tag:blogger.com,1999:blog-920831647912894746.post4654753485291798294..comments2023-09-27T13:28:05.008+05:30Comments on Tread the middle path: Currency Reform Bill gains ground?Srikarhttp://www.blogger.com/profile/17073379167588035440noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-920831647912894746.post-23684273396606758982013-07-20T06:36:34.798+05:302013-07-20T06:36:34.798+05:30srikar,
what's ur opinion on this? if forex m...srikar,<br /><br />what's ur opinion on this? if forex mkt policies have to be regulated, by WTO or some other agency, then what form should it take?<br /><br />i am asking this because, unlike directly trade related issues like tariffs etc, exchange rate policies are very closely inter-twined with monetary policy and policies that regulate external capital flows (the impossible trinity). these three form the three pillars of any macroeconomic stabilization policy that open economies follow. <br /><br />regulating one, would effectively (in a very direct sense) mean regulating the other two. it is a very small distance for us to be talking about regulating monetary policy itself. we need to remember that currency devaluations (which by definition has a beggar-thy-neighbour dimension) have been a commonly used critical policy instrument for regaining external competitiveness by countries. in fact, the biggest criticism of the eurozone experiment is that it denied countries the flexibility to devalue their way out of a sovereign debt and external competitiveness crisis.<br /><br />by the same logic, we should be arguing even more vehemently about regulating monetary policy itself, since the extraordinary monetary accommodation that the developed economies have been following for the past five years has done much more damage to the world economy (it has had strongly destabilising influence on emerging markets) than anything in the forex markets.<br /><br />i feel that the whole issue has assumed significance because of China. i also agree that China's currency policies hurt similarly placed emerging economies like Brazil and India more than the developed economies. but how long is it going to last? <br /><br />tomorrow if Brazil lowers its corporate tax rate as low as Ireland, thereby sucking businesses and distorting the business practices of MNCs, will we start talking about harmonizing national corporate tax rates? ireland does not attract much attention only because of non-threatening size...Urbanomicshttps://www.blogger.com/profile/16956198290294771298noreply@blogger.com