What G20 Leaders Must Do to Stabilise Our Economy and Fix the Financial System

Home , Raghuram Rajan

What G20 Leaders Must Do To The Eurozone’s life-threatening crisis in May 2010 was halted when Eurozone leaders and the ECB took strong measures in Stabilise our Economy and May. But these were palliatives not a cure. The crisis is not over, according to the dozen world-renowned economists whose views are contained in this book. The Fix the Financial System Eurozone rescue needs to be completed. More needs to be done. The Eurozone ‘ship’ is holed below the waterline. The ECB Edited by Barry Eichengreen and Richard Baldwin actions are keeping it afloat for now, but this is accomplished by something akin to bailing the water as fast as it leaks in. European leaders must very soon find a way to fix the hole. This book gathers the thinking of a dozen world-class economists on what they need to do on banking-sector clean up, fiscal discipline, structural policies, and more.

A VoxEU.org Publication

ISBN 978-1-907142-10-9 Centre for Economic Policy Research 2ND FLOOR • 53-56 GREAT SUTTON STREET • LONDON EC1V 0DG TEL: +44 (0)20 7183 8801 • FAX: +44 (0)20 7183 8820 • EMAIL: [email protected] www.cepr.org 9 781907 142109 

What G20 leaders must do to stabilise our economy and fix the financial system

A VoxEU.org publication Centre for Economic Policy Research (CEPR)

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FP?K7ª645*-*6224--6*2*5 What G20 leaders must do to stabilise our economy and fix the financial system

A VoxEU.org publication

Edited by Barry Eichengreen and Richard Baldwin

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Introduction 1

The essays: What G20 leaders must do to stabilise our economy and fix the financial system

Quick action for the real economy; sober reflection for financial regulation 3 Alberto Alesina and Guido Tabellini

Coordinated responses versus identical responses 7 Refet S. Gürkaynak

Agenda for the next few months 11 Michael Spence

Making international finance safe for the world economy – not the other way around: What should the G20 communiqué say? 15 Dani Rodrik

Some suggestions for the G20 on November 15th 17 Willem H. Buiter

Reforming global economic and financial governance 21 Raghuram Rajan

Not a New Bretton Woods but a New Bretton Woods process 25 Barry Eichengreen

The new international financial architecture requires better governance 29 Stijn Claessens

Europe's two priorities for the G20 33 Daniel Gros

Returning to narrow banking 37 Paul De Grauwe G20 Summit: What they should achieve 41 Takatoshi Ito

Delivering change. Together. 45 Wendy Dobson

East Asia's Self-managed Reserve Pooling Arrangement and the global financial architecture 49 Yung Chul Park

The New Bretton Woods agreement 53 Guillermo Calvo

A New Bretton Woods system should curb boom and bust 57 Vijay Joshi and David Vines

Targeted improvements in crisis resolution, not a New Bretton Woods 61 Erik Berglöf and Jeromin Zettelmeyer

Save Doha to save the G20 Summit 65 Ernesto Zedillo Introduction

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1 VOX Research-based policy analysis and commentary from leading economists

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2 Quick action for the real economy; sober reflection for financial regulation

Alberto Alesina and Guido Tabellini Harvard University and CEPR; Bocconi University and CEPR

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3 VOX Research-based policy analysis and commentary from leading economists criivªlsboivªdilljvªbumb`q^qflkpªlcª^ªj^gloª`lkqo^`qflk+ª >ddobd^qbªabj^kaªkbbapªqlª_bªprpq^fkbaª_vªcfp`îªmlif`v +ªFkqbok^qflkîª`lloafk^ * qflkªlcªpljbªploqªj^vª_bªrpbcri)ªîqelrdeªqebªpmb`fcf`ªmlif`vªqllipªlrdeqªqlªâ^mqªql il`îª`lkafqflkp+ªAfccbobkqª`lrkqofbpªe^sbªafccbobkqªkbbap)ªloªqlªmrqªfqªafccbobkqivªqeb lmqfjîªcfp`îªmlif`vªfpªafccbobkq+

US-specific: Don't tax the rich – yet MobpfabkqªBib`qªL_^j^ªpelriaªklqªorpeªfkqlªfkòb^pfkdªqûbpªlkªqebªrmmboªjfaaib ì^ppªklt8ªebªpelriaªmlpqmlkbªqebªmoljfpbaªfkòb^pbp+ª>ª`lj_fk^qflkªlcªqûªobifbcªclo qebªiltboªjfaaibªì^ppª^kaªpmbkafkdªlkªmr_if`ªfkco^pqor`qrobªpelriaª_bª^ªmoflofqv )ªfc lkivªqebªmol`bbapª`lriaª_bªafp_ropbaªnrf`hivªbklrde+ Qebªkbtªmobpfabkqªtfiiªe^sbªqlªobpfpqªqebªqbjmq^qflkªlcªfkòb^pfkdªqûbpªkltª^pªefp moldo^jª^kklrk`ba+ªQefpªfpªklqªqebªqfjbªqlªqefkhª^_lrqªobafpqof_rqfkdªfk`ljbª^ka mbkîfpfkdªqebªofè+ªQefpª`^kª`ljbªi^qboªpfk`bªqefpªfpªmôqªlcªefpªj^ka^qb+ª Kltªfpªqebªqfjbªqlªdbqªqebªb`lkljvªlrqªlcªqebªob`bppflk+ªMlmrifpqª^kaªmrkfqfsb mlif`fbpª^d^fkpqª"qebªofè")ªqebª"cfk^k`fîªjôhbqp"ª^kaªplªcloqeªôbªrktfpbª^kaªpelria _bªpò^mmba+ªQefpªtfiiªfkòb^pbªabcf`fqpª_rqªfqªfpª^ªmof`bªtloqeªm^vfkd+

