Federal Reserve chairman Ben Bernanke tried to refute arguments that the US central bank’s record stimulus is causing destabilizing flows of capital to emerging-market economies.
‘‘It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,’’ Bernanke said Sunday in prepared remarks for a seminar in Tokyo on the last day of International Monetary Fund annual meetings.
His comments contrasted with those of IMF managing director Christine Lagarde, who told the same audience that such easing is likely to cause large and volatile flows that risk leading to ‘‘overheating, asset-price bubbles and the build-up of financial imbalances’’ in emerging economies, even as she applauded Fed efforts to boost growth.
Divisions among policymakers over such issues underscore the challenge of forging a unified response to what Lagarde described today as the global economic ‘‘malaise.’’ South Korea’s Finance Minister Bahk Jae Wan said Saturday that the IMF meetings failed to secure agreement and the world has a ‘‘leadership problem.’’
Bernanke said that recent research, including studies by the IMF, ‘‘does not support the view that advanced-economy monetary policies are the dominant factor behind emerging market capital flows.’’
US central bankers cut the benchmark lending rate to a range of zero to 0.25 percent in December 2008, and last month said that such low levels are ‘‘likely to be warranted at least through mid-2015.’’ The Fed initiated a third phase of so-called quantitative easing on Sept. 13, purchasing $40 billion of mortgage-backed securities per month, and said this will continue until the outlook for jobs improves ‘‘substantially.’
The MSCI Emerging Markets Index has risen 1.9 percent in the month since the Fed began the third round of stimulus, and the BSE India Sensitive Index, or Sensex, is up 3.8 percent. In China, the Shanghai Stock Exchange Composite Index has declined 1 percent in the period.
Lagarde made a plea to policymakers to avoid discord on such issues as the management of capital flows, saying that ‘‘disagreements may be unavoidable, but we must not forget that we all have a stake in global financial stability. It is important for us to stay at the table and work through these issues.’’
Bernanke said differences in expected returns are the most important determinant of capital flows, and the rebound in emerging markets from the global financial crisis ‘‘provided still greater encouragement to these flows.’’
Slowing growth in emerging market economies this year in part results from decelerating exports to the United States, Europe, and other advanced economies, he said.