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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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  • Christian Just, 2004. "The International Financial Architecture: Official Proposals on Crisis Resolution," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 73-89.
    • Handle: RePEc:onb:oenbmp:y:2004:i:1:b:3
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    Cited by:

    1. Balázs Egert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," CESifo Working Paper Series 2127, CESifo.
    2. 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), issue 2, pages 55-71.
    3. 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 0411, University of Vienna, Department of Economics.
    4. 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 2007/10, Czech National Bank.
    5. Thomas Gruber & Doris Ritzberger-Grünwald, 2005. "The Euro Changeover in the New Member States - A Preview," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 52-75.
    6. Balázs Égert, 2007. "Real Convergence, Price Level Convergence and Inflation in Europe," Working Papers 267, Bruegel.
    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, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, January.

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