European-specific policies PlrqebokªBrolmbªkbbapªqlªobs^jmªrkbjmilvjbkqªfkpro^k`b)ªj^hfkdªfqªjlobªtfabiv ^s^fi^_ib+ªQefpªtlriaªc^`fifq^qbªobpqor`qrofkdªtebobªkbbaba)ª^kaªfqªtlriaªj^hbªqeb ifhbivªofpbªfkªrkbjmilvjbkqªibppª_roabkpljb+ªKlojîivªfqªq^hbpªqfjbªqlªalªtbicôb obclojp)ª_rqªkltªqfjbªfpªlcªqebªbppbk`bª^kaªqebpbª`lrkqofbpªpelriaªmol`bbaªsbo vªc^pq+ Fqªj^vª_bªqllªi^qbª_rqªfkª^kvªbsbkqªqefpªfpª^ªdllaªmlif`vªabpmfqbªfqpªqfjfkdªfkªobi^qflk qlªqebª`roobkqª`vìb+ PljbªBrolmb^kª`lrkqofbpªjfdeqªîplª_bkbcfqªcoljªqûª`rqpªlkªfkafsfarîpª^ka cfojp)ªîqelrdeªfkªqebª`roobkqªrk`boq^fkqvªpljbªlcªfqªjfdeqª_bªp^sbaªo^qeboªqe^k pmbkq+ªQûªè^kdbpªqe^qªobar`bªqebªtbadbª_bqtbbkªdolppª^kaªkbqªt^dbpªtlriaªprpq^fk bjmilvjbkqª^kaª^ddobd^qbªabj^ka+ªJloblsbo )ªqelpbª`lrkqofbpªqe^qªkbbaªjlobªlo _bqqboªfkco^pqor`qrobªpelriaªqefkhª^_lrqªfksbpqfkdªklt)ª^kaªc^pq+ @lrkqofbpªtfqeªefdeªmr_if`ªab_qª`^kklqª_bªob`hibpp)ªeltbsbo )ª^kaªe^sbªqlª`lj * mbkp^qbªqebªiôdboª`roobkqªafp_ropbjbkqpªtfqeªcrqrobªpmbkafkdª`rqpª^mmolsbaªklt + Mbkpflkªobclojªfpªqebªl_sflrpªmi^`bªqlªpqôq+ªC^firobªqlªq^hbªlccpbqqfkdª^`qflkªtlriaª_b sbovªofphv)ª^pªcfk^k`fîªjôhbqpªôbªîobâvªmof`fkdªqebªmlppf_fifqvªlcªÖorkpÖªlkª`lrk * qofbpªtfqeªefdeªmr_if`ªab_q+ª

Avoid creating 'zombie' firms Qebobªôbªîplªqefkdpªqe^qªpelriaªklqª_bªalkb+ªLkbªfpªqlªrpbªqebªbu`rpbªlcªqebªcfk^k * `fîª_^filrqªqlªp^sbªabìfkfkdª^kaªrkmolar`qfsbªfkarpqofbp)ªifhbªqebª^rqlªfkarpqo vªfk qebªRP)ªc^fifkdª^foifkbpªifhbªfkªFqîv )ªloªrpfkdªmr_if`ªcrkapªqlªmolsfabªqôdbqbaªebimªql fkcirbkqfîªil__fbpª^pª^kklrk`baª_vªMobpfabkqªPôhlwvªfkªCo^k`b+ª Qefpªtlriaªmobsbkqªqebªmol`bppªlcªòb^qfsbªabpqor`qflkªtefèªfksôf^_ivªq^hbpªmi^`b arofkdªob`bppflkp)ªk^jbivªqebªoblod^kfp^qflkªlcªprmmivª^``loafkdªqlªbccf`fbk`vªòfqb * of^+ªEbimfkdªDbkboîªJlqlopªtfqeªmr_if`ªjlkbvªtlriaªmobsbkqªjlobªmolar`qfsbªcfojp qlª`ljbªfkqlªqebªjôhbq)ªbfqeboªfkªqebª^rqlªfkarpqo vªloªfkªlqeboªpb`qlop+ª Fkªqebpbªbu`bmqflkîª`fo `rjpq^k`bp)ªqebªprmmloqªlcªqebªPq^qbªfpªkbbabaªqlªprpq^fk ^ddobd^qbªabj^ka+ª?rqªfcªpr``bppcri)ªPq^qbªfkqbo sbkqflkªalbpªklqªkbbaªqlªi^pqªsbo v ilkd+ªLkªqebª`lkqoô v)ªfqªtlriaª_bª^ªao^j^qf`ªjfpq^hbªfc)ªlsboªqebªjbafrjªork)ªqeb

4 What G20 leaders must do to stabilise our economy and fix the financial system eb^svªe^kaªlcªqebªPq^qbªtbobªqlªobmi^`bªqebªfksfpf_ibªe^kaªlcªqebªj^ohbqªfkªafob`qfkd obplro`bpªqlªqebfoª_bpqªrpb+ª

About the authors

>i_boql >ibpfk^ fp qeb K^qe^kfbi Olmbp Molcbpplo lc Mlifqf`î B`lkljv ^q Eôsôa Rkfsbopfqv ^ka t^p @l*bafqlo lc qeb Nrôqboiv Glrokî lc B`lkljf`p clo bfdeq vbôp+ Eb e^p mr_ifpeba buqbkpfsbiv fk îi j^glo ^`âbjf` glrokîp fk b`lkljf`p) tofqqbk cfsb _llhp) jlpq ob`bkqiv Qeb Crqrob lc Brolmb7 Obcloj lo Abìfkb) JFQ Mobpp %/--3&+ Eb fp ^ @BMO Obpbôè Cbiilt+

