Emerging economies'' growth jacking up commodity prices: US Fed

Published: Saturday, February 19, 2011, 0:00 [IST]
 

Chandra Shekhar

Paris, Feb 18 (PTI) The US Federal Reserve today blamedhigh growth in emerging nations for rising commodity priceswhich in turn is affecting the global economy.

"Resurgent demand in the emerging markets has contributedsignificantly to the sharp recent run-up in global commodityprices," Federal Reserve Chairman Ben Bernanke said here atthe Banque de France Financial Stability Review Launch Event.

Bernanke''s remarks coincide with the meeting of financeministers of G20. Generally, governors and heads of centralbank meet a day or two in advance of the meeting of theirFinance Ministers.

India along with several other emerging economies likeChina has retained high growth, even up to 10 per cent, evenwhile the global economy was grappling with the slowdown andrecession in several countries.

However, the emerging economies face the new challenge ofinflation, particularly of food items.

Bernanke also said capital flows to emerging economiesare posing some notable challenges for internationalmacroeconomic and financial stability.

"These capital flows reflect in part the continuedtwo-speed nature of the global recovery, as economic growth inthe emerging markets is far outstripping growth in theadvanced economies," he said.

Bernanke said the policy makers in emerging market haverange of powerful tools to manage their economies and preventoverheating.

However, "... it should be borne in mind that spilloverscan go both ways," he said.

He said resurgent demand in the emerging markets hascontributed to the sharp recent run up in global commodityprices.

In this backdrop, "our collective challenge is to reshapethe international monetary system to foster strong,sustainable growth and improve economic outcomes for allnations," he said.

Bernanke said to achieve a more balanced internationalsystem over time, countries with excessive and unsustainabletrade surpluses will need to allow their exchange rates tobetter reflect market fundamentals and increase their effortsto substitute domestic demand for exports.

"At the same time, countries with large, persistent tradedeficits must find ways to increase national saving, includingputting fiscal policies on a more sustainable trajectory," hesaid.

Capital flows to emerging markets have been driven bymany factor, including expectations of more rapid growth andthus higher investment returns in the emerging marketeconomies than in advanced economies.


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