I have extracted excerpts from the press briefing that deal with the currency issue.
Transcript of Press Briefing on the International Monetary Fund’s World Economic Outlook by Olivier Blanchard, Economic Counsellor and Director of the Research Department,
Thursday, October 1, 2009
MR. MURRAY: Good day. I am William Murray, Chief of Media Relations at the IMF. This is the WEO press briefing. We are live and on the record.
Joining us today is Olivier Blanchard, Economic Counsellor and Director of the Research Department; Jorg Decressin, Chief of the World Economic Studies Division; and Krishna. Srinivasan, Chief of the Multilateral Surveillance Division of the Research Department. Mr. Blanchard will have some brief opening remarks and then we will take your questions.
MR. BLANCHARD: Thank you Bill Good morning.
So, if you put this together and you think that eventually fiscal deficits will have to be smaller and private demand or private domestic demand is going to be weak in some advanced countries, especially in the U.S., this implies that these countries will have to rely more on foreign demand, on net exports and, by implication, this implies that some emerging market countries will need to do the reverse, rely less on net exports. (W1)
Some of it will happen through exchange rate adjustment, but it is likely to require also more active policies, for example policies aimed at increasing social insurance, reducing saving and increasing consumption, for example in the case of China.
QUESTION: I just want to pick up on two of the points you mentioned of potential difficulty in the recovery from the report, one on global imbalances where you point to the need to eventually move to floating exchange rates to make that more effective. Presumably, you are referring to China there. I wonder what your view is as to the political impetus in China for doing that and moving toward that policy, which, of course, the IMF has long urged.
MR. BLANCHARD: On your two points, when you think about global rebalancing, you realize it is going to have to come from a number of measures and from a number of adjustments. It is very hard to see how this could happen at current exchange rates. In general, it is very hard to see how global rebalancing does not come with an appreciation of Asian currencies of various degrees, depending on the country. It is very hard to see how this would not be part of the package.
Transcript of Press Briefing on the International Monetary Fund’s World Economic Outlook by Olivier Blanchard, Economic Counsellor and Director of the Research Department,
Thursday, October 1, 2009
MR. MURRAY: Good day. I am William Murray, Chief of Media Relations at the IMF. This is the WEO press briefing. We are live and on the record.
Joining us today is Olivier Blanchard, Economic Counsellor and Director of the Research Department; Jorg Decressin, Chief of the World Economic Studies Division; and Krishna. Srinivasan, Chief of the Multilateral Surveillance Division of the Research Department. Mr. Blanchard will have some brief opening remarks and then we will take your questions.
MR. BLANCHARD: Thank you Bill Good morning.
So, if you put this together and you think that eventually fiscal deficits will have to be smaller and private demand or private domestic demand is going to be weak in some advanced countries, especially in the U.S., this implies that these countries will have to rely more on foreign demand, on net exports and, by implication, this implies that some emerging market countries will need to do the reverse, rely less on net exports. (W1)
Some of it will happen through exchange rate adjustment, but it is likely to require also more active policies, for example policies aimed at increasing social insurance, reducing saving and increasing consumption, for example in the case of China.
QUESTION: I just want to pick up on two of the points you mentioned of potential difficulty in the recovery from the report, one on global imbalances where you point to the need to eventually move to floating exchange rates to make that more effective. Presumably, you are referring to China there. I wonder what your view is as to the political impetus in China for doing that and moving toward that policy, which, of course, the IMF has long urged.
MR. BLANCHARD: On your two points, when you think about global rebalancing, you realize it is going to have to come from a number of measures and from a number of adjustments. It is very hard to see how this could happen at current exchange rates. In general, it is very hard to see how global rebalancing does not come with an appreciation of Asian currencies of various degrees, depending on the country. It is very hard to see how this would not be part of the package.