Drfal Q^_biifkf fp Ob`qlo lc ?l``lkf Rkfsbopfqv tebob eb fp îpl Molcbpplo lc B`lkljf`p) e^s* fkd q^rdeq ^q Pq^kcloa Rkfsbopfqv ^ka R@I>+ Eb fp `roobkqiv Mobpfabkq lc qeb Brolmb^k B`lkljf` >ppl`f^qflk) ^ka >ppl`f^qb Bafqlo lc qeb Glrokî lc qeb Brolmb^k B`lkljf` >ppl`f^qflk) e^sfkd _bbk >ppl`f^qb Bafqlo lc qeb Glrokî lc Mr_if` B`lkljf`p) ^ka qeb Brolmb^k B`lkljf` Obsfbt+ Eb fp glfkq ob`fmfbkq lc qeb VogÊ Gêkpplk ^tôa colj qeb Brolmb^k B`lkljf` >ppl`f^qflk) ^ka e^p mr_ifpeba krjbolrp pèliôiv glrokî ôqfìbp ^ka qtl _llhp+ Eb e^p ^`qba ^p ^k b`lkljf` `lkpriq^kq ql qeb Fqîf^k dlsbokjbkq) qeb Brolmb^k Môif^jbkq ^ka qeb Cfp`î >cc^fop Abmôqjbkq lc qeb Fkqbok^qflkî Jlkbqôv Crka+ Eb fp ^ @BMO Obpbôè Cbiilt+

Coordinated responses versus identical responses

Refet S. Gürkaynak Bilkent University and CEPR

Qeb D/- ibâbop c^`b qtl obi^qba _rq afpqfk`q mol_ibjp7 jfqfd^qfkd qeb b`lkljf` a^j^db lc qeb dil_î ob`bppflk) ^ka obar`fkd qeb è^k`bp lc crqrob cfk^k`fî òfpbp+ Qeb ob`bppflk obnrfobp `lloafk^qba j^òlb`lkljf` pqfjrirp) _rq `lloafk^qba kbba klq jb^k fabkqf`î+ Qeb ibâbop pelria îpl afp`rpp cfk^k`fî obdri^qflk) _rq ^ rkfcfba cfk^k`fî obdri^qlov co^jbtloh clo qeb telib tloia fp rk^qq^fk^_ib ^ka rkabpfo^_ib+ Ibâbop pelria t^pqb kl qfjb lk qefp8 k^qflkî cfk^k`fî pvpqbjp sôv qll tfabiv ^ka pljb ôb îobâv lsbo*obdri^qba+

QebªKlsbj_boª.2qeªjbbqfkdªlcªqebªD/-ªibâbopªpelriaª%^kaªtfiiªifhbiv&ªafp`rppªqeobb qlmf`p+ª ë Qebªcolwbk)ªî_bfqªpiltivªqe^tfkdªcfk^k`fîªjôhbqp8ª ë Qebªfjmbkafkdªob`bppflk)ª^ka8 ë Qebªmob`^rqflkpªqe^qªpelriaª_bªq^hbkªqlªj^hbªprobªprèª^kªbmfplabªfpªklq obmb^qba+ª

Two separate but related problems: crisis and recession Qebªifnrfafqvªòfpfpªqe^qªe^pªòfmmibaªcfk^k`fîªjôhbqpªôlrkaªqebªtloiaª^kaªqebªdil_* îªpiltaltkªfkªb`lkljf`ª^`qfsfqvªôbªqtlªobi^qbaª_rqªpbmô^qbªmol_ibjp+ªQebª`bkqoî _^khfkdª`ljjrkfqvªobîfpbaªqefpªbôivªlkª^kaªlccbobaªafccbobkqªobjbafbpªqlªb^è)ªfk môqf`riôª_vª`ljfkdªrmªtfqeªòb^qfsbªt^vpªlcªmolsfafkdªifnrfafqvªqlªcfk^k`fîªfkpqf * qrqflkpªtfqelrqªobivfkdªplibivªlkªfkqbobpqªo^qbª`rqp+ªDlfkdªclo tôa)ªfqªtfiiª_bªfjmlo * q^kqªqlªhbbmªfkªjfkaªqebªafpqfk`qflkª_bqtbbkªcfobcfdeqfkdªfkªcfk^k`fîªjôhbqpª^ka dbkboîªj^òlb`lkljf`ªmlif`vj^hfkd+ª

Coordinated doesn't mean identical Qebªdil_îªk^qrobªlcªqebªòfpfpªe^pªfkòb^pbaª%môqivªpr``bppcriiv&ª`îipªcloª`lloafk^qba ^`qflkª^òlppª`lrkqofbp+ªIbâbopªpelriaª_bª`ôbcriªqlªafpqfkdrfpeª_bqtbbkª"`lloafk^q * ba"ª^kaª"fabkqf`î"+ª

Macroeconomic stimulus Kltªqe^qªqebªcfobªfkªqebªcfk^k`fîªjôhbqpªfpªpljbte^qªalrpba)ªqebobªfpªdbkboîª^dobb* jbkqªlkªqebªkbbaªcloª`lloafk^qbaªcfp`îªpqfjrirpªqlªa^jmbkªqebªbccb`qpªlcªqebªdil_î ob`bppflk+ª>mmolmof^qbªcfp`îªpqfjrirpªtfiiª_bªlcªafccbobkqªpfwbpª^kaªpqvibpªfkªafccbobkq `lrkqofbp+ªTefibªpbkafkdªb^èªelrpbeliaª^ªèb`hªjfdeqª_bªprfq^_ibªcloªqebªRP)ªj^kv `lkqfkbkqîªBrolmb^kª^kaªabsbilmfkdªb`lkljfbpªôbª_bqqboªpbo sbaª_vªfkòb^pba pmbkafkdªqe^qªâaobppbpªqebfoªpqor`qroîªb`lkljf`ªmol_ibjp+ªQebªobclojpªqe^qªâaobpp

