Cheerful chappy.

  • Output gap in advanced economies likely to remain large for years to come
  • Advanced economies as a whole may need to depreciate their currencies to boost exports
  • China shifting toward domestic demand appears highly desireable
  • May be useful for China’s currency to appreciate to ward off economy overheating
  • Capital flows into emerging economies largely driven by good fundamentals, good growth
  • Capital flows can lead to bubbles; authorities should be prepared to take steps, including using reserves to slow flow if needed