CPF215 | Public Finance and the Struggle for Control Over Money

he transition from commodity-based to fiat money during the 20th century necessitated the development of public finance as we know it today. The institutional arrangement of public finance that had evolved during this period was meant to curb the moral hazards and limitations that could arise from unfettered money creation and public spending. The coordinated interventions made by central banks and governments during the Great Recession and the Covid Pandemic reflected a decisive shift in our understanding of how money is created and administered by the State. The monetary and fiscal effects of the response to these episodes are being felt to this day.

This course is aimed at providing a doctrinal classification and comparative evaluation of the relationship between the central bank and the executive branch across seven jurisdictions, including India. This will include examining the potential for monetary financing, i.e., central bank funding of public spending -and, the risks and uncertainty that arise from this practice. Class discussions will be organised to provoke ideas towards reimagining the existing institutional arrangements for a political system like India, so that money is used by public authorities in a targeted, transparent and accountable manner.