Gita Gopinath: The First Woman Chief Economist of the IMF

Gita Gopinath is an Indian-American economist. The Mysore born 46-year old Gopinath is currently the John Zwaanstra Professor of International Studies and Economics at Harvard University. She has been appointed as Chief Economist at the International Monetary Fund. She will take over as the Economic Counsellor and Director of the IMF’s Research Department from December after the current chief economist Maurice Obstfeld retires in December. She will be the second Indian economist after Raghuram Rajan, the former governor of Reserve Bank of India, to become the Chief Economist of the IMF. 

Naming her as the Chief Economist, Christine Lagarde, Managing Director, IMF observed: Gopinath is “one of the world’s outstanding economists with impeccable academic credentials, a proven track record of intellectual leadership, and extensive international experience. All this makes her exceptionally well-placed to lead our Research Department at this important juncture.”

Her research focuses on International Finance and Macroeconomics—mostly centered on exchange rate pass through, international price-setting, emerging market business cycles, monetary unions and debt crises. She is co-director of the International Finance and Macroeconomics program at the National Bureau of Economic Research. She, along with Kenneth Rogoff, co-edited the current Handbook of International Economics. She is the managing editor of the Review of Economic Studies and also co-editor of the American Economic Review. She also serves as economic adviser to many financial institutions and governments.

Gopinath is the economic adviser to the Chief Minister of Kerala, her home state. Reports indicate that she has advised the Chief Minister, who belongs to Marxist party of India, to take a leaf out of the Chile’s experiences—a country, which stepping out of its past socialistic framework embraced new economic policy that runs on the lines of the experiments carried out by the liberal economists, popularly called: ‘Chicago boys’. Obviously, such advices carry weight because, as she claims, she advocated such policies more as a “trained technocrat and professional economist.”

In 2014, she was named as one of the top 25 economists under 45 by the IMF. World Economic Forum has chosen her as a “Young Global Leader” in 2011. In 2018, she was elected as a fellow of the American Academy of Arts and Sciences. Reacting to the generally held opinion of many economists that the “Great Trade Collapse” that happened during the recent global financial crisis was caused by cost shocks specific to traded goods, Gopinath, a “very independent thinker” who  “made herself a big player in international economics”—about whom Ben Bernanke, one of her doctoral advisers at Princeton University and the former Fed Chairman observed said: “Gita was certainly one of the strongest and most promising students I ever worked with”—argued that such price changes have almost no role in the drop in the trade. Her paper written along with Itskhoki and Neiman on trade collapse suggests that such decline in trade is rather quantity-driven owing to fall in consumer spending.

During the Eurozone crisis, Gopinath published a seminal paper along with Farhi and Itskhoki which argued that there are instruments other than exchange rate devaluations that a country can use to gain trade competitiveness. The paper proposed fiscal-devaluation measures such as an ad valorem tariff plus a uniform subsidy for exports as, of course, originally proposed by Keynes, or value-added taxes, plus lower payroll taxes for creating an equal impact as an exchange rate devaluation would do for the economy. But for the political challenges in its implementation, Gopinath argues that such an intervention delivers outcomes exactly like that of a currency devaluation. Incidentally, this suggestion was partly implemented by France.       

There is another interesting work that she did on monetary unions which commands our attention: Contrary to the commonly held belief that it is optimal for high-debt nations to join an austere monetary union that practices low-inflation policy, she argued that in some cases, particularly, when debt crisis is more owing to panicky reaction of lenders, it makes sense for high-debt nations like Greece to be in the mix of nations with similar high debt profiles like Italy and some low-debt nations like Germany.  And the recent news about Greece coming out of its debt-crisis is perhaps a kind of vindication of her findings.   

Interestingly, as India is now experiencing a continuously depreciating rupee, there is something relevant for its policy makers to adopt from her research:  In one of her presentations at the Fed’s Jackson Hole Symposium, Gopinath argued that it is the degree of imports denominated in the domestic currency versus foreign currency that defines its impact on domestic inflation. India, whose imports are mostly denominated in dollar terms, is obviously vulnerable for “pass through” of its currency depreciation vis-à-vis dollar to its domestic prices, which means rise in inflation in a scenario of depreciating rupee. She also turned down the argument that a weaker currency for a non-US economy is good for a country’s exports.  And she even advised that central bankers in developing countries must respond to such depreciations pretty aggressively.    

That said, it would be interesting to watch how the IMF and its member countries particularly the developed western countries would receive her—her line of economic argument that challenges the IMF-advocated wisdom of the advantages of flexible exchange rates.

Whether or not there are any takers of her research findings in our monetary policy committee, your most obedient joins the nation in congratulating Gita Gopinath on her appointment as Chief Economist of the IMF, particularly, at a time when the world is witnessing protectionism and trade wars where her sane economic-sense matters most   and wishing her all the success in her new role.