Accord After G20 Meeting
Monday, 21 February 2011
A senior academic from the Australian School of Business has analysed the G20 finance ministers meeting which reached a compromise agreement on imbalance indicators.
Professor Fariborz Moshirian says "The ministers from the G20 nations were clearly aware that the global recovery is strengthening but it is still uneven and downside risks remain."
Over the weekend finance ministers of the world's major economies met in Paris and reached a fudged accord on how to measure imbalances in the global economy. This came after China prevented the use of exchange rates and currency reserves as indicators.
Fariborz Moshirian says there is a need to reduce excessive imbalances and maintain current account imbalances at sustainable levels by strengthening multilateral cooperation. The issues include the external imbalance composed of the trade balance and net investment income flows and transfers, taking due consideration of exchange rate, fiscal, monetary and other policies.
Ministers and central bank governors have now agreed a list of indicators. This includes private savings and borrowing, public debt and fiscal deficits, and the trade balance including net investment flows. However the Chinese delegation insisted there was no mention of foreign currency reserves or the real effective exchange rate.
Fariborz Moshirian analyses the global economy, and says "The international monetary system has proven resilient, but vulnerabilities still remain. Policies need to be adopted for prudential measures to deal with potentially destabilising capital flows. For this there needs to be a coherent approach, which was lacking in the G20 meeting."
AGSM Scholar, Professor, Director of the Institute of Global Finance
School of Banking & Finance