Cooperative tools are required to create confidence in EME (Emerging market economies) investors and to prevent currency crises according to Union Finance Minister Arun Jaitley. Jaitley said this at his Intervention made during his visit to Washington D.C. for G-20.

The FM reminded that once again the global economic situation requires ambitious policy reforms and international coordination. "The growth in some advanced countries has not improved as much as we had anticipated. Emerging market economies face a high risk of negative spill-overs from un-conventional monetary policy actions of advanced economies.

The uncertainties about their extent and eventual normalisation have induced greater volatility and intensified pressures on both emerging market currencies and capital markets," he said.

Jaitley underlined that some EMEs have had to dip into their foreign exchange reserves in order to manage the effects of volatile currency markets and others had to shore them up in the absence of other adequate safety nets.

Given these challenges, there is need for clarity in communications and forward guidance to minimise surprises. "But we need cooperative tools which will create confidence in EME investors and prevent currency crises. As we have seen from the crises of the 90s in East Asia and Latin America, policies which place the burden of tackling the impact of capital flight solely on affected countries, are ineffective.

"We need to co-operate to cushion the impact of unconventional policies and their normalisation on affected economies which may face a flight of capital shortly similar to that of the "taper tantrum" of 2013."

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