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Why the interest in reforming the International Monetary System?

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Author Info
Jane Sneddon Little
Giovanni P. Olivei

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Abstract

The recent spate of severe financial crises has provoked an interest in international monetary reform not seen since the breakdown of the fixed exchange rate system 30 years ago. Indeed, the crises have forced both academic economists and policymakers to question some of their most basic assumptions about the appropriate design of the international monetary system. This article was the introductory paper at the Federal Reserve Bank of Boston's conference on "Rethinking the International Monetary System," held in June 1999. The article reviews recent changes in the economic environment that have provoked the interest in reform. It goes on to explore how policy choices concerning four key aspects of the international monetary system-exchange rate regimes, treatment of capital flows, international lender of last resort facilities, and policy coordination-interact to support or undermine national efforts to achieve stable economic growth. The authors posit that current arrangements create unpalatable policy choices for many nations and that inadequate surveillance and policy coordination and the ambiguities surrounding international rescue programs contributed to recent crises. While widely advocated improvements in transparency and governance and the market forces they engender should encourage more mature financial systems and better macro policies, the authors suggest that the ongoing struggle to achieve stable growth points to the need for more fundamental reform.

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Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1999)
Issue (Month): Sep ()
Pages: 53-84
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Handle: RePEc:fip:fedbne:y:1999:i:sep:p:53-84

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Keywords: International finance;

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References listed on IDEAS
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  4. Martin Feldstein, 1999. "Self-Protection for Emerging Market Economies," NBER Working Papers 6907, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Graciela Laura Kaminsky, 1999. "Currency and Banking Crises - The Early Warnings of Distress," IMF Working Papers 99/178, International Monetary Fund.
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  13. Eduardo Fernández-Arias & Ricardo Hausmann, 1999. "International Initiatives to Bring Stability to Financial Integration," RES Working Papers 4174, Inter-American Development Bank, Research Department. [Downloadable!]
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  19. Roberto Chang & Andres Velasco, 1998. "The Asian Liquidity Crisis," NBER Working Papers 6796, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  24. Michael D. Bordo, 1989. "The lender of last resort: some historical insights," Proceedings, Federal Reserve Bank of Chicago, pages 177-197.
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  25. McKinnon, Ronald I. & Pill, Huw, 1998. "International Overborrowing: A Decomposition of Credit and Currency Risks," World Development, Elsevier, vol. 26(7), pages 1267-1282, July. [Downloadable!] (restricted)
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  31. Lynn Elaine Browne & Rebecca Hellerstein & Jane Sneddon Little, 1998. "Inflation, asset markets, and economic stabilization: lessons from Asia," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-32. [Downloadable!]
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  33. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall. [Downloadable!] (restricted)
  34. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August. [Downloadable!] (restricted)
  35. repec:fth:inadeb:402 is not listed on IDEAS
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  38. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," RES Working Papers 4170, Inter-American Development Bank, Research Department. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. George G. Kaufman, 2000. "Banking and currency crisis and systemic risk: lessons from recent events," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 9-28. [Downloadable!]
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