Raghuram Rajan

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Raghuram Rajan

Birth	February 3, 1963 (1963-02-03) (age 46) Bhopal, India
Nationality	Indian American
Institution	University of Chicago
Field	Financial economics
Alma mater	MIT (Ph.D.) IIM Ahmedabad (M.B.A.) IIT-Delhi (B.E.)
Awards	2003 Fischer Black Prize
Information at IDEAS/RePEc

Raghuram Govind Rajan (born 3 February 1963) is an American economist of Indian nationality.^[1] He is the Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business, University of Chicago.

Early life

Raghuram Rajan was born in Bhopal, India. In 1985, he graduated from the Indian Institute of Technology, Delhi, with a bachelor's degree in Electrical Engineering; he earned an MBA at the Indian Institute of Management, Ahmedabad in 1987. He received his PhD from the Massachusetts Institute of Technology (MIT) in 1991 with a thesis entitled "Essays on Banking."

Career

Upon graduation, Rajan joined the Booth School of Business at the University of Chicago.

He was the "Economic Counselor and Director of Research" (Chief Economist) at the International Monetary Fund from September 2003 until January 2007; he has thus far been the youngest person to hold the position. In 2003, he was also the inaugural recipient of the Fischer Black Prize awarded by the American Finance Association for contributions to the theory and practice of finance by an economist under age 40. ^[2]

In 2005, at a celebration honoring Alan Greenspan, who was about to retire as chairman of the U.S. Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector.^[3] In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom."^[4] Rajan argued that financial sector managers were encouraged to

(take) risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks.[...] But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialize, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimized.

Thus Rajan described the 2007-2008 collapse of the world's financial system.

The response to Rajan's paper at the time was negative. For example, former U.S. Treasury Secretary and former Harvard President Lawrence Summers called the warnings “misguided.”^[5]

In April 2009, Rajan penned a guest column for The Economist, in which he proposed a regulatory system that might minimize boom-bust financial cycles. ^[6]

Other roles

Rajan has also been a visiting professor at the Massachusetts Institute of Technology Economics Department; at the Kellogg School of Management at Northwestern University; at the Sloan School of Management; and the Stockholm School of Economics. He also has worked as a consultant for the Indian Finance Ministry, World Bank, Federal Reserve Board and Swedish Parliamentary Commission.^[7] Rajan was appointed an honorary adviser to Indian Prime Minister Manmohan Singh in November 2008, and headed a committee^[8] appointed by the Planning Commission on financial reforms in India.

Publications

His book, Saving Capitalism from the Capitalists, was co-authored with fellow Chicago Booth professor Luigi Zingales and published in 2004. He has also published in the Journal of Financial Economics, Journal of Finance and Oxford Review of Economic Policy.

References