Financial safety nets needed or safer capital flows: bnm
Published on: Wednesday, January 16, 2019
By: Bernama
KUALA LUMPUR: Stay up-to-date by following Daily Express’s Telegram channel.
Daily Express Malaysia
ADVERTISEMENT
Assistant governor Marzunisham Omar said to this end, Asean+3 countries (China, Japan and South Korea) have achieved a significant milestone under the Chiang Mai Initiative Multilateralisation when the fund size was doubled to US$240 billion in 2014.
“Moving forward, an important consideration is to bring the various bilateral swap arrangements and regional financial safety nets together with the International Monetary Fund’s safety net into a coherent framework that will enhance their complementarities and thus, effectiveness in supporting emerging economies in dealing with short-term capital flow volatility,” he said.
He said this in his welcoming remarks at the World Bank’s Conference on “Globalisation: Contents and Discontents” here on Tuesday.
Secondly, he said there is a need for emerging economies to constantly refresh their policy toolkit to deal with the multifaceted risks confronting these economies and to be flexible in implementing them.
ADVERTISEMENT
“Clearly, capital flow volatility poses considerable challenges to emerging economies’ policymakers in safeguarding financial and macroeconomic stability,” he said, adding that policy configuration would need to be pragmatic and premised on the risk that is being managed.
Marzunisham said financial globalisation has expanded tremendously with cumulative global bond and equity market flows now more than 80 times larger than that in the year 2000 and far exceeded trade flows.
ADVERTISEMENT
If properly managed, he said financial integration could catalyse a more efficient allocation of productive capital and know-how transfers with the intended benefits.
However, financial globalisation has also been accompanied by highly-volatile short-term portfolio flows, which frequently led to major disruptions to emerging economies’ financial markets, he added.
“In Malaysia, two-way capital flows have increased by almost three-fold in the aftermath of the global financial crisis. Similar to other emerging economies, we have also experienced several episodes of sharp capital flow reversals.– Bernama
