When government debt and deficits are large enough, a central bank can find itself managing the sovereign's borrowing needs rather than pursuing its own mandate on inflation, growth, or employment - a condition known as fiscal dominance. Its reach extends well beyond the interest rate decision: it can shape bank recapitalisation and regulatory forbearance, delay default-disclosure norms that markets rely on for credit assessment, tilt liquidity operations and government bond market regulation, constrain capital flow management, and erode the central bank's own balance sheet strength. The cumulative effect shows up as crowded-out private credit, external sector fragility, and weak monetary transmission — problems that compound rather than resolve on their own. This session examines how these pressures operate in emerging markets, where fiscal space is tight and financial markets are still developing, and what scope central banks retain to hold the line.
About the Speaker
Viral Acharya is the C.V. Starr Professor of Economics at NYU Stern School of Business. Between 2017 and 2019 he served as Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy, Financial Markets, Financial Stability, and Research, and became a prominent voice for central bank independence during that period. His RBI-era speeches, collected in Quest for Restoring Financial Stability in India, introduced "fiscal dominance" as a lens for understanding how sovereign financing needs constrain monetary policy.
The event will be held in a hybrid format; however, in-person attendance is strongly encouraged to participate in the discussion. Registration is mandatory.