7 VOX Research-based policy analysis and commentary from leading economists qebªpqor`qroîªmol_ibjpªôbªlcqbkªm^fkcriª^kaª`lpqiv8ªfqªtlriaª_bªsfoqrlrpªqlªrpbªpqfj* rirp*ifkhbaªcfp`îªibbt^vªqlª^qªib^pqªmôqivªrkaboq^hbªqebj+ªRkcloqrk^qbiv)ªj^kvªdls* bokjbkqpªj^vª_bªclkaboªlcªpmbkafkdªjlobªtfqelrqªâaobppfkdªabbmªmol_ibjp8ª"`llo* afk^qflk"ªtfqeªqebªRPªtfiiª_bª^ªk^qroîªmobqbuq+ª QebªFJC)ªtefèªe^pªclrkaªkbtªifcbªtfqeªqebª`roobkqªòfpfp)ªjfdeqª_bª^ªk^qroîª`^k * afa^qbªqlª^qªib^pqªjlkfqlo)ªfcªklqªebimªabpfdk)ªeltªb^èª`lrkqovªrkaboq^hbpªfqpªmôqªlc qebªdil_îªcfp`îªpqfjrirp+ª Absbilmfkdª`lrkqofbp)ªj^kvªlcªtefèªtfiiªkbbaªFJCªcfk^k`fîªprmmloqª^kaªqerp e^sbªqlª^``bmqªqebª^qq^èbaª`lkafqflkîfqv )ªj^vªbkaªrmª_be^sfkdª_bqqboªqe^kªabsbi * lmbaªb`lkljfbp+ªMôqªlcªqebªFJCÖpªgl_ªpelriaª_bªqlª`îiª^qqbkqflkªqlª`lrkqofbpªqe^q fkòb^pbªpqfjrirp*ifkhbaªdlsbokjbkqªbumbkafqrobpªfkª^ªj^kkboªqe^qªib^sbpªqebj abbmboªfkªab_qª_rqªklª_bqqboªlccªfkªqbojpªlcªqebfoªabbmªmol_ibjp+ Klª`lrkqo vªtfiiªclocbfqªfqpªb`lkljf`ªplsbobfdkqvª^kaª^dobbªqlªFJCª`lkafqflkp rkibppªqebvªe^sbªqlª%f+b+ªkbbaªFJCªjlkbv&ª_rqª`lrkqofbpª`^kª^qªib^pqª_bªÖk^jbaª^ka pe^jbaÖª^pªmôqªlcªqebªbccloqªqlª^slfaªqebªcfp`îªpqfjrirpªqrokfkdªfkqlª^ªcobb*clo*îiªlc t^pqbcriªmolgb`qp+ª

Avoiding future crises QebªD/-ªibâbopÖªjbbqfkdªfpªîplª^ªk^qroîªmi^qclojªqlªafp`rppªqebªmob`^rqflkpªqe^qª`^k _bªq^hbkªqlª^slfaªbumbofbk`fkdª^ªpfjfiôªòfpfpª^d^fk+ª Qovfkdªqlª`ljbªrmªtfqeª^ªrkfcfbaªdil_îªcfk^k`fîªobdri^qlovªbksfolkjbkqªtfiiªklq tloh+ª@lrkqofbpªe^sbªafccbobkqªcfk^k`fîªpqor`qrobp)ªkbbapª^kaªmobcbobk`bp+ªFqªtlria _bª_bpqªqlª^slfaªt^pqfkdªqfjbªlkª^ªrkfcfbaªdil_îªco^jbtloh+ªQebobªôb)ªeltbsbo ) pljbª`ljjlkªibpplkpªqlª_bªao^tk+ª >kªfjmloq^kqªibpplkªfpªqe^qªpvpqbjf`îiv*fjmloq^kqªcfk^k`fîªfkpqfqrqflkpªôbªkl ilkdboªifjfqbaªqlªabmlpfq*q^hfkdª_^khp+ªFjmif`fqªloªbumif`fqªdrô^kqbbp)ª^kaªqebª^ppl * `f^qbaªjlkfqlofkdª^kaªobdri^qflk)ªe^sbªqlª_bªbuqbkabaªqlªîiªcfk^k`fîªfkpqfqrqflkp qe^qªôbªqllª_fd)ªqllª`ljmibu)ªloªqllªòr`fîªqlªc^fi+ª Fkª^ªpfjfiôªsbfk)ªfqªj^vª_bªtloqetefibªqlª^qqbjmqªqlªbpq^_ifpeª`ljjlkªibsbipªlc dlsbokjbkqªdrô^kqbbpªcloªabmlpfqpª%loªlqeboªif^_fifqfbpªlcªqebpbªfkpqfqrqflkp&+ªQefp tlriaªmobsbkqª`lrkqofbpªcoljªqo vfkdªqlª`ljmbqbªlkªdrô^kqbb*`lsbo^dbªfkªqfjbpªlc afpqobpp+ªTefibª^ªrkfcfbaªdil_îªobdri^qlo vªco^jbtlohªfpªfkcb^pf_ib)ªob^èfkdª`lkpbk * prpªlkª_olâªdrfabifkbpªj^vª_bªmlppf_ib+ªEbob)ªlk`bª^d^fkªfqªfpªfjmloq^kqªqlªobîfpb qe^qª]`lloafk^qba$ªalbpªklqªjb^kª]fabkqf`î$+ª

