Can reforming global institutions help developing countries share more in the benefits from globalization?
Globalization could significantly expand trade, international investment, and technological advances, but the gains from global integration have been unevenly distributed across and within nations. Greater global interdependence has also brought greater macroeconomic volatility, resulting in several serious financial crises in the second half of the 1990s. The global matrix of Bretton Woods and United Nations institutions that developed starting in the 1940s, formed under a different balance of power, in a world of fixed exchange rates and limited capital mobility. Since the 1960s regional financial institutions have emerged because of the greater autonomy of different regions and the greater financial needs of development. The author reviews different proposals for reform of the international financial institutions and changes in the roles of the International Monetary Fund (IMF) and the World Bank. He highlights the implications for developing countries of (1) Policy conditionality. (2) The countercyclical role of multilaterals'lending. (3) Greater lending to middle-income than to low-income developing countries. (3) Access to liquidity at times of crisis. (4) Mechanisms for giving low-income countries a greater voice in IMF and World Bank decisionmaking. The author streses the overlapping responsibilities of the Bretton Woods and regional financial institutions and the need to reassess the allocation of responsibilities and to develop better coordination mechanisms between these institutions. Those designing institutional reform must consider the corporate capabilities of each type of institution. The corporate cultures of global and regional institutions differ. So does the kind of knowledge they generate and disseminate, and so do patterns of interactions with, and mechanisms for representation of, client countries.Finally, the author calls attention to the need to harmonize national and global growth-oriented policies in a way that reduces volatility and promotes social equity.
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Nobel Prize in Economics documents
1999-5, Nobel Prize Committee.
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