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The Need for Institutional Changes in the Global Financial System: An Analytical Framework

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  • Claessens, Stijn
  • Underhill, Geoffrey R D

Abstract

The international financial system has been the subject of much debate following the financial crises of the 1990s. While many reforms have been proposed for and implemented by mostly developing countries, few changes have been made to the international financial system itself. Fundamentally, the design, institutions, and governance of the international system remain very similar to those of two decades ago. The major changes in global financial markets, financial services industries and economies during this period, however, have rendered the international financial system and its governance of out date. In this paper, we analyse the causes and consequences of the failure to reform. We highlight the forces driving the need for changes in the governance of the international financial system, in particular the combination of the global integration processes and the increased role of the private sector. We then provide insights into the desirable institutional structure for international financial decision-making, also as it relates to the legitimacy of the international system in the eyes of the public worldwide. We also discuss the (political economy) factors inhibiting reform. We conclude with suggestions for future research.

Suggested Citation

  • Claessens, Stijn & Underhill, Geoffrey R D, 2005. "The Need for Institutional Changes in the Global Financial System: An Analytical Framework," CEPR Discussion Papers 4970, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4970
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    References listed on IDEAS

    as
    1. Claessens, Stijn & Kingebiel, Daniela & Schmukler, Sergio L., 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," WIDER Working Paper Series 094, World Institute for Development Economic Research (UNU-WIDER).
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    More about this item

    Keywords

    international financial arrangements; international financial institutions; international governance; legitimacy; political economy;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • P50 - Economic Systems - - Comparative Economic Systems - - - General

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