The Case for Re-Regulating Capital Accounts
A serious discussion of global capital-account regulations would benefit both advanced and emerging-market economies. Inded, this would adhere to the IMF’s founding principle: it is in the best interest of all members to allow countries to pursue their own full-employment macroeconomic policies, even if this requires regulating capital flows.
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NEW YORK – Today’s debates over “currency wars” reveal two paradoxical features of the global economy. The first is that there is no mechanism linking world trade rules to exchange-rate movements. Countries spend years negotiating trade rules, but exchange-rate movements can, within days, have a greater impact on trade than those painstaking deals. Furthermore, exchange-rate movements are essentially determined by financial flows and may have no effects in terms of correcting global trade imbalances.