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The International Financial Architecture: Official Proposals on Crisis Resolution

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Abstract

The absence of a clear framework for the resolution of international financial crises introduces many risks and raises legal uncertainties about how to deal with sovereign financial crises.While a fairly broad consensus exists on how to prevent financial crises, namely by strengthening macroeconomic policies and improving financial supervision and regulation, views on how to manage and resolve sovereign debt crises are rather diverse. At the International Monetary Fund's (IMF) annual meeting in Prague in the year 2000, the international community tried to address this issue by advocating the Private Sector Involvement (PSI) initiative. PSI, however, never amounted to more than public statements that lack in substance. Consequently, this led to widespread dissatisfaction among the main participants of the international financial architecture. Debtor countries grew more discontented with the governance of the international financial system, and the private sector started to accuse the IMF of increasing the time inconsistency of its policies. Finally, in November 2001, the Deputy Managing Director of the IMF, Anne Krueger, proposed a legal framework for the resolution of sovereign insolvency crises, a Sovereign Debt Restructuring Mechanism (SDRM). This mechanism would have rendered PSI more operational, in addition to addressing many market failures of today's international financial architecture. This paper addresses some of the key issues related to the international financial architecture and the resolution of sovereign debt crises. It is important to note that while support for an SDRM has waned for the time being, its discussion has nevertheless been beneficial and has produced several tangible results.

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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2004)
Issue (Month): 1 ()
Pages: 73–89

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Handle: RePEc:onb:oenbmp:y:2004:i:1:b:3

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Keywords: International Financial Architecture;

References

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  1. Vladislav Flek & Lenka Marková & Jiøí Podpiera, 2003. "Sectoral Productivity and Real Exchange Rate Appreciation: Much Ado about Nothing?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 53(3-4), pages 130-153, March.
  2. Peter Christoffersen & Torsten Sløk & Robert Wescott, 2001. "Is inflation targeting feasible in Poland?," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 9(1), pages 153-174, March.
  3. Fidrmuc, Jarko & Korhonen, Iikka, 2003. "Similarity of supply and demand shocks between the euro area and the CEECs," Economic Systems, Elsevier, Elsevier, vol. 27(3), pages 313-334, September.
  4. Balázs Egert, 2002. "Investigating the Balassa-Samuelson hypothesis in the transition: Do we understand what we see? A panel study," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 10(2), pages 273-309, July.
  5. Darvas, Zsolt, 2001. "Exchange rate pass-through and real exchange rate in EU candidate countries," Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank, Research Centre 2001,10, Deutsche Bundesbank, Research Centre.
  6. Canzoneri, Matthew, et al, 2002. "Productivity Trends in Europe: Implications for Real Exchange Rates, Real Interest Rates, and Inflation," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 10(3), pages 497-516, August.
  7. Egert, Balazs, 2002. "Estimating the impact of the Balassa-Samuelson effect on inflation and the real exchange rate during the transition," Economic Systems, Elsevier, Elsevier, vol. 26(1), pages 1-16, April.
  8. Peter Backé & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2002. "Price Dynamics in Central and Eastern European EU Accession," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 61, Oesterreichische Nationalbank (Austrian Central Bank).
  9. Balázs Égert & Imed Drine & Kirsten Lommatzsch & Christophe Rault, 2002. "The Balassa-Samuelson effect in Central and Eastern Europe: Myth or reality?," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 483, William Davidson Institute at the University of Michigan.
  10. Balázs Egert, 2005. "The Balassa-Samuelson Hypothesis in Estonia: Oil Shale, Tradable Goods, Regulated Prices and Other Culprits," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 28(2), pages 259-286, 02.
  11. Peter Back� & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2003. "Price Dynamics in Central and Eastern European EU Accession Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 39(3), pages 42-78, May.
  12. Fidrmuc, Jarko, 2001. "The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 8/2001, Bank of Finland, Institute for Economies in Transition.
  13. Matthew Canzoneri & Robert Cumby & Behzad Diba & Gwen Eudey, 1998. "Trends in European Productivity: Implications for Real Exchange Rates, Real Interest Rates and Inflation Differentials," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 27, Oesterreichische Nationalbank (Austrian Central Bank).
  14. Jan Babetski & Laurence Boone & Mathilde Maurel, 2003. "Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries," CERGE-EI Working Papers, The Center for Economic Research and Graduate Education - Economic Institute, Prague wp206, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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Cited by:
  1. Michal Franta & Branislav Saxa & Katerina Smidkova, 2007. "Inflation Persistence in New EU Member States: Is It Different Than in the Euro Area Members?," Working Papers, Czech National Bank, Research Department 2007/10, Czech National Bank, Research Department.
  2. Balázs �gert, 2007. "Real Convergence, Price Level Convergence and Inflation in Europe," Working Papers, Bruegel 267, Bruegel.
  3. Stephan Barisitz, 2005. "Developments in Selected Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 10-49.
  4. Markus Knell, 2004. "The Role of Revaluation and Adjustment Factors in Pay-As-You-Go Pension Systems," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 55–71.
  5. Égert, Balázs, 2004. "Assessing equilibrium exchange rates in CEE acceding countries: Can we have DEER with BEER without FEER? A critical survey of the literature," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 1/2004, Bank of Finland, Institute for Economies in Transition.
  6. Balazs Egert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp895, William Davidson Institute at the University of Michigan.
  7. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten Years of Inflation Targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, August.
  8. Jesús Crespo Cuaresma & Maria Antoinette Silgoner, 2004. "Groth effects of inflation in Europe: How low is too low, how high is too high?," Vienna Economics Papers, University of Vienna, Department of Economics 0411, University of Vienna, Department of Economics.

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