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Some economists give former BOJ head good grade
By Julian Richardson Assistant Business co-ordinator
richardsonj@jamaicaobserver.com
Wednesday, November 04, 2009
At least two economists believe that former Bank of Jamaica (BOJ) governor, Derick Latibeaudiere, who was fired less than a week ago, performed strongly as head of the country's central bank up to a change of political administration two years ago.
Latibeaudiere had his job terminated last Friday, after 13 years at the helm of the central bank, because of disagreements over the governor's contract valued at over $38 million per annum, which Prime Minister Bruce Golding said was higher than the chairman of the US Federal Reserve.
Looking back at Latibeaudiere's tenure after his dismissal, some said the governor had displayed a level of arrogance with the financial sector and impatience with views that opposed his view on major policy issues. One of the most topical issues, was his opposition to calls from the private sector to significantly lower interest rates.
However, economists Errol Gregory and Dr Davidson Daway chipped in that Latibeaudiere's duration as central bank governor, was, in the most part, a successful one, which has been clouded by controversial issues in the latter part of his tenure.
Gregory, who is a lecturer at the University of Technology, said that while he disagreed with the governor's stance on interest rates, he believes that Latibeaudiere, enjoyed much success, particularly in the early 2000s, when Government policy was geared at exchange rate stability and inflation control.
"The data will show that certainly in the period up to 2006, entering 2007, the monetary policy was successful in terms of containing inflation with some relative level of exchange rate stability and we can definitely say that had to do with the stewardship of the governor," said Gregory.
Daway, a retired UN economist, concurred: "When we analyse Mr Latibeaudiere, we would have to say that over a period of about 10 years, he was very effective. There was stability (and) he actually bought the country to a point where people could feel comfortable for a while."
Both economists opined that Latibeaudiere's firm rein as head of the BOJ began to deteriorate after the Jamaica Labour Party administration went into office in 2007.
Gregory noted that the root of the differences between the central bank boss and Government lied in their differences on monetary and fiscal policy.
"The administration changed (in 2007) and then there was the onset of the depression, and I think that there was a feeling that we had exhausted that period of exchange rate stability," said Gregory. "The focus tended to be now on how are we going to grow the economy plus how we were going to address this heavy debt burden that we had."
The university lecturer said the differences subsequently culminated with the widely unpopular decision by the BOJ to sharply increase interest rates to 24 per cent late last year in the midst of the global recession. The BOJ, at the time, supported its decision to increase interest rate as part of its efforts to protect the country from the "disorderly depreciation in the exchange rate, which if allowed to persist, will only precipitate higher inflation and greater macroeconomic instability."
According to Gregory, that decision by the BOJ caused louder opposition at the Governor's decision of keeping the policy of protecting the exchange rate in tact.
"I think by that time, with the recession, there was a feeling that we could now more aggressively think of pulling rates down," said Gregory. "Even though there might have been the fear that there might be a run on the currency, there was a feeling that if we use that opportunity to pull rates down, there wasn't that real danger of capital flight the way we had feared in the past.
"Because of what was happening in America and the world generally, we didn't believe the attraction of moving money outside of Jamaica to get one per cent or one and a half per cent in the states would have been that strong," he added.
Daway, on the other hand, widely believes that Latibeaudiere's job was affected by interference from Government.
"We cannot elude the fact that it has to be a joint policy effort in terms of our economy and in terms of our fiscal policies. If his idea wasn't popular, it would be trashed because we have a system whereby the Minister of Finance has the type of authority to dictate exactly what should be Jamaica's policy on financial matters, especially when it comes to fiscal responsibility," said Dr Daway. "Like everything else, there are people who you can work with because they give you some latitude, on the other hand, there are people who you cannot work with.
Daway continued: "When anything became new, Latibeaudiere had to adjust to (Government's) thinking ...He had to align himself with the policies of those who were in power at the time, so he would have to submit to the policies that they wanted, good, bad or indifferent."
To this end, Daway believes that the aforementioned move to sharply increase interest rates last year was not Latibeaudiere's idea, although he took the brunt of the criticism for it.
"I know for sure that that decision was not influenced by just Mr Latibeaudiere, what happened is that there is a level of arrogance in terms of our Ministry of Finance where they believe that they have a level of authority," said Daway. "A man who has been in the position for the length of time that he was, he understood practically every nook and cranny of fiscal policy. He always made good judgements when it came to dropping interest rates and raising interest rates. But for that period of time, we went through a state of turmoil which gives me reason to believe that those policies that he made then were not of him.'
Daway also criticised the Government for initially leaving Latibeaudiere out of the International Monetary Fund (IMF) negotiations.
"At the point when Jamaica was in the gutter and decided to go to the IMF, they left out the most important person, which is the governor of the BOJ," he said. " He would've been the best person to negotiate on behalf of Jamaica because he had the intimate knowledge necessary to start up that negotiation, but for the life of me I didn't understand how Mr (Don) Wehby was chosen over him and he is not even an economist."
http://www.jamaicaobserver.com/magaz...GOOD_GRADE.asp
By Julian Richardson Assistant Business co-ordinator
richardsonj@jamaicaobserver.com
Wednesday, November 04, 2009
At least two economists believe that former Bank of Jamaica (BOJ) governor, Derick Latibeaudiere, who was fired less than a week ago, performed strongly as head of the country's central bank up to a change of political administration two years ago.
