Indeed, the acceleration in globalisation in the 1990s and 2000s was accompanied by steady growth in world imbalances. Even though the role played by these imbalances in the triggering of the last crisis is still a matter of debate, their coincidence with the rise in financial imbalances in several economies, such as the credit and securitisation boom, the sharp increase in asset prices, government deficits, etc., is striking. In short, the issue of global imbalances and that of regulation in a global economy are undeniably closely linked. Two major topics appear particularly relevant to our discussions today. The first focuses on the developments in the international monetary and financial system. The financing of current account imbalances has been facilitated by the liberalisation of capital movements that occurred in a large number of countries in the 1990s; international capital flows thus increased seven-fold between 1990 and 2010. These flows clearly had a positive effect, in particular for emerging countries which require capital to develop. However, the rapid increase in the volume of financial flows was accompanied by a rise in their volatility, which represents a new source of risk. The sudden withdrawals of international capital have played a major role in triggering and spreading financial crises over the past fifteen years. This is the main concern of the French Presidency of the G-20 and it appears crucial to me to examine it, not only from the narrow perspective of the management of capital flows, but also from the wider perspective of global liquidity.
Changes in the exchange rate should only be resorted to when everything else has failed. They should be a measure of last resort. Besides, they only produce the desired results if they are accompanied by a comprehensive set of complementary policies implemented in a controlled environment. Speculating about the exchange rate without producing conclusive proof that it is the root cause of the economy’s difficulties is, therefore, inappropriate and can have serious repercussions. The national interest requires all of us to concentrate rather on the more immediate, and well documented, reasons for the economy’s slow growth. I have elaborated on this aspect in a recent interview carried by another local newspaper. 1/1