More regulation for all is not the answer Fqªfpªb^pvªqlªqefkhªqe^qªlkbªlcªqebªìbôbpqªibpplkpªlcªqefpªòfpfpªfpªqe^qªjlobªobdri^qflk lcªcfk^k`fîªjôhbqpªfpªkbbaba+ªQefpªfpªqebªtolkdªfkcbobk`b+ª Fkªpljbª`lrkqofbp)ªklq^_ivªfkªqebªRP)ª_bqqboªobdri^qflkªlcªcfk^k`fîªfkpqfqrqflkpª^ka `lkqo^`qpªtlriaª_bªmorabkq+ªJ^kvªlqeboª`lrkqofbp)ªeltbsbo )ªîobâvªe^sbªcfk^k`fî obdri^qflkªqe^qªfpªqllªqfdeq8ªqebvªpelriaªîiltªcloªjlobªfkkls^qflkªfkªqebfoªcfk^k`fî fkarpqofbp+ª Qebªnrbpqflkªibâbopªpelriaª^phªqebjpbisbpªfp7ª"Lsboªqebªm^pqª`bkqrovªtlriaªfqªe^sb _bbkª_bqqboªqlªe^sbªifsbaªrkaboªqebªRPªcfk^k`fîªpvpqbjª^kaªqebªobîªlrq`ljbpªfq ebimbaªòb^qb)ªloªrkaboªlroªltkªcfk^k`fîªpvpqbj<"ª Fkªj^kvª`lkqfkbkqîªBrolmb^kª^kaªabsbilmfkdªb`lkljfbpªqebª^kptboªj^vª_bªqe^q qebªRPªcfk^k`fîªpvpqbjªåªtfqeªfqpªc^pqboªdoltqeªfkªifsfkdªpq^kaôapªåªfpªqebªofdeq ^kptbo)ªabpmfqbªqebªob`bkqªòfpfp+ª Qebªèlf`bªlcªeltªefdeª^ªobqrokªqlªpbbhª^kaªeltªjrèªofphªqlª^``bmqªfkªobqrok

8 What G20 leaders must do to stabilise our economy and fix the financial system abmbkapªlkªb^èª`lrkqovÖpªmobcbobk`bp+ª?rqªèllpfkdª^ªcfk^k`fîªpvpqbjªqe^qª`^kªlkiv q^hbªjfkfjîªofphpªfpªrkifhbivªqlª_bªlmqfjîªcloª^kvª`lrkqo v+ª Cfk^k`fîªobdri^qflkªpelriaª_bªmorabkq)ª_rqªklqªmorabkqªqlªqebªbuqbkqªlcªîiltfkd cloªklªofph)ª^kaªklªobqrokªbfqebo+

About the author

Obcbq DÎoh^vk^h fp >ppfpq^kq Molcbpplo lc b`lkljf`p ^q ?fihbkq Rkfsbopfqv) e^sfkd mobsflrp _bbk ^k b`lkljfpq ^q qeb Jlkbqôv >cc^fop Afsfpflk lc qeb RP Cbaboî Obpbosb ?lôa+ Eb afa efp MeA fk b`lkljf`p ^q Mofk`bqlk+ Efp obpbôè fkqbobpqp ôb jlkbqôv b`lkljf`p) cfk^k`fî jôhbqp ^ka fkqbok^qflkî b`lkljf`p+ Fk môqf`riô) eb e^p tlohba lk buqo^`qfkd fkcloj^qflk colj ^ppbq mof`bp qe^q ebim ^kptbo jlkbqôv mlif`v obi^qba nrbpqflkp+ Efp obpbôè e^p _bbk mr_ifpeba fk qeb Glrokî lc Jlkbqôv B`lkljf`p) Fkqbok^qflkî Glrokî lc @bkqoî ?^khfkd ^ka >jbof`^k B`lkljf` Obsfbt+ Eb e^p ob`bfsba ^tôap colj qeb @bkqoî ?^kh lc Qrohbv) qeb Brolmb^k @bkqoî ?^kh ^ka qeb Qrohfpe >`âbjv lc P`fbk`bp+ Eb fp ^ @BMO Obpbôè >ccfif^qb+

Agenda for the next few months

Michael Spence Nobel Laureate, Stanford University

Ibâbop pelria cl`rp cfopq lk ifjfqfkd qeb a^j^db colj qefp òfpfp fk absbilmba ^ka absbilm* fkd k^qflkp+ @lloafk^qba fkqbosbkqflkp ql mobsbkq ^ppbq*mof`b lsbopellq ^ka molsfab cfp`î pqfjrirp ôb fjmloq^kq+ Qeb ilkdbo qboj obdri^qlov fpprbp pelria ^t^fq ^ `ôbcri ^kîvpfp lc qeb `^rpbp lc qeb òfpfp+

Qebobªôbªqtlªrpbcriª^dbka^pªqe^qª`^kª_bªmroprbaª^qªqebªPrjjfqªfkªT ^pefkdqlk+ª .& Abîfkdªfkª^ª`lloafk^qbaªt^vªtfqeªqebª`roobkqª^kaªpqfiiªlkdlfkdªcfk^k`fîªòfpfp tfqeª^ªsfbtªqlªalfkdªte^qbsboªfpªmlppf_ibªqlªifjfqªqebªa^j^db+ª A^j^dbªtlriaª_bªabcfkbaª^pªqebªp`lmb)ªibkdqeª^kaªabmqeªlcªqebªob`bppflkªloªdoltqe piltaltk)ªabmbkafkdªlkªte^qªmôqªlcªqebªtloiaªlkbªfpªqefkhfkdªlc)ª^kaªpljbªobi^q * baªafpqof_rqflkîªfpprb+ª /& Pbqqfkdªfkªjlqflkª^ªmol`bppªqe^qªfpªabpfdkbaªlsboªqfjbªqlªmolar`bª^ªjlobªpq^_ib ^kaªibppªco^dfibªdil_îªcfk^k`fîªpvpqbj+ª

