OECD Urges Exchange Flexibility, Sees Role for Capital Controls

The Organization for Economic Cooperation and Development urged greater exchange-rate flexibility in emerging markets and changes to fiscal policy in developed economies to trim risks related to capital flows.

To minimize risks linked to large capital flows, reforms are needed, “particularly in respect of fiscal policy and exchange rates,” the Paris-based organization said today in a report. “There may also be a role for some form of capital controls, if designed in a way that minimizes distortions in long-term investments and ordinary business activities.”

The report comes as Group of 20 countries are looking for a set of rules on when capital controls should be used as part of an effort to manage the global economy and trim imbalances.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.