Wednesday, June 12, 2013

Roubini On the proposed BRICS bank

Nouriel Roubini : Well, BRICS sort of agreed to create the bank that could provide funding for productive investment to BRICS and other emerging markets. The details of that bank are still very fuzzy: Where will it be located? Who will provide most of the capital? Talks of the BRICS bank are a signal that emerging markets are somehow tired about global and financial institutions such as International Monetary Fund and World Bank where the executive boards are still controlled by advanced economies. They want to create a financial institution on which they have greater control. That in some sense is a negative signal because until now approach to financial stability has been driving global institutions, rather than the regional ones.

BRICS are non-homogenous types of countries and economies. Some have political systems which are democratic like India, Brazil and South Africa and some of them are authoritarian like Russia and China. Again, some of them have comparative advantage in goods like China and services like India. It is not a very homogenous group and we need to see whether the BRICS bank is going to materialize and be successful. - in livemint

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