IDEAS home Printed from https://ideas.repec.org/p/ris/adbiwp/0167.html
   My bibliography  Save this paper

Reform of the International Financial Architecture: An Asian Perspective

Author

Listed:
  • Kawai, Masahiro

    (Asian Development Bank Institute)

Abstract

The paper attempts to evaluate whether the international financial architecture is adequate for maintaining the financial stability of the East Asian economies by summarizing the lessons learned from the Asian financial crisis of 1997-1998 and the global financial crisis of 2007-2009 and reviewing the progress being made to enhance the effectiveness of the international financial architecture in crisis prevention, management and resolution. The paper finds that the international community had to experience the two crises before seriously starting to work on the reform of the international financial architecture. Facing the global financial crisis, the international community has responded by making the G20 Summit the premier forum for international economic and financial cooperation, creating a potentially more powerful Financial Stability Board, and augmenting the financial resources of the IMF. The paper concludes, however, that the international financial architecture remains inadequate for the needs of many emerging market economies, including in East Asia. International Monetary Fund surveillance—particularly that of systemically important economies (such as the United States, the United Kingdom and the Euro Area)—is ineffective and its governance structure is heavily biased towards Europe and the United States. International liquidity support is insufficient in assisting countries with sound economic and financial management that are hit by externally driven crises. No international agreements exist on external (sovereign) debt restructuring, or on the cross-border resolution of insolvent, internationally active financial firms for fair burden sharing of losses between creditors and debtors, or among different national authorities. The paper emphasizes the importance of a well-functioning regional financial architecture to complement and strengthen the global financial architecture. It offers advice for East Asian authorities to focus on: (i) the establishment of resilient national financial systems, including local-currency bond markets; (ii) integration of national financial markets to facilitate the mobilization of regional savings for regional investment (in infrastructure and small- and medium-sized enterprises); (iii) enhancement of regional liquidity (Chiang Mai Initiative Multilateralization) and economic surveillance mechanisms; and (iv) regional exchange rate policy coordination to achieve sustained economic growth without creating macroeconomic and financial instability.

Suggested Citation

  • Kawai, Masahiro, 2009. "Reform of the International Financial Architecture: An Asian Perspective," ADBI Working Papers 167, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0167
    as