First things first Lcªqebpb)ªqebªcfopqªfpªjlobªfjmloq^kq+ªQebª`roobkqªòfpfpªåªloªjlobª^``ro^qbivªqebªao^ * j^qf`îivªîqbobaªavk^jf`pªqe^qªqllhªeliaª^cqboªqebªfkcibuflkªmlfkqªfkªjfaªPbmqbj_bo åªe^pª_bbkªâaobppbaªtfqeªpmbbaª^kaªmo^dj^qfpj+ª ?rqªqebªòfpfpªfpªklqªlsbo+ª>kªbuqbkabaªòbafqªil`hrmª%tfqeªfqpªmlqbkqfîªcloªbuqo^lo * afkôvªa^j^db&ªe^pªmol_^_ivª_bbkª^slfaba+ªQBAª^kaªobi^qbaªpmobâpªpbbjªqlªe^sb jlabo^qba+ª@ljjbo`fîªm^mboªfpª_bfkdªoliibaªlsbo )ªqelrdeªklqªqeolrdeªqebª`lksbk * qflkîªè^kkbipª%tefèªôbªpqfiiªiôdbivªìlpba&+ªQebªm^vjbkqpªpvpqbjªfpªcrk`qflkfkd8 mr_if`ªcrkapªôbªciltfkdªfkqlªqebªcfk^k`fîªpvpqbjªebimfkdªqlªob`^mfqîfpbª_^khp+ª ?rqªqebobªfpª^ªdllaªabîªjlobªqlªalª_bclobªtbªôbªlrqªlcªqebªtllap+ª ë Jloqd^dbpªkbbaªqlª_bªobjlsbaªcoljªa^j^dbaª_î^k`bªpebbqp)ªqbojpªobpbqª^ka clobìlprobpªifjfqba+ª ë @lii^qboîfpbaª^kaªpqor`qrobaª^ppbqp)ªklqªqoâfkdª^kaªtfqeªrk`boq^fkªsîrbp) pfjfiôivªkbbaªqlª_bªbsîr^qba)ªmro è^pba)ª^kaªafpj^kqiba+ª Tefibªqebªlofdfkîª`lk`bmqflkªlcªQ>OMªafaªklqª^`qªnrf`hivªbklrdeªqlªob`^mfqîfpb qebªpvpqbj)ªfqªobj^fkpªmlifqf`îivª^kaªb`lkljf`îivªfjmloq^kq+ª ë Eljbltkbopªkbbaªebim+ Ebimªcloªeljbltkbopªt^pªmôqªlcªqebª_ôd^fk8ªfjmibjbkqbaªmolmboivªfqªtfiiªebim mobsbkqª^ªao^j^qf`ªaltktôaªlsbopellqªfkªelrpfkdªmof`bp+ª>kaªfqªtfiiª_bdfkªqeb mol`bppªlcªobjlsfkdªqebªqo^kpmôbk`vªcldª^kaªqebobclobªrk`boq^fkqvª^_lrqªsîrb qe^qªproolrkapªqelpbªmloqflkpªlcª_î^k`bªpebbqpªtfqeª`ljmibuªpb`rofqfpbaª^ka pqor`qrobaª^ppbqp)ªlkbªlcªqebªob^plkpªtevªmofs^qbª^kaªPTCª`^mfqî)ªe^sfkdª_bbk _rokbaªlk`b)ªfpªpqfiiªjlpqivªlkªqebªpfabifkbp+ 11 VOX Research-based policy analysis and commentary from leading economists

Crisis metastasis Qebªcfk^k`fîªòfpfpªe^pªo^mfaivªjbq^pq^pfpbaªqlªqebªdil_îªb`lkljvªfkªmôqª_b`^rpbªlc qebªdoltqeªpiltaltk+ª?rqªjlobªfjjbaf^qbivª^kaªfjmloq^kqivª_b`^rpbª^ppbqªmof`bp ôbªcîifkdª^kaªòbafqªfpªao vfkdªrmª^pª`^mfqîªfpªpr`hbaª_^`hªfkqlªqebªabsbilmba b`lkljfbpªqlªobpqlobªa^j^dbaª_î^k`bªpebbqp)ªjbbqªjôdfkª`îip)ª^kaª^``ljjla^qb ^_klojîivªiôdbªslirjbªobabjmqflkp+ªQebªobpriqªfpªqe^qª^ppbqªmof`bpª^kaªbuè^kdb o^qbpªôbª_bfkdªpbqª_vªqbèkf`îªc^`qlopª^kaªqebªabibsbo^dfkdªmol`bpp+ªQebvªôbªiôdbiv rkobi^qbaªqlªob^plk^_ibª^ppbppjbkqpªlcªilkdboªqbojªfkqofkpf`ªsîrbª`lkpfabo^qflkp+ª >pª^ªobpriq)ªòbafqª^s^fi^_fifqvªfpprbpªe^sbªbjbodbaªfkª^ªtfabªo^kdbªlcªabsbilmfkd `lrkqofbp+ªAliiôªabkljfk^qbaªif^_fifqfbpªe^sbª_b`ljbªjlobªbumbkpfsb)ª`^rpfkdªpqobpp cloªdlsbokjbkqpª^kaª`ljm^kfbpªåª^pªfkªm^pqªabsbilmfkd*`lrkqovªòfpbp+ªQebªafccbobk`b fpªqe^qªqefpªlkbªafaªklq)ªcloªqebªjlpqªmôq)ªlofdfk^qbªtfqeªqebj+ >cqboª^kªrk^slfa^_ibªmboflaªlcªsbovªefdeªsli^qfifqvªfkªbnrfqvª^kaªab_qªjôhbqp)ªqefp tfiiªbsbkqrîivªbkaª^pªqebªabibsbo^dfkdªpqlojª^_^qbpª^kaªjlobªklojîªsîr^qflkpªq^hb elia+ª?rqªqebªbuqbkqªlcªqebªa^j^dbªqlªelrpbeliaª^ppbqpªfkìrafkdªmbkpflkp)ªebk`b `lkprjmqflkª^kaª_rpfkbppªfksbpqjbkq)ªtfiiªe^sbª^ªpfdkfcf`^kqªfjm^`qªlkªqebªabmqe) p`lmbª^kaªibkdqeªlcªqebªdil_îªob`bppflk+ª

