What is wrong with the International Financial Architecture and some elements for its reform Alfredo Calcagno. UNCTAD 3 October 2011. The International Financial System does not comply with the goals set in Bretton Woods:. Stable exchange rates at sustainable levels. Capital controls.
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3 October 2011
Stable exchange rates at sustainable levels.
Timely financing in order to smooth adjustments and limit their costs.
Avoiding lasting imbalances.
Legitimacy eroded by unfair distribution of voting rights
« Triffin Paradox »
IMF-sponsored programmes systematically underestimate their negative impact on GDP growth and fiscal balances
Select an exchange rate regime that would reduce volatility and real misalignments (managed floating vs. « corner solutions »).
Reserve accumulation (self-insurance and limiting appreciation).
Pros and cons:
Worked quite well in 2008
Costs of monetary sterilisation
Works better for avoiding appreciation than depreciation
Use of national currencies for international transactions
Credit among Central Banks
Regional exchange rate system
Regional development banks
« Modularity » of cooperative measures
Multilateral payments mechanism contracted and are widening again (billion $)
Multilateral mechanisms for financing and supervision
Finance for defending exchange-rates and policy coordination
Single currency and regional Central Bank
Reciprocal credit agreements (swaps)
Supervision mechanism desirable
Regional reserve funds
Different types of financial integration
Debate within the G 20:
Cooperation or « beggar-thy-neighbor »
Still a recessive bias: fiscal adjustment, confidence game, structural reforms
Debate on capital flows, liquidity, reserves, exchange rates
Market-oriented vs. macro prudential policies
More radical reforms?
Multilateral agreements on exchange rates
From regional to global
A true international currency