He has done pioneering empirical and theoretical work across a remarkably broad field of topics. His main interests, however, lie in banking, corporate finance and economic development, and especially the role played by finance in economic development. In his paper entitled ʻFinancial dependence and growth’, co-authored with Luigi Zingales, he found evidence of a positive causality between the level of development of a country’s financial sector and income growth. According to Google Scholar, this paper has been cited more than 9,000 times. This is on a par with Milton Friedman’s influential 1967 presidential address to the American Economic Association on the concept of the natural rate of unemployment. Raghu’s trademark is his willingness to challenge the accepted wisdom of the day. The bestknown example of this took place at the Jackson Hole symposium in 2005. There he warned of an upcoming meltdown in the global financial system, with substantial negative consequences for the real economy. Three years later, the global financial crisis broke out. And it was largely caused by the very factors that he had identified. For Raghu, financial markets play an important role for economic growth in the long term. However, financial markets have a tendency to deviate from fundamental values. Financial regulation has therefore been a concern of his since well before the crisis. What are his recommendations in this regard? To be effective, regulation must avoid being procyclical, that is, over-regulating in a bust and de-regulating in a boom. Rather, regulation must be comprehensive and contingent. Consider two types of such regulation.
First, instead of being required to raise permanent capital, institutions should arrange for capital to be infused when they are in trouble. One example of contingent capital is for banks to issue debt that Page 2/4  automatically converts to equity under specified conditions. The second type of regulation is aimed at ‘too big to fail’ institutions. Instead of limiting their size and activities, a more sustainable form of regulation requires these institutions to develop a plan that would enable them to be resolved over a weekend. Both of these measures proposed by Raghu have become fundamental elements of banking regulation in Switzerland since the financial crisis. Impressive policymaker I have known Raghu for many years. From my personal experience I can say with conviction that he is not only an exceptional scholar but also an impressive policymaker. His career as a policymaker began at the International Monetary Fund (IMF). In the aftermath of the 1997 Asian financial crisis, the IMF wanted to strengthen its financial expertise. Anne Krueger, then the IMF’s First Deputy Managing Director, asked Raghu if he would be interested in becoming the IMF’s Chief Economist. Raghu replied: ‘Anne, I don't know any macroeconomics’. However, this claim was neither convincing nor credible for the IMF’s Deputy Managing Director, and so at the age of 40, Raghu was appointed as the IMF’s Chief Economist. He was both the youngest-ever person to be assigned the position, and the first from an emerging-market nation.