    Download full text from publisher

    File URL: http://www.adbi.org/working-paper/2009/11/24/3370.reform.international.financial.architecture/
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Edwin M. Truman, 2006. "Reforming the IMF for the 21st Century," Peterson Institute Press: All Books, Peterson Institute for International Economics, number sr19, October.
    2. Edwin M. Truman (ed.), 2006. "Reforming the IMF for the 21st Century," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3870, October.
    3. Haruhiko Kuroda & Masahiro Kawai, 2002. "Strengthening Regional Financial Cooperation in East Asia," Asia Pacific Economic Papers 332, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    4. 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.
    5. Eswar S. Prasad & Raghuram G. Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 149-172, Summer.
    6. Graham Bird & Ramkishen Rajan, 2002. "The Evolving Asian Financial Architecture," Centre for International Economic Studies Working Papers 2002-03, University of Adelaide, Centre for International Economic Studies.
    7. anonymous, 1998. "How will the Asian financial crisis affect the Southeast?," Regional Update, Federal Reserve Bank of Atlanta, issue Jan, pages 1,3-4.
    8. Masahiro Kawai & Shinji Takagi, 2005. "Strategy for a Regional Exchange Rate Arrangement in East Asia: Analysis, Review and Proposal," Global Economic Review, Taylor & Francis Journals, vol. 34(1), pages 21-64.
    9. Morris Goldstein, 1998. "The Asian Financial Crisis," Policy Briefs PB98-1, Peterson Institute for International Economics.
    10. Mr. Fabian Valencia & Mr. Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
    11. repec:fip:fedgsq:y:2005:i:mar10 is not listed on IDEAS
    12. Takatoshi ITO, 2007. "Asian Currency Crisis and the International Monetary Fund, 10 Years Later: Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 16-49, June.
    13. Griffith-Jones, Stephany & Ocampo, José Antonio, 2003. "What progress on international financial reform? why so limited?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34941, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Ocampo, José Antonio, 2003. "Capital-account and counter-cyclical prudential regulations in developing countries," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1796, September.
    15. Alan Greenspan, 2002. "Federal Reserve Board's semiannual monetary policy report to the Congress: testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, March 7, 2002," Speech 5, Board of Governors of the Federal Reserve System (U.S.).
    16. C. Randall Henning, 2002. "East Asian Financial Cooperation," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa68, October.
    17. Ben S. Bernanke, 2005. "The global saving glut and the U.S. current account deficit," Speech 77, Board of Governors of the Federal Reserve System (U.S.).
    18. Masahiro Kawai & Richard Newfarmer & Sergio L. Schmukler, 2005. "Financial Crises: Nine Lessons from East Asia," Eastern Economic Journal, Eastern Economic Association, vol. 31(2), pages 185-207, Spring.
    19. de Brouwer,Gordon, 2001. "Hedge Funds in Emerging Markets," Cambridge Books, Cambridge University Press, number 9780521802338, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hong Bum Jang, 2011. "Financial Integration and Cooperation in East Asia: Assessment of Recent Developments and Their Implications," IMES Discussion Paper Series 11-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
    2. Ashima Goyal, 2012. "The Future Of Financial Liberalization In South Asia," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 19(1), pages 63-96, June.
    3. Rana, Pradumna Bickram & Chia, Wai-Mun & Jinjarak, Yothin, 2012. "Monetary integration in ASEAN+3: A perception survey of opinion leaders," Journal of Asian Economics, Elsevier, vol. 23(1), pages 1-12.
    4. Yamamoto, Shugo, 2014. "Transmission of US financial and trade shocks to Asian economies: Implications for spillover of the 2007–2009 US financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 88-103.
    5. Paul De Grauwe & Zhaoyong Zhang & Paul De Grauwe & Zhaoyong Zhang, 2016. "The Rise of China and Regional Integration in East Asia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(1), pages 1-6, February.
    6. Kuo-Chun Yeh, 2013. "An Asian Currency Unit: Simulations for Its Effects on East Asia," The World Economy, Wiley Blackwell, vol. 36(12), pages 1611-1631, December.
    7. Edwin M. Truman, 2011. "Asian regional policy coordination," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 247-292.
    8. Bose, Udichibarna & MacDonald, Ronald & Tsoukas, Serafeim, 2019. "Policy initiatives and firms' access to external finance: Evidence from a panel of emerging Asian economies," Journal of Corporate Finance, Elsevier, vol. 59(C), pages 162-184.
    9. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series WP11-9, Peterson Institute for International Economics.
    10. Capannelli, Giovanni & Tan, See Seng, 2012. "Institutions for Asian Integration: Innovation and Reform," ADBI Working Papers 375, Asian Development Bank Institute.
    11. C. Randall Henning & Mohsin S. Khan, 2011. "Asia and Global Financial Governance," Working Paper Series WP11-16, Peterson Institute for International Economics.
    12. Hal Hill & Jayant Menon, 2014. "Financial safety nets in Asia: genesis, evolution, adequacy and way forward," Chapters, in: Masahiro Kawai & Peter J. Morgan & Pradumna B. Rana (ed.), New Global Economic Architecture, chapter 5, pages 83-111, Edward Elgar Publishing.
    13. Moon, Woosik, 2013. "Cross-Border Price Differentials and Goods Market Integration in East Asia," ADBI Working Papers 426, Asian Development Bank Institute.
