Rule-based currency regime must: Unctad
The rules-based floating currency regime was necessary to curb ‘‘excessive speculation’’, the trade and development report 2011 (TDR 2011) of the United Nations Conference on Trade and Development (Unctad) release globally said.
It also suggested measures for restructuring of national banking systems and a stricter regulation of financial markets, including for commodity derivatives.
‘‘The new financial turmoil should be a wake up call for the international community and its institutions. It remains imperative to address the unfinished elements in the global financial reform agenda more vigorously than has been the case so far,’’ said the TDR 2011.
Unctad said that after several decades of experience it has become clear that monetary shocks, particularly in a system of flexible exchange rates, are much more significant and harmful.
According to the report, there are two approaches for the design of a rules-based floating currency regime—under which the central bank of a country maintains a broader range in which it allows the currency to fluctuate and beyond which it intervenes to check any greater appreciation/depreciation of the currency. ‘‘Such a system could be built on the adjustment of nominal exchange rates to inflation differentials or to interest rate differentials.’’
‘‘The first principle addresses more directly the need to avoid imbalance in trade flows, while the second one is more directly related to