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The future of the global financial system

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  • JOHN WILLIAMSON

Abstract

This paper argues that economic growth is fundamentally constrained from the supply side, which is why it is desirable to maintain the constraints on balance-of-payments deficits that are provided by limited reserves. Reform of the international monetary system could lead to more harm than good if it undermines the discipline provided by reserves. The paper nonetheless identifies a number of reforms that it argues would be compatible with the maintenance of a globalized world consisting of market economies and the sovereignty where every country needs to see itself as a net gainer from a reform package. The reforms advocated are: introduction of "reference rates" to provide a guide for the exchange rates that the official sector believes consistent with macroeconomic equilibrium in the medium term; using the World Economic Outlook to assess progress toward the payments objectives that underlie the reference rates; adoption of an actively anti-cyclical stance by the IMF; employment of instruments like unremunerated reserve requirements to repel excessive capital inflows when these threaten emerging markets; and a new allocation of special drawing rights.

Suggested Citation

  • John Williamson, 2004. "The future of the global financial system," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(4), pages 607-611.
  • Handle: RePEc:mes:postke:v:26:y:2004:i:4:p:607-611
    DOI: 10.1080/01603477.2004.11051410
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    Cited by:

    1. Ocampo, José Antonio, 2014. "The provision of global liquidity: The global reserve system," WIDER Working Paper Series 141, World Institute for Development Economic Research (UNU-WIDER).
    2. José Ocampo, 2007. "The Instability and Inequities of the Global Reserve System," International Journal of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 71-96.
    3. José Antonio Ocampo, 2017. "Resetting the International Monetary (Non)System," Books, Red Investigadores de Economía, number 2017-11, May.
    4. Carlo Viviani & Paolo Savona, 2005. "The impact on the U.S. Dollar of the conflict between the American locomotive’s model and the emerging economies’ autopoietic growth," International Finance 0504009, University Library of Munich, Germany.
    5. José Antonio Ocampo, 2014. "The Provision of Global Liquidity: The Global Reserve System," WIDER Working Paper Series wp-2014-141, World Institute for Development Economic Research (UNU-WIDER).

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