Investment policy

Capital flow management and liberalisation: the role of international co-operation


Remarks by Angel Gurría, OECD Secretary-General, delivered at a high-level seminar on the role of international co-operation in capital flow management and liberalisation.

Paris, Tuesday 9 October 2012

(As prepared for delivery)

See the agenda.

Dear Governors, Dear Deputy Governors, Dear friends, Ladies and Gentlemen,

It’s a great pleasure to welcome you to the OECD for this day of discussion, debate and reflection on how we can collectively make the most of international capital flows to make our economies more prosperous and resilient. I am glad that distinguished central bank governors and deputy governors will have such an active role in our discussions.

Let me also extend a special welcome to the representatives of countries that are “partners” of the OECD in this undertaking. It is encouraging to see so many of you at this table. This high-level seminar is a promising start for what we hope will be a long journey together. I look forward to hearing from colleagues from South Africa, China and Colombia about their experiences.

Making the most of international capital flows

The flow of capital across country borders is a key feature of international finance. It allows investors in capital-rich countries to seek better investment opportunities abroad. It allows fast-growing economies to tap international markets to complement domestic sources of finance for much-needed investment. 

At the same time, we know that dealing with international capital flows can be challenging. When they are too large, capital inflows may overwhelm the capacity of domestic markets to absorb foreign savings in the most productive manner and can distort asset prices. When they are too reliant on capital inflows, countries can become vulnerable to those sudden stops and flow reversals that wreak so much havoc in the economy.

The task before us is therefore to make the most of international capital flows as a tool to finance growth and development while dealing with the challenges that they pose for policymakers.

We can only perform this task through international cooperation, one that needs to involve capital exporters and capital importers; mature, emerging-market and developing economies; policymakers and practitioners. We have a lot to learn from each other, from our collective wisdom, from the experiences of our countries.

The OECD Codes of Liberalisation as a tool for collaboration

The OECD is proud to have been – since its early days – a focal point of discussion of capital flow issues. We share views and experiences, we seek a better understanding of the forces shaping national policies and global events; we look for solutions to global problems through dialogue.

Our cooperation has been based on the ground rules provided by the OECD Codes of Liberalisation. Our members value the contribution that the Codes have made to preserve an open international system and to avoid individual uncoordinated responses that could be detrimental to all. Very much like trade protectionism, widespread recourse to capital controls could bring forth retaliatory reactions that could paralyse the global financial system and hurt jobs and growth. 

The OECD Codes are about maintaining deep liquid capital markets. This is why the Codes are now available to all. We should also look behind, and ask ourselves where the codes would need to be modified, and how we can continue to make the best out of them, while avoiding downside risks of capital liberalization.  The OECD Council decided last June to open the Codes to countries outside the OECD, with equal rights as OECD countries. I am delighted to have received just last week a letter from Colombia expressing their interest in adhering to the Codes.  We also need your views on how the Codes can be strengthened.

Ladies and Gentlemen,

This is a first step to deepen our dialogue on capital flow issues. We have set up a new Task Force to address these issues. We will be inviting you and other experts to its meetings.

I now turn the floor to Governor Fischer, who may wish to offer some introductory remarks.


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