FRANKFURT Jan 24 One of the Bundesbank's top
officials on Thursday signalled a break in the Germany central
bank's long-held opposition to the regulation of capital flows,
saying limited use of controls could sometimes be appropriate.
In a guest column published in German financial daily
Handelsblatt, board member Andreas Dombret said direct capital
controls could be considered if other measures failed to work.
Having for decades rejected such controls, the Bundesbank is
shifting its position, with an acceptance of some control if
measures such as increasing reserves or making foreign exchange
rates more flexible do not work.
Bundesbank President Jens Weidmann this week joined top
central bankers in speaking out over the risk of competitive
devaluations - countries encouraging their currencies to weaken
in order to boost the attractiveness of home-grown products.
Policymakers in advanced countries, particularly Japan and
the United States, have been pursing aggressive action to
reflate their economies. This has the effect of weakening their
currencies on foreign exchange markets.
As well as boosting a country's outward trade, it also make
locally-made goods more attractive by pushing up the price of
Investment, meanwhile, shifts into higher-yielding
currencies, particularly in emerging markets, making them even
"If measures to limit capital flows are applied in
exceptional cases, they should be temporary, transparent and
targeted and as much as possible should not harm others,"
He said the Bundesbank broadly shared the view of the
International Monetary Fund, which in December unveiled
principles for how countries should manage international capital
Countries from Brazil to Indonesia, South Korea, Peru and
Thailand have all imposed controls to limit inflows since 2009,
while a few countries like Argentina, Iceland and Ukraine have
sought to stem large or sudden capital outflows.
It has raised concerns among some economists that this could
trigger a global currency war.