Conference Proceedings

(CP4/2014) SEACEN High-Level Seminar on Global Liquidity and Impact of Capital Flows on Exchange Rates in Emerging Asia

Published Date : December 2014


The uncertainty of QE tapering in the advanced countries has generated expectations concerning capital outflows and deepening of sell-off assets in the region. In fact, the Institute of International Finance (IIF), reported that in early 2013 emerging market conditions have continued to be quite choppy, including a significant market correction. However, retrenchment of flows in the middle of 2013 from the emerging economies is proven to be temporary as the global economy gained pace and the markets absorbed the impact of Fed tapering since its decision in December 2013. While the IIF continues to expect a gradual rebound in capital flows to emerging economies in 2014 and 2015, there are some elements of uncertainty, in particular when the advanced economies start to increase their key interest rates, which may result in the narrowing of interest rate differentials, resulting in a surge of capital outflows from this region.

Hence, the challenge to policymakers in the developing economies is thus how to manage these boom-bust cycles of capital flows to ensure that they do not have any long-term adverse effect on the economic growth and financial stability. To address these issues, policy makers are implementing or searching for appropriate policy responses.

Among other things, two questions are attracting our keen attention. First, what are the right policy tools and the right combination of them to deal with large capital flows, both inflows and outflows at the individual economy level? Second, do we need regional initiatives or actions to complement and facilitate domestic policies in managing surge in capital flows? If yes, what are the more realistic regional initiatives or actions?

In light of this, SEACEN held the High-level Seminar on “Global Liquidity and Impact of Capital Flows on Exchange Rates in Emerging Asia,” in Bandung, Indonesia, on 9-11 June 2014, to discuss these issues, among others.

The following are the papers presented and discussed at the Seminar:


Summary and Seminar Proceedings
By Dr. Herbert Poenisch

Opening Remarks
By Dr. Hendar, Deputy Governor, Bank Indonesia

Welcome Remarks
By Mr. Hookyu Rhu, Executive Director, The SEACEN Centre

Keynote Address on Asia’s Response to Capital Flows since the GFC
By Prof. Masahiro Kawai (Forthcoming)

Policy Responses in Asia to Changing Capita Flows: Indonesia’s Experience
By Dr. Rizki E. Wimanda

Chinese Taipei's Experience on Capital Flows
By Kuang-Huei Lee and Ti-Jen Tsao

Global Liquidity and Impact of Capital Flows on Exchange Rate
By Dr. Herbert Poenisch

The Impact of the U.S. QE Policy on China’s Macroeconomy and the RMB Internationalisation Strategy
By Dr.Tu Yonghong

The Policy Response to Tapering in Latin America
By Dr. Kenneth Coates