Nations vow to curb capital flow volatility

Nations vow to curb capital flow volatility

In a joint statement issued by the G20 nations, the developed world sought to mitigate this risk by being vigilant against disorderly movement in exchange rates and by refraining from competitive devaluation of currencies.

The statement, issued after a meeting of finance ministers of the G20 nations, also said that the member countries will resist all forms of protectionist moves. The move assumes importance amid growing demand for protectionism in countries like US.

“Advanced economies, including those with reserve currencies, will be vigilant against excessive volatility and disorderly movements in exchange rates. These actions will help mitigate the risk of excessive volatility in capital inflows facing some emerging countries,” the statement said.

Emerging market economies are witnessing huge influx of foreign money due to their faster recovery from the impact of global financial crisis. This has appreciated their currencies and increased the riks of volatility in capital inflows, if the conditions back home in advanced countries worsen.

India, for example, has witnessed record inflows worth Rs 1 trillion in its stock markets, considered hot money by many.