weak linkbetween short-term interest rates and employment


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G oldberg & Tracy (2001)Study of the effects in changes of dollar value uponemployment in the United States

Changes in the value of the dollar can cause the wagegap between those who change jobs and those whostay on in jobs to expand and contract sharplyAdditionally, women who stay on in their jobs show

greater wage sensitivity to currency movements thantheir male counterpartsThe strongest effects are observed among thoseworkers who are less educated with most affectedbeing less educated women workers


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Review of Literature (Slide 4)Theoretically, dollar movements affect a producer s revenuesthrough both domestic and foreign market sales

Revenues arising from domestic sales respond to exchange rates inrelation to the import penetration and export intensity in themarkets i.e. structure of the market

This means that industries characterized by greater competitionare likely to have larger labour demand elasticities

Demand for skilled workers is less sensitive to revenue shocks

Contemporaneous labour demand effects are expected to bestrongest when exchange rates are expected to be morepermanent

Taken together, exchange rate effects upon workers may differ dueto many reasons including worker characteristics (such as gender)


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B raunstein & Heintz (2005)W hat is the impact of inflation upon employment and isthis impact different for men and women?

How is monetary policy connected to deflationaryepisodes and gender-specific employment effects?There is a declining ratio of W omen s Employment toMen s Employment during periods of contractionaryinflation reduction

Also, countries attempting to control inflation by anincrease in real interest rates or a decrease in moneysupply often end up experiencing contractions inemployment (with higher costs for women)


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There may be several reasons for this: Men s and women s employment are affected by factors

on both the demand and supply side Differences in human capital is the most important supply

side factor Gender-based differences in human capital are derived

from the structures of institutions in society There are 4 important structures of constraint that cause

gendered differences in employment:

PreferencesNormsAssets/ W ealthLegal Constraints


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Review of Literature (Slide 7) On the demand side, more subtle forms of discrimination can

result in gendered differences in employment (Ex: TheBreadwinner Perception)

Such gendered differences in the labour force can have variedeffects when inflation reduction policies are implemented

An empirical model devised with data from 17 low and middleincome countries show that in 67% of all incidents of inflation-reduction, women s employment was disproportionately

affected Countries responding to inflation by reducing interest rates

above the long term trend are more likely to experience a slowdown in employment growth with higher losses for femaleemployment


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The Reserve Bank of India (Functions)Implementation of Monetary Policy

Regulation and supervision of banking and non banking financial institutions including creditinformation companies

Regulation of money, foreign exchange and govt securities

Debt and cash management for Central and State Governments

Management of forex reserves

Acting as a banker to banks

Acting as a banker to central and state governments

Currency management

Assisting in national development

Conducting research and providing statistics


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Monetary Policy Operations of the RBI(2009-10)

Largely influenced by the events triggered by economicrecession of 2008First half of 2009 saw an accomodative policy stanceW PI Inflation had declined to zero but prices of foodarticles remained highBy First Quarterly Review, RBI began to contemplatethe reversal of the accomodative stanceBoth W PI and CPI rose quickly during the Second

Quarter while capital inflows began to resume(increasing liquidity in the system)Tightening the money supply remained a primaryconcern


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Monetary Policy Operations of the RBI(2009-10)

First phase of exit began in October 2009 but RBI refused to utilize any powerfultools of inflation control such as interest rates

By January 2010, there were clear signs of recovery but agriculture remainedstagnant

Food prices continued to increase and with a global rise in food commodity prices,importing food from abroad was not possible

Inflation began to affect non-food manufactured articles in the Third Quarter. RBIraised the SLR, CRR and Repo rates in response

At the end of the year 2009-10, RBI identified 3 issues for the following year:

(1) Normalizing policy instruments to pre-recession levels(2) Preventing demand side inflation from becoming entrenched(3) Absorbing excess liquidity in the system while preventing too much credittightening


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Credit Delivery and Financial Inclusion

Priority Sector LendingKisan Credit Cards and Priority Sector LendingCertificatesMicro, Small & Medium Enterprises:

Increase annual credit lending to MSMEs 10% annual growth rate in number of micro enterprise

accounts Opening of more MSME-focused branches by commercial

banksFinancial Inclusion:

Usha Thorat Committee Lead Bank Scheme Study of rural co-operatives


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Credit Delivery and Financial Inclusion(Slide 2)

Setting up of funds for financial inclusion No-frills accounts Outreach programmes

Discussion: Very little work in covering the gender gap No specific policy for financial inclusion of women No benefits provided to enterprises owned by women or

having a large female workforce No acknowledgement of the need to include women inmainstream banking system such as commercial banks

Negligible mention of women even in policies targetingSHGs, MFIs and other institutions typically considered

women-centric


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End

monetary and banking policies from a gender economics present at a ion

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