By Ben Leubsdorf 

JACKSON HOLE, Wyo.--The role of politics and history is a little-discussed but important force in determining the goals and tactics of economic policy makers, Reserve Bank of India Gov. Raghuram Rajan said Saturday.

For instance, when it comes to modern central banks' focus on targeting inflation, "which side of the inflation band is emphasized stems from history and political economy," Mr. Rajan said at the Federal Reserve Bank of Kansas City's annual economic symposium.

He said some have argued the U.S. focus on the costs of low inflation or deflation reflects in part farm and business bankruptcies in the 1920s and 1930s, while the German experience with very high inflation in the 1920s "would explain the focus on the upper bound, that is, protecting against high inflation." He also asked if Japan's aging population and "the political power of the elderly" might help explain the country's tolerance for deflation.

Mr. Rajan said that "political economy is not an aberration, but a reality that should be accounted for in our policy analysis."

Mr. Rajan spoke in Jackson Hole on Saturday on a panel about global inflation dynamics with Federal Reserve Vice Chairman Stanley Fischer, Bank of England Gov. Mark Carney and European Central Bank Vice President Vítor Constâncio.

Unlike his colleagues in advanced economies, where inflation has remained stubbornly sluggish in recent years, Mr. Rajan noted that he is trying to bring down India's high inflation rate while navigating complications like manufacturers who are hurt by higher interest rates and a stronger currency.

The Reserve Bank of India's policy process, among other things, involves "trying to take the heat away from the political economy and put it on frameworks, technical models, projections, et cetera, and say, 'What we're doing is disinflation without worrying too much about distribution, '" he said. "To some extent, that framework allows us protection."

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

August 29, 2015 15:36 ET (19:36 GMT)