However, what is important is that co-ordination does exist on various economic aspects, including sustainable, balanced growth, financial sector reforms, and reform of international financial institutions. Excess global liquidity on account of easy monetary policies in advanced economies, coupled with the combination of promising growth prospects, improved governance and capital account liberalisation, made emerging market economies very attractive investment destinations.
Consequently, currency tensions came to the fore early last year as volatile capital flows returned to emerging market economies, resulting in currency appreciation and thereby eroding export competitiveness and disrupting macroeconomic stability. Apart from currency appreciation, these inflows have also increased the possibility of bubbles in asset prices in emerging economies.