Financial crisis could have been averted: UWS economist

The current financial crisis could have been averted if economic policy concentrated on the effects of globalisation, according to University of Western Sydney economist, Dr Partha Gangopadhyay.

Gangopadhyay, a senior lecturer of economics and finance, published a book in 2005, Economics of Globalisation, which identified the role of globalisation in institutional arrangements and the conduct of monetary policies in many nations.

Gangopadhyay said “as a result of globalisation, monetary authorities in most advanced nations do not, or cannot, use conventional macroeconomic policy to fight a financial crisis.

“The main mandate of a central bank now is to ensure price stability.

“These changes in the constitutional arrangements are a product of conscious economic reforms in the 1990s,” he said.

Gangopadhyay’s previous work has also found further developments in the international financial architecture that are the unintended consequences of globalisation and beyond the control of national governments.

“As an example, a central bank cannot get sufficient external resources to offset private capital flight in the current era. As a result, countries have little flexibility to deal with a financial crisis.

“Globalisation has led to an integration of global financial markets such that national governments have little autonomy in pursuing policies to reverse capital flight and boost their domestic economies,” Gangopadhyay said.

Winner of the 2008 Nobel Prize in economics, Nobel-Laureate Professor Paul Krugman contributed a prophetic chapter in Dr Gangopadhyay’s book, further validating his research.