Nobel laureate economist Douglas W Diamond has said that the stability of the rupee against the dollar depends on exchange rates. "The continuous depreciation of the rupee will stabilize when the pace of appreciation of the US dollar slows down," he said.
In an interview with the news agency PTI, he said the dollar strengthens when the US hikes exchange rates unexpectedly. He said, when interest rates in the US and India come to almost the same level, things will start normalizing.
Let us tell you, Professor Douglas W. Diamond at the Booth School of Business of the University of Chicago has received the Nobel Prize jointly with Ben Bernanke, former chairman of the US Central Bank Federal Reserve, and American economist Philip H. Dibwig.
It is difficult to make accurate predictions of exchange rates, the Nobel laureate said. When the US raises rates unexpectedly, the dollar strengthens. When the rate hike in the US slows down, the rupee will stabilize. Let us tell you that on Friday, the rupee was up by 16 paise at 81.54 per dollar against the US dollar.
Diamond said the supervisory system works better when banks have capital. Competition among banks is necessary for depositors to get good returns, he said. Let us tell you, Nobel laureate Diamond worked on the 'Theory of Banking' in 2001 with former RBI Governor Raghuram G. Rajan.
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