homeeconomy News15 years of Lehman crisis, a decade of taper tantrum | Insights for India and the world
15 years of Lehman crisis, a decade of taper tantrum | Insights for India and the world
In an interview with CNBC-TV18, Mridul Saggar, a Professor at IIM Kozhikode and former Executive Director at the Reserve Bank of India (RBI), and Sajjid Chinoy, Chief Economist-India at JPMorgan, engaged in a comprehensive discussion regarding the lessons learned from these events and their influence on financial markets and regulatory approaches.
Today, September 15, marks the 15th anniversary of the Lehman Brothers' collapse, an event that triggered more than three months of turmoil in global financial markets and effectively halted lending by banks worldwide.
Additionally, September 2023 marks the 10th anniversary of the "taper tantrum," a somewhat lesser but still significant issue. During this period, the Federal Reserve began withdrawing the dollars it had initially printed to address the Lehman crisis.
Notably, the taper tantrum had a pronounced impact on India, causing the Indian rupee to depreciate from 53.50 per dollar at the end of May to 68.80 per dollar at the end of August 2013.
In an interview with CNBC-TV18, Mridul Saggar, a professor at IIM Kozhikode and former executive director at the Reserve Bank of India (RBI), and Sajjid Chinoy, chief economist-India at JPMorgan, engaged in a comprehensive discussion regarding the lessons learned from these events and their influence on financial markets and regulatory approaches.
To begin, Saggar pointed out that the US Federal Reserve was the sole central bank to implement unconventional monetary policies following the 2008 financial crisis, whereas the European Central Bank (ECB) and the Bank of Japan did not manage to do so.
He went on to explain that during the taper tantrum period, there were significant vulnerabilities in the economy: growth was declining, inflation was on the rise, and the current account deficit was expanding. The crucial lesson drawn from the taper tantrum experience is the importance of maintaining control over macroeconomic factors.
In contrast, Chinoy noted that the recovery following the Lehman crisis has been more profound and enduring. He said, "It took 8 years for the global economy to close its output gap and go back closer to trend level."
For the entire discussion, watch the accompanying video
First Published: Sept 15, 2023 3:32 PM IST
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