A response to a response to “The Rupee Crunch: Reconciling Theory with Reality”

I would like to convey my sincerest gratitude for the response from the consultants. In this response I shall demonstrate that no opportunity was presented to refine my views and that technical flaws still abound in the corroboration of the central argument presented and that I have the utmost respect for my fellow citizens.

The story ‘BCCI study shows that government spending is main cause of rupee crisis’ printed on 18th April, 2012, which first revealed the primary findings of the QED study explicitly stated that “…a study by the Bhutan Chamber of Commerce and Industry shows that government expenditure and government projects are the main cause behind the rupee shortage.”

The basis for my argument was this accusation which referred explicitly to a study, and was loosely corroborated by a graph in the article. “Then again it was hardly the most offensive of crime” to defend against such a blatant statement. Since this was a story in a popular newspaper, I assumed that the consultants would have carefully submitted their major findings and central arguments.

At the time the story was printed, I had no clue as to who the consultants were. Upon discovering that the consultants were none other than some of the most competent minds in town, I was convinced that the story did not reflect the entire depth of the report and made an attempt to acquire the full report, the communication attempt for which I still have the records. However my wait was futile and I assumed that I had crossed the border between the professional and the personal. I was forced to resort to other channels and finally managed to get the report only two days ago, which I shall enthusiastically read. I am sure there will be areas in the study where our views are aligned as well as areas where they diverge.

Hence, the opportunity to refine my arguments was never presented. The brief exposure to segments of the study that I was granted through an earlier presentation also reinforced my views relating to some of the technical deficiencies. There seemed to be no mention of tests conducted for data stationary or existence of unit roots which are crucial given the potential spurious relationship between rupee shortage and investments in recent times. However, let us not meander into technical details and limit the extent of our reliance on econometric corroborations to the establishment of the direction of causality and the mechanisms through which this causality takes place such as the credit multiplier effect and not just government spending per se. The government multiplier effect is an obsolete and heavily abused term for small open economies.

To dispel any perceptions that I have been repeatedly sending the referred article to different newspapers sequentially to cause frustration, I must clarify that I sent the article a long time ago. Of course many new hypotheses have emerged since then and in hindsight we all become much wiser. But I do concur with the authors that this is an issue of national importance and we should engage in discussions, so such expressions like the response letter is much welcome.

On a lighter note, I would like to extend my Tashi Delek to the QED consulting group on their establishment and hope that they will set the precedence for intellectual meanderings for aspiring researchers. I look forward to more publications from them and sincerely apologize if I gave the impression of attempting to demean my fellow citizens. After all even Paul Krugman accused Milton Friedman’s arguments of bordering on intellectual dishonesty.


A humble civil servant,  Nyingtob

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