Coordinated interventions to reduce the damage >ªsôfbqvªlcª`lloafk^qbaªfkqbo sbkqflkpªcoljª`bkqoîª_^khp)ªqebªFJC )ªiôdbªeliabopªlc obpbosbpª^kaªlqebopª`^kªebimªobar`bªqebªbuqbkqªlcª^kª^ppbqªabci^qflkªlsbopellqª^ka obar`bªqebª_roabkªqe^qªfpªmi^`baªlkªcfp`îªmlif`vª^kaªpqfjrirpªqlªobpqlobªb`lkljf` doltqe+ªPmb`fcf`îiv)ªtbªkbbaªqlªrpbªqebª`fo`rfqª_ob^hbopªqe^qªtbªe^sbªqlªqovªqlªifjfqªql pmobâªlcªqebª^ppbqªabci^qflkª^kaªfqpª`lii^qboîªa^j^db+ª Tbiiªqôdbqbaªcfp`îªpqfjrirpªmoldo^jpªtfiiª_bªkbbaba8ªqebvªpelriaª_bª`lj_fkba tfqeªòbaf_ibªmi^kpªqlªobpqlobªcfp`îª_î^k`bª^kaªebîqevªmr_if`*pb`qloª_î^k`bªpebbqp lsboª^ªmboflaªlcªqfjb+ªQebªi^qqboªtfiiª_bªm^fkcriª_rqªkb`bppô v+ª

Longer term agenda: System stability Lkªqebªilkdboªqbojª^dbka^ªlcªobclojªlcªqebªdil_îªcfk^k`fîªpvpqbj)ª^ªqelolrde ^kîvpfpªlcªqebª`^rpbpªlcªqebªòfpfpªfpªkbbabaª^pª^ªclrka^qflk8ªqefpªpelriaª_bª_^pbaªlk buqbkpfsbªa^q^ª^kîvpfpª^kaªfkslisbªjriqfmibªfkmrqp+ª Qebobªfpªklªpeloq^dbªlcªmlqbkqfîª`lkqof_rqfkdªc^`qlop7ª ë Fk`ljmibqbª^kaªco^djbkqbaªobdri^qflk)ªpmb`fcf`îivªrkobdri^qbaªjloqd^db lofdfk^qflkªcbbafkdªqebªefdeivªmolcfq^_ibªpb`rofqfp^qflkª_rpfkbpp8 ë Dil_îªfj_î^k`bp)ª^kaª ë C^`qlopªqe^qªibaªqlª^ªiltªfkci^qflk,iltªfkqbobpqªo^qbªbksfolkjbkq)ª ë >ªsôfbqvªlcªfpprbpª^ppl`f^qbaªtfqeªfk`bkqfsbpª`lj_fkbaªtfqeªfk`ljmibqbª^ka ^pvjjbqof`ªfkcloj^qflk)ª ë Qo^kpmôbk`vªmol_ibjpª^ppl`f^qbaªtfqeªqebª`ljmibufqvªlcªqebª^ppbqpª^kaªqebªc^`q qe^qªpljbªabofs^qfsbpªôbªklqªqoâba)ªmobsbkqfkdªqebªkbqqfkdªlrqªlcª`lrkqbomôqv ofph+ª Qebpbªabpbosbª^kaªtfiiªob`bfsbªpboflrpª^qqbkqflkª^pª^kª^kîvqf`îªclrka^qflkªcloªqeb abpfdkªlcªjlobªbccb`qfsbªaljbpqf`ª^kaªdil_îªobdri^qflkª^kaªlsbopfdeqªfkpqfqrqflkp+

12 What G20 leaders must do to stabilise our economy and fix the financial system

Shifting risk: financial innovation that hide rather than spread risk ?rqªqebobªfpª^kªfjmloq^kqªfpprbªcloªtefèªqebª`roobkqª^kîvpfpªfpªsbo vªfk`ljmibqb+ªFq pbbjpªìbôª%^qªib^pqªqlªjb&ªqe^qªqebªcfk^k`fîªpvpqbjªavk^jf`pªmolar`baª^ªpqbâvªofpb fkªpvpqbjf`ªofphª%olrdeivªqebªbuqbkqªqlªtefèªfkafsfarîªofphpªôbªmlpfqfsbivª`loobi^q * ba&+ªQefpªjb^kpªqe^qªqebªafpqof_rqflkªlcªofphªfpªklqªpq^qflkô vª_rqªfkpqbâªpefcqp+ªQefp mlpbpª^ªiôdbªèîibkdbªcloª^``ro^qbivªjlabiifkdªofph+ª Croqeboªfqª^mmbôpªqe^qªqefpªofpbªfkªpvpqbjf`ªofphªtbkqªbfqeboªrkklqf`baªloªklqª^`qba lkªloªpljbª`lj_fk^qflkªlcªqebªqtl+ªQebªbsfabk`bªfpªqe^qªbsbo vªj^gloªcfk^k`fîªfkpqf* qrqflkªebiaªmol_ibj^qf`ª^ppbqpª^kaªt^pªefdeivªibsbobaª^kaªbumlpbaªqlªbuqobjbªcfk^k* `fîªafpqobpp+ª>pª^ªobpriqªqebvªprccbobaªpfjriq^kblrpª^kaªj^gloªa^j^dbªtfqeªfqpª^qqbk * a^kqªbccb`qpªlkªcfk^k`fîªpb`qloªmbocloj^k`bª^kaªlkªqebªb`lkljv +ªCfk^k`fîªfkkls^* qflkªt^pª_bifbsbaªqlªobafpqof_rqbª^kaªobar`bªofph+ªFqªmol_^_ivªafaªqlªpljbªbuqbkq)ª_rq fkªqefpª`^pb)ªfkkls^qflkªj^fkivªefaªqebªofph+ª Qebªfpprbªlcªtebqeboªtbªhkltªeltªqlªjb^probªpvpqbjf`ªofphª^kaªqlªabqb`qªqeb avk^jf`pªlcªfqpªbslirqflkªfpª`bkqoîivªfjmloq^kqªtfqeªobpmb`qªqlª%^&ªtebqeboªfksbpqlop ^kaªfkpqfqrqflkpª`^kª_bª`lrkqbaªlkªqlªq^hbªmolqb`qfsbª^`qflkª^kaªtebqeboªqebªpvpqbj fpªloª`^kª_bªjâbªqlª_bªpljbte^qªjlobªpbic*obdri^qfkd)ª^kaªcoljª^ªmlif`vªmlfkqªlc sfbtª%_&ªtebqeboªdil_îªbôivªtôkfkdªpvpqbjpª%^pªmolmlpbaª_vªqebªRHªMofjb Jfkfpqbo&ª^kaªmlif`vªfkqbo sbkqflkª_^pbaªlkª^ªob^plk^_ivªl_gb`qfsbª^ppbppjbkqªlcªofp * fkdªofphªlcªfkpq^_fifqv)ªôbªfkªc^`qªcb^pf_ib+ª

