Several questions continue to swirl around the collapse of Silicon Valley Bank and its larger implications. In this special episode, Chicago Booth’s Raghuram Rajan – former Governor of the Reserve Bank of India and IMF Chief Economist – joins Bethany and Luigi to explore the risks in the financial system and possible solutions.
Rajan discusses a paper he presented (with NYU Professor Viral Acharya) at the Federal Reserve’s Jackson Hole conference in 2022, arguing that the Fed’s liquidity provision left the financial sector more sensitive to shocks, and suggesting that the expansion and shrinkage of central bank balance sheets involves tradeoffs between monetary policy and financial stability. Together with the hosts, Rajan discusses the path forward on inflation, given economic and political pressures, and his recommendations on how to manage risks and tradeoffs.
