SEOUL, Dec. 18 (Xinhua) -- South Korea's top economic policymaker said Wednesday that time is nearing to end quantitative easing in major economies, urging the need for cooperation between Group of 20 (G20) members.
"Time is nearing to unwind quantitative easing. This is the inevitable cost we have to bear over the coming years," Finance Minister Hyun Oh-seok said in his opening remarks for the G20 conference held in central Seoul.
Around 200 finance officials and experts from G20 member countries and international organizations gathered in Seoul to discuss how to respond to the upcoming exit in the U.S. Federal Reserve's ultra-stimulus monetary policy.
Hyun added that the ongoing monetary policy meeting of the U.S. central bank should be closely watched.
The Fed began its two-day policy meeting on Tuesday to decide on whether to taper its monthly bond purchases from December. Expectations spread over the Fed tapering as early as this month given recent upbeat economic data in the United States.
Hyun said that the G20 members should cooperate to manage the exit in an orderly manner, emphasizing on the so-called reverse- spillover effects, a new jargon coined and mentioned first in July by Hyun.
The reverse spillover says that an early tapering of the Fed's asset purchases would influence the United States itself as well as emerging and advanced economies.
Rising interest rates caused by the Fed tapering would worsen fiscal soundness in the already-troubled economies in Europe, while triggering foreign capital exodus from emerging countries.
The economics of reverse spillover, in addition, says that the disordered U.S. exit would cause damages to the U.S. economy itself because it would dampen a fledgling recovery in the world's largest economy, which depends on exports for its growth.
If emerging economies sell their holdings of U.S. Treasury bonds to get dollars for the foreign-exchange market protection usage, interest rates in the United States would rise further, making it more difficult for the economy to go back on its feet.
Hyun said that negative spillovers, which the tapering could entail in the emerging market, should be minimized, urging the G20 to additionally come up with a timely policy coordination if needed as well as to put into practice the policy coordination agreed this year.
ECB official cautions against challenges of QE
FRANKFURT, Dec. 9 (Xinhua) -- An official with the European Central Bank (ECB) on Monday cautioned against the challenges related to quantitative easing (QE) as well as other monetary policy tools.
Yves Mersch, a member of the ECB executive board, warned that it would pose huge economic, legal and political challenges for the ECB to define portfolios of government bonds of the euro area member states. Full story