Devaluing to Prosperity

Bhalla (chairman of Oxus Investments, a market advisory firm based in New Delhi, India) seeks to demonstrate the neglected role of currency undervaluation in economic (export-led) growth and to consider its implications for global economics. He explains the mechanisms by which currency valuation effects growth (largely through investment); offers evidence in defense of the hypothesis that policies promoting cheap currency lead to higher growth, as well as the stronger hypothesis that a large proportion of growth accelerations and decelerations can be explained in terms of currency valuation; and considers the issues of whether the Chinese renminbi has been substantially undervalued. He also considers the pitfalls of widespread reliance on currency devaluation, arguing that such practice eventually can be understood as mercantilism if widespread and long-term and will inevitably lead to financial and/or currency crisis, thus necessitating more collaborative currency arrangements in the pursuit of a more stable globalized future. Annotation c2012 Book News, Inc., Portland, OR (booknews.com)

Surjit S. Bhalla is managing director of Oxus Research and Investments, a New Delhi-based economic research, asset management, and emerging-markets advisory firm. He taught at the Delhi School of Economics and worked at the Rand Corporation, the Brookings Institution, and at both the research and treasury departments of the World Bank. He has also worked at Goldman Sachs (1992–94) and Deutsche Bank (1994–96).