    14. Ding, Cherng G. & Wu, Chiu-Hui & Chang, Pao-Long, 2013. "The influence of government intervention on the trajectory of bank performance during the global financial crisis: A comparative study among Asian economies," Journal of Financial Stability, Elsevier, vol. 9(4), pages 556-564.
    15. Harinder Kohli & Ashok Sharma & Anil Sood (ed.), 2011. "Asia 2050: Realizing the Asian Century," Books, Emerging Markets Forum, edition 1, number asia2050, October.
    16. Cheng, Gong, 2015. "The Global Financial Safety Net through the Prism of G20 Summits," MPRA Paper 68070, University Library of Munich, Germany, revised Nov 2015.
    17. D. Essers & E. Vincent, 2017. "The global financial safety net :In need of repair ?," Economic Review, National Bank of Belgium, issue ii, pages 87-112, september.
    18. Bose, Udichibarna & MacDonald, Ronald & Tsoukas, Serafeim, 2015. "Policy initiatives and firms' access to external finance: Evidence from a panel of emerging Asian economies," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-65, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Wu, Chiu-Hui & Ding, Cherng G. & Jane, Ten-Der & Lin, Hang-Rung & Wu, Cheng-Ying, 2015. "Lessons from the global financial crisis for the semiconductor industry," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 47-53.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series WP11-9, Peterson Institute for International Economics.
    2. Barry Eichengreen, 2009. "From the Asian crisis to the global credit crisis: reforming the international financial architecture redux," International Economics and Economic Policy, Springer, vol. 6(1), pages 1-22, June.
    3. Peter B. Kenen & Ellen E. Meade, 2006. "Monetary integration in East Asia," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    4. Julie McKay & Ulrich Volz & Regine Wölfinger, 2011. "Regional Financing Arrangements and the IMF," Chapters, in: Ulrich Volz (ed.), Regional Integration, Economic Development and Global Governance, chapter 10, Edward Elgar Publishing.
    5. McKay Julie & Volz Ulrich & Wölfinger Regine, 2011. "Regional Financing Arrangements and the Stability of the International Monetary System," Journal of Globalization and Development, De Gruyter, vol. 2(1), pages 1-33, August.
    6. Joseph Joyce & Todd Sandler, 2008. "IMF retrospective and prospective: A public goods viewpoint," The Review of International Organizations, Springer, vol. 3(3), pages 221-238, September.
    7. Maurice Obstfeld, 2009. "2009 International Conference "Financial System and Monetary Policy Implementation," Keynote Speech, Lenders of Last Resort in a Globalized World," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 27(1), pages 35-52, November.
    8. Stephen GRENVILLE, 2007. "Regional and Global Responses to the Asian Crisis," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 54-70, June.
    9. Michael G. Plummer, 2012. "Regional Monitoring of Capital Flows and Coordination of Financial Regulation: Stakes and Options for Asia," Chapters, in: Masahiro Kawai & David G. Mayes & Peter Morgan (ed.), Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia, chapter 8, Edward Elgar Publishing.
    10. Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2006. "The IMF in a world of private capital markets," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1335-1357, May.
    11. Robert B Kahn & Ellen E Meade, 2018. "International aspects of central banking: diplomacy and coordination," Chapters, in: Peter Conti-Brown & Rosa M. Lastra (ed.), Research Handbook on Central Banking, chapter 17, pages 333-364, Edward Elgar Publishing.
    12. Robert Brown, 2010. "Measuring Delegation," The Review of International Organizations, Springer, vol. 5(2), pages 141-175, June.
    13. Sieglinde Gstöhl, 2007. "Governance through government networks: The G8 and international organizations," The Review of International Organizations, Springer, vol. 2(1), pages 1-37, March.
    14. Julien Reynaud & Fabien Lange & Łukasz Gątarek & Christian Thimann, 2011. "Proximity in Coalition Building," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 3(3), pages 111-132, September.
    15. Ramkishen S. Rajan, 2007. "Managing new-style currency crises: the swan diagram approach revisited," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 583-606.
    16. Morris Goldstein & Daniel Xie, 2009. "The impact of the financial crisis on emerging Asia," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 27-80.
    17. Jiang, Hai & Tang, Shenfeng & Li, Lifang & Xu, Fangming & Di, Qian, 2022. "Re-examining the Contagion Channels of Global Financial Crises: Evidence from the Twelve Years since the US Subprime Crisis," Research in International Business and Finance, Elsevier, vol. 60(C).
    18. José Antonio Ocampo & Stephany Griffith-Jones, 2007. "A counter-cyclical framework for a development-friendly international financial architecture," Working Papers 39, United Nations, Department of Economics and Social Affairs.
    19. Zhang Jiaming, 2015. "Imf’S Reforms And Brics’ New International Financial Institutions: Progress And Policies," Romanian Economic Business Review, Romanian-American University, vol. 10(3), pages 133-149, September.
    20. Jäger, Kai, 2016. "The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation," European Journal of Political Economy, Elsevier, vol. 44(C), pages 79-96.

    More about this item

    Keywords

    asian financial crisis; global financial crisis; crisis prevention; management and resolution; the imf; the financial stability board; regional financial architecture;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:0167. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ADB Institute (email available below). General contact details of provider: https://edirc.repec.org/data/adbinjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.