February 10, 2011

The IMF and the World Bank did not listen then… and, unfortunately, they still do not listen enough

Sir Alan Beattie in “Watchdog says IMF missed crisis risks” February 10 makes reference to ignored warnings such as those delivered in 2005 by Raghuram Rajan, the then chief economist of the fund, and which mentioned the threat of widespread financial instability.

Mr Rajan was far from being alone in that. I myself, as an Executive Director of the World Bank, in a formal statement at the Board in 2004 said: “We believe that much of the world’s financial markets are currently being dangerously overstretched through an exaggerated reliance on intrinsically weak financial models that are based on very short series of statistical evidence and very doubtful volatility assumptions.”

No one wanted to listen then… the real problem though is that most still don’t. (And this would include also FT)