To facilitate sustainable growth, governments in Asia have to find ways to achieve efficient resource allocation and create trust and confidence in the public, Bank of Thailand Governor Prasarn Trairatvorakul, a graduate of Harvard Business School, told t
He was interviewed by The Harvard Crimson after lecturing to the Harvard Kennedy School on Monday.
The strength and quality of domestic institutions are the most important factors in determining Asian economies’ capability to transition to a more diverse and sophisticated model of growth, he said.
Institution-building is like a soccer game, Prasarn said. “There are many moving parts at the same time, the play is unpredictable and it involves an enormous amount of tacit unseen coordination among players.” During the lecture, he identified institutional features conducive to economic growth, including macroeconomic stability, rule of law, good education and low levels of corruption.
The concept of central-bank independence was also discussed.
“We should be wary of using the term ‘independence’ because independence has different meanings in different contexts for different people,” he said in response to a question from a student on whether past decisions by the Thai central bank were swayed by political considerations.
“It would be naive to think that the central bank here is completely independent of the US government,” he said.
The elected government should be involved in determining the targets and objectives of monetary policy, but “timing, strategy and other technicalities” should be independently decided by the central bank.
“The central bank has to be the neutral party that takes away the punch bowl when everyone else is drinking.”