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Out of the Box Thoughts about the International Financial Architecture

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  • Mr. Barry J. Eichengreen

Abstract

The Global Credit Crisis of 2008-09 has underscored the urgency of reforming the international financial architecture. While a number of short-term reforms are already in train, this paper contemplates more ambitious reforms of the international financial architecture that might be implemented over the next ten years. It proposes routinizing the expansion of IMF quotas and the conduct of exchange rate surveillance. It contemplates an expanded role for the SDR in international transactions, which would require someone-like the IMF-to act as market maker. It considers proposals for reimposing Glass-Steagall-like restrictions on commercial and investment banking, something that will have to be coordinated internationally to be feasible. Other proposals would require banks to purchase capital insurance; here the question is who would be on the other side of the market. Again there is likely to be a role for the IMF. Then there are arguments for a new agency or institution to deal with cross-border bank insolvencies. Any such entity will require staff support, which might plausibly come from the Fund. Finally, some insist that international colleges of regulators are not enough-that it is desirable to create a World Financial Organization (WFO) with the power to sanction members whose national regulatory policies are not up to international standards. A WFO will similarly need staff support, of which the IMF would be one possible source. All this of course presupposes meaningful IMF governance reform so that the institution has the legitimacy and efficiency to assume these additional responsibilities. The paper therefore concludes with some conventional and unconventional proposals for IMF governance reform.

Suggested Citation

  • Mr. Barry J. Eichengreen, 2009. "Out of the Box Thoughts about the International Financial Architecture," IMF Working Papers 2009/116, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2009/116
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    Cited by:

    1. Feroldi Valentina & Gaffeo Edoardo, 2014. "At the Core of the International Financial System," Global Economy Journal, De Gruyter, vol. 14(2), pages 1-26, April.
    2. Helleiner, Eric & Pagliari, Stefano, 2011. "The End of an Era in International Financial Regulation? A Postcrisis Research Agenda," International Organization, Cambridge University Press, vol. 65(1), pages 169-200, January.
    3. Andersson, Fredrik NG, 2016. "A Blessing in Disguise? Banking Crises and Institutional Change," World Development, Elsevier, vol. 83(C), pages 135-147.
    4. Lino Sau, 2015. "Do the International Monetary and Financial Systems Need More Than Short-Term Cosmetic Reforms?," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(4), pages 325-340, October.
    5. Marcus Giamattei & Johann Lambsdorff, 2015. "Balancing the current account: experimental evidence on underconsumption," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 670-696, December.
    6. Steiner, Andreas, 2014. "Reserve accumulation and financial crises: From individual protection to systemic risk," European Economic Review, Elsevier, vol. 70(C), pages 126-144.
    7. Hertig Gerard & Lee Ruben & McCahery Joseph A., 2010. "Empowering the ECB to Supervise Banks: A Choice-Based Approach," European Company and Financial Law Review, De Gruyter, vol. 7(2), pages 171-215, January.
    8. Rana, Pradumna B., 2013. "From a Centralized to a Decentralized Global Economic Architecture: An Overview," ADBI Working Papers 401, Asian Development Bank Institute.
    9. Marko Malovic, 2009. "International Financial Crisis, G-20 And Global Policy Response," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 5(10), pages 119-127.
    10. Najeeb, Syed Faiq & Ibrahim, Shahul Hameed Mohamed, 2014. "Professionalizing the role of Shari'ah auditors: How Malaysia can generate economic benefits," Pacific-Basin Finance Journal, Elsevier, vol. 28(C), pages 91-109.
    11. Adalbert Winkler, 2012. "The Financial Crisis: A Wake-up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?," Chapters, in: Masahiro Kawai & David G. Mayes & Peter Morgan (ed.), Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia, chapter 7, Edward Elgar Publishing.
    12. Helleiner Eric, 2010. "The New Politics of Global Reserve Reform," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-14, December.
    13. Chmielewska Anna & Sławiński Andrzej, 2021. "Climate crisis, central banks and the IMF reform," Economics and Business Review, Sciendo, vol. 7(4), pages 7-27, December.
    14. Pradumna B. Rana, 2014. "From a centralized to a decentralized global economic architecture: an overview," Chapters, in: Masahiro Kawai & Peter J. Morgan & Pradumna B. Rana (ed.), New Global Economic Architecture, chapter 2, pages 11-26, Edward Elgar Publishing.
    15. Steiner, Andreas, 2014. "Current account balance and dollar standard: Exploring the linkages," Journal of International Money and Finance, Elsevier, vol. 41(C), pages 65-94.
    16. Ilene Grabel, 2010. "Promising Avenues, False Starts and Dead Ends: Global Governance and Development Finance in the Wake of the Crisis," Working Papers wp241, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Rolf H. Weber & Dominic N. Staiger, 2014. "Financial Stability Board: Mandate and Implementation of Its Systemic Risks Standards," IJFS, MDPI, vol. 2(1), pages 1-21, February.
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    20. Hanappi, Hardy, 2013. "Money, Credit, Capital and the State: On the evolution of money and institutions," MPRA Paper 47166, University Library of Munich, Germany.

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    More about this item

    Keywords

    WP; bank; central bank; financial market; IMF governance; credit crisis; IMF surveillance;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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