Latibeaudiere had his job terminated last Friday, after 13 years at the helm of the central bank, because of disagreements over the governor's contract valued at over $38 million per annum, which Prime Minister Bruce Golding said was higher than the chairman of the US Federal Reserve.
Looking back at Latibeaudiere's tenure after his dismissal, some said the governor had displayed a level of arrogance with the financial sector and impatience with views that opposed his view on major policy issues. One of the most topical issues, was his opposition to calls from the private sector to significantly lower interest rates.
However, economists Errol Gregory and Dr Davidson Daway chipped in that Latibeaudiere's duration as central bank governor, was, in the most part, a successful one, which has been clouded by controversial issues in the latter part of his tenure.
Gregory, who is a lecturer at the University of Technology, said that while he disagreed with the governor's stance on interest rates, he believes that Latibeaudiere, enjoyed much success, particularly in the early 2000s, when Government policy was geared at exchange rate stability and inflation control.
"The data will show that certainly in the period up to 2006, entering 2007, the monetary policy was successful in terms of containing inflation with some relative level of exchange rate stability and we can definitely say that had to do with the stewardship of the governor," said Gregory.
Daway, a retired UN economist, concurred: "When we analyse Mr Latibeaudiere, we would have to say that over a period of about 10 years, he was very effective. There was stability (and) he actually bought the country to a point where people could feel comfortable for a while."
Both economists opined that Latibeaudiere's firm rein as head of the BOJ began to deteriorate after the Jamaica Labour Party administration went into office in 2007.
Gregory noted that the root of the differences between the central bank boss and Government lied in their differences on monetary and fiscal policy.
"The administration changed (in 2007) and then there was the onset of the depression, and I think that there was a feeling that we had exhausted that period of exchange rate stability," said Gregory. "The focus tended to be now on how are we going to grow the economy plus how we were going to address this heavy debt burden that we had."
The university lecturer said the differences subsequently culminated with the widely unpopular decision by the BOJ to sharply increase interest rates to 24 per cent late last year in the midst of the global recession. The BOJ, at the time, supported its decision to increase interest rate as part of its efforts to protect the country from the "disorderly depreciation in the exchange rate, which if allowed to persist, will only precipitate higher inflation and greater macroeconomic instability."
According to Gregory, that decision by the BOJ caused louder opposition at the Governor's decision of keeping the policy of protecting the exchange rate in tact.
"I think by that time, with the recession, there was a feeling that we could now more aggressively think of pulling rates down," said Gregory. "Even though there might have been the fear that there might be a run on the currency, there was a feeling that if we use that opportunity to pull rates down, there wasn't that real danger of capital flight the way we had feared in the past.
"Because of what was happening in America and the world generally, we didn't believe the attraction of moving money outside of Jamaica to get one per cent or one and a half per cent in the states would have been that strong," he added.
Daway, on the other hand, widely believes that Latibeaudiere's job was affected by interference from Government.
"We cannot elude the fact that it has to be a joint policy effort in terms of our economy and in terms of our fiscal policies. If his idea wasn't popular, it would be trashed because we have a system whereby the Minister of Finance has the type of authority to dictate exactly what should be Jamaica's policy on financial matters, especially when it comes to fiscal responsibility," said Dr Daway. "Like everything else, there are people who you can work with because they give you some latitude, on the other hand, there are people who you cannot work with.
Daway continued: "When anything became new, Latibeaudiere had to adjust to (Government's) thinking ...He had to align himself with the policies of those who were in power at the time, so he would have to submit to the policies that they wanted, good, bad or indifferent."
To this end, Daway believes that the aforementioned move to sharply increase interest rates last year was not Latibeaudiere's idea, although he took the brunt of the criticism for it.
"I know for sure that that decision was not influenced by just Mr Latibeaudiere, what happened is that there is a level of arrogance in terms of our Ministry of Finance where they believe that they have a level of authority," said Daway. "A man who has been in the position for the length of time that he was, he understood practically every nook and cranny of fiscal policy. He always made good judgements when it came to dropping interest rates and raising interest rates. But for that period of time, we went through a state of turmoil which gives me reason to believe that those policies that he made then were not of him.'
Daway also criticised the Government for initially leaving Latibeaudiere out of the International Monetary Fund (IMF) negotiations.
"At the point when Jamaica was in the gutter and decided to go to the IMF, they left out the most important person, which is the governor of the BOJ," he said. " He would've been the best person to negotiate on behalf of Jamaica because he had the intimate knowledge necessary to start up that negotiation, but for the life of me I didn't understand how Mr (Don) Wehby was chosen over him and he is not even an economist."
http://www.jamaicaobserver.com/magaz...GOOD_GRADE.asp
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