Political Risk Latin America Blog @PolRiskLatam

IMF pounds at emerging and developed countries, but forgets self-criticism

Posted in News and Articles, Political Risk by politicalrisklatam on April 19, 2011

by Merco Press News, April 19th, 2011.

The IMF criticized developing countries for not responding strongly enough to the surge of hot money into their markets, saying the result could be a hard economic landing.

After meeting in Washington DC, the IMF said in a note to G20 major economies that huge inflows of speculative capital had sped up economic growth in emerging markets, but also pushed up inflation and the response by developing country governments had “been insufficient to address these rising pressures, portending risks of a hard landing.”

It said while capital flows to emerging markets have moderated, and in some cases been reversed, they remained high and volatile.

The IMF said emerging market economies have tried to slow the flows through a combination of macroeconomic policies as well as capital control measures, but are delaying further macroeconomic responses such as raising interest rates.

In Brazil, the IMF said there was scope to continue monetary policy tightening, while in China there should be less reliance on quantitative limits and reserve requirements and more focus on raising interest rates. (continue reading… )

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