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Stabilization of world currencies priority: Nobel economist
By Ding Qingfen and Wang Xiaotian (China Daily)
Updated: 2011-03-31 12:32
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Stabilization of major currencies need to be addressed prior to broadening role of SDR (Special Drawing Right), Robert Mundell, professor of economics at Columbia University and, told China Daily before opening ceremony of the G20 seminar on international monetary system held in Nanjing on Thursday.
The Noble Economics Prize winner in 1999 said he will deliver a speech on stabilization of major currencies, especially dollar and euro later on the day.
After the opening ceremony where Chinese Vice-Premier Wang Qishan and French President Nicolas Sarkozy made keynote speeches, officials of major world economies and economists will hold a close-door discussion on reforming the international monetary system.
"The two big currencies are devastating and hurting the world economy, so I would propose to stabilize the dollar and euro rate with intervenes and gradually narrow that band, and after that create SDR, which base on dollar and euro, and Chinese yuan, Japanese yen, British pounds, then move that into the creation of the IMF and global currency," he said.
Mundell said one of the reasons why IMF refused to include yuan into SDR basket is that China's currency is not convertible. "But other thing is that they go over right that. I guess they don't want to create pressure on that to introduce one country that seems to make convertible currency, and maybe pressure from other countries will weaken the SDR."
"Whether China gets into the SDR, or India and other country gets in, technically we should change the way the system works," he said, adding stabilization of the major exchange rates, such as the dollar, euro, yen, and yuan, is the most important thing before working on SDR.
"I hope we don't spend too long talking about SDR. Today it is just a distraction of the real problem of the system. The big swing of exchange rate is the lack of anchor for the currencies we want to stabilize."
He said as China develops a major world financial center in Shanghai, convertibility of yuan will automatically come very quickly.