Rethinking common goods in monetary policy from a financially integrated Global South framework: central banking, financial flows and the loss of monetary policy autonomy

Sanchari Choudhury

Chapter 4 in Central Banking, Monetary Policy and the Common Good, 2026, pp 53-73 from Edward Elgar Publishing

Abstract: This chapter interrogates the dominant framing of low inflation as the ultimate common good served by monetary policy, particularly within the context of neoliberal economic governance. Drawing on heterodox political economy perspectives, it challenges the technocratic consensus that has long justified inflation targeting and austerity in both advanced and developing economies. Focusing on India as a case study, the chapter analyzes the evolving composition and management of capital flows, the gradual relaxation of capital controls, and the shifting contours of monetary and exchange rate policy in the post-liberalization period. Despite a largely pegged exchange rate regime and incomplete sterilization practices, India's capital account has undergone significant transformation – marked by increasing integration with global financial markets and a widening current account – without parallel reforms in monetary governance. Interest rate movements since 2004, along with the Reserve Bank of India's post-2008 foreign exchange interventions, reflect the growing tension between domestic policy autonomy and global financial pressures. By examining macroeconomic aggregates, foreign exchange reserves, capital flows, and central bank balance sheets, the chapter highlights the financial vulnerabilities that arise from global market integration and the constraints placed on monetary policy autonomy in the periphery. Ultimately, it argues for a reconceptualization of monetary policy's objectives beyond inflation control – toward a broader vision of the common good grounded in economic sovereignty, gender equality, financial stability, and equitable development.

Keywords: Central banking; Common good; Financial flows; Global South; Inflation targeting; Loss of monetary policy autonomy (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035348299
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