Gita Gopinath, the World’s New Economic Growth Genius

(Bloomberg Businessweek) -- The IMF is a pillar of the post-World War II global order at a time when pillars of the post-World War II global order are under attack. The fund’s headquarters are three blocks from the White House, where President Trump routinely threatens to pull the U.S. out of multilateral institutions it created. Relations have been tense: The IMF has slammed Trump’s trade war as a threat to world growth, and the U.S. Department of the Treasury has rejected a boost in IMF funding.

That might have been what Christine Lagarde, the outgoing IMF managing director who picked Gopinath for the job, meant when she called Gopinath “exceptionally well placed to lead our research department at this important juncture.” Born in Kolkata to a father who runs a farmers collective and a mother who ran a preschool, Gopinath moved to the U.S. in 1994. She got a master’s degree, her second, from the University of Washington, followed by a doctorate from Princeton, where Ben Bernanke was one of her advisers before he became Federal Reserve chairman. Since 2005 she’s taught in Harvard’s economics department. Now, she says, she’s leading research into “some of the most important and sensitive policy debates of our time.”

Her work this year has shown that the cost of U.S. tariffs on imports from China are borne almost entirely by American importers and consumers, not Chinese producers, contradicting the president’s assertion. And, building on work she did at Harvard, she and some IMF colleagues documented a sharp short-term hit to economic growth in India following Prime Minister Narendra Modi’s shock 2016 program, which invalidated certain large bank notes to fight corruption and terrorism.

But Gopinath’s main area of interest is on the effects of the U.S. dollar’s dominance in international trade. She’s been studying what happens when buyers and sellers price their products in dollars—the lingua franca for international commerce—even when neither party is American. What she’s found is that when fragile nations price this way they lose resilience to economic shocks: When their currencies fall, their imports cost more, as expected. But they don’t get an offsetting boost on the export side; because their exports are denominated in dollars, the depreciation doesn’t make their exports cheaper. Meanwhile, their currency’s decline makes it harder to borrow from abroad. Brazil and Peru have been walloped in this way.

How IMF member nations will apply her work to help struggling economies is unclear. Meanwhile, Gopinath has another legacy on her mind. It’s unfortunate, she says, that economics is so male-dominated. “My hope is that my tenure both at Harvard and at the IMF can help change that status quo,” she says, “and encourage young women to enter the field knowing they can also make a difference in the world of economics.”