These speculative flows of currency lead to wild short-term fluctuations in exchange rates that have no basis in economic reality.

"They are all highly speculative because most of them do not generate any cash flow or even a means of generating cash flow."

Thailand has just imposed restrictions to cope with speculative flows into its currency, the baht.

Keynes strongly favoured the use of controls to restrain international capital movement, especially short term speculative flows, but in the 1970s and 1980s opinion among Western economists and institutions swung firmly against them.

Also, speculative flows of capital may enter the country during a boom and leave during a recession, deepening economic crises and destabilizing the economy.

"As a result of uncertainties caused by the French referendum," he said, "massive speculative flow have continued to disrupt the functioning of the exchange-rate mechanism."

The central bank imposed the capital controls to stem a surge of speculative flows into the country, particularly in the bond market.

For a while, the conviction in the markets that the system was secure, and that realignments would be avoided, was a self-fulfilling prophecy: speculative flows of capital helped to stabilise the system.

An additional consideration is that the adjustment process prior to floating was influenced by the one-way nature of speculative flows.

Long-term, good-quality investment can help strengthen economies and is the opposite of short-term speculative flows.