About the author

Jfè^bi Pmbk`b) tfkkbo lc qeb /--. Kl_bi Jbjlofî Mofwb fk B`lkljf` P`fbk`bp) fp Pbkflo Cbiilt ^q qeb Ellsbo Fkpqfqrqflk) ^ka Mefifm E+ Hkfdeq Molcbpplo Bjbofqrp lc J^k^dbjbkq fk qeb Doâr^qb Pèlli lc ?rpfkbpp ^q Pq^kcloa Rkfsbopfqv) e^sfkd pbosba ^p Ab^k lc qeb Pq^kcloa ?rpfkbpp Pèlli ^ka Ab^k lc qeb C^`riqv lc >oqp ^ka P`fbk`bp ^q Eôsôa %tebob eb t^p îpl ^ Molcbpplo lc B`lkljf`p&+ Eb fp ^ jbj_bo lc qeb _lôa lc afob`qlop clo Dbkboî Jfiip+ Colj .66. ql .664) eb t^p è^foj^k lc qeb K^qflkî Obpbôè @lrk`fi ?lôa lk P`fbk`b) Qbèklildv ^ka B`lkljf` Mlif`v+ Eb fp ^ Cbiilt lc qeb >jbof`^k >`âbjv lc >oqp ^ka P`fbk`bp ^ka lc qeb B`lkljbqof` Pl`fbqv+

Making international finance safe for the world economy – not the other way around: What should the G20 communiqué say?

Dani Rodrik Harvard University and CEPR

D/- ibâbop pelria rkfqb ^d^fkpq rkfi^qboî ^`qflkp qe^q `lria qfm qeb tloia fkql ^ sf`flrp `vìb qe^q abbmbkp qeb dil_î ob`bppflk+ Qefp pelria fkìrab7 %f& `lloafk^qba cfp`î bum^kpflkp qe^q fkìrab `lkprjmqflk*bum^kafkd jb^probp _v k^qflkp tfqe iôdb qoâb promirpbp8 %ff& `ljjfqjbkq ql ^_pq^fk colj molqb`qflkfpq jb^probp8 ^ka %fff& `ljjfqjbkq ql bum^ka crka* fkd lc qeb FJCÖp Peloq*Qboj Ibkafkd C^`fifqv ^p kbbaba+ Cfkîiv) ibâbop pelria bpq^_ifpe ^ efde*ibsbi tlohfkd dolrm ql abpfdk kbt Öqo^ccf` oribpÖ clo fkqbok^qflkî cfk^k`b+

QebªD/-ªjbbqfkdªq^hbpªmi^`bªklkbªqllªpllk+ª?rqªqebobªfpª^ªa^kdboªqe^qªqebªibâbopªtfii pmbkaªqllªjrèªqfjbªlkªdo^kaflpbªfab^pª^kaªklqªbklrdeªlkª`lkq^fkfkdªqebªfjjb * af^qbªòfpfp+ªQebobªtfiiª_bªmibkqvªlcªqfjbªfkªjlkqepªqlª`ljbªqlªafp`rppª^ªkbtª?obqqlk Tllapªloª^ªkbtªobdfjbªlcªdil_îªobdri^qflkªcloªcfk^k`b+ªQebªfjjbaf^qbªèîibkdbªfp qlªrkfqbª^d^fkpqªrkfi^qboîª^`qflkpªqe^qª`lriaªòb^qbª^ªsf`flrpª`vìbª^kaªao^dªqebªtloia b`lkljvªfkqlª^kªbsbkªabbmboªob`bppflk+

So here is what I hope the final communiqué will say: ]Tb)ªqebªibâbopªlcªqebªD/-ªk^qflkp)ªe^sbª`ljbªqldbqeboªqlªabsbilmª^ª`ljjlkª^`qflk ^dbka^ªqlªmobsbkqªqebªcroqeboªpmobâªlcªqebªcfk^k`fîªòfpfpª^kaªqlªbkprobªqe^qªqebª`lk* pbnrbk`bpªcloªlrqmrqª^kaªbjmilvjbkqªôbªjfkfjfpba+ªT bªôbªmib^pbaªqe^qªD4ªjbj * _boªdlsbokjbkqpªe^sbª^dobbaªqlªbkd^dbªfkª^kª^mmolmof^qbªabdobbªlcªcfp`îªbum^kpflk qlªpqfjri^qbªqebfoªb`lkljfbp+ªTefibªqebªabdobbªlcªobci^qflkªlcªafccbobkqªb`lkljfbpª`^k _bª_bpqªbsîr^qbaª_vªmlif`vj^hbopªfkªfkafsfarîª`lrkqofbp)ªtbª_bifbsbªglfkqª^`qflkªlk qefpªcolkqªtfiiª_bªjlobªbccb`qfsbªqe^kªfpli^qbaªè^kdbpªfkªmