The IMF appoints a new chief economist


THE International Monetary Fund (IMF) used to be known for its unwavering advocacy of the “Washington consensus”, a set of free-market policies including free capital flows and fiscal consolidation. Nowadays it is a little more introspective—or, perhaps, open-minded. On October 1st the fund announced that Gita Gopinath, a professor at Harvard University, will soon replace Maurice Obstfeld as its top economist. The appointment puts another pillar of orthodoxy—regarding the benefits of flexible exchange rates—on notice.

Born in India, Professor Gopinath studied for her doctorate at Princeton under Kenneth Rogoff, a former occupant of her new job, and Ben Bernanke, who later led the Federal Reserve during the financial crisis. From there she moved to the University of Chicago, and on to Harvard, where she has produced prodigious amounts of research.

Most famous is her work on currency movements. One reason countries have flexible exchange rates is to cushion their economies from external shocks. A country whose currency is falling should see its terms of trade—the cost of its exports relative to imports—fall, encouraging foreigners to buy its goods and keep its economy healthy. Professor Gopinath’s work questions that assumption. Because so much trade is invoiced in dollars, she argues, foreigners might find that their troubled neighbour’s goods are no cheaper, unless their own currency has moved against the dollar. In this “dominant currency paradigm” the strength of the greenback drives trade flows and prices. Floating currencies therefore provide less of a cushion.

The IMF role will not be Professor Gopinath’s first foray into public policy. For example, she currently advises the chief minister of Kerala, a state in India. In her new job she will oversee the fund’s twice-yearly economic forecasts. She will also be responsible for ensuring that the fund’s thinking is based on “solid theoretical and empirical grounds”, says Olivier Blanchard, another of her predecessors.

Her research suggests that she may have a fresh perspective on what does, and does not, meet that threshold. And she is distinctive in another way—she will be the first woman to hold the job.