Central bank Governor Perng Fai-nan (彭淮南) has called for the world’s larger economies to shoulder some responsibility in promoting global economic stability.
“From a global perspective, major advanced countries enjoy, to varying degrees, exorbitant privilege as issuers of international currencies,” Perng said in an article in this month’s edition of The Banker magazine ahead of the opening of the 44th annual meeting of the World Economic Forum tomorrow.
In the article, Perng said monetary policies formulated by advanced economies have a disproportionally large impact on the rest of the world and can affect the financial markets of less developed countries through short-term international capital movements.
“With great power comes great responsibility; the burden of promoting global economic and financial stability rests squarely on the shoulders of the central bankers in these countries,” Perng said.
The magazine’s January edition is published during the four-day economic forum in Davos, Switzerland, which is attended by political leaders and business heavyweights.
However, Perng’s comments came as the world’s major economies are strengthening following a spate of fiscal stimulus measures such as the US Federal Reserve’s quantitative easing, while small economies are witnessing foreign fund outflows amid major economies’ talks of winding down stimulus measures.
The governor, known for tightly controlling Taiwan’s foreign exchange rate to support the nation’s export-reliant economy, said small economies would be particularly affected by volatile capital flows and currency fluctuations caused by advanced countries’ polices.
“Monetary policy that depends on the stock market to provide on and off short-term stimulus can neither foster long-term economic development, nor promote global financial stability,” Perng said.
“For individual countries, a viable economic revitalization program entails strengthening financial supervision, improving the standard of education and raising the level of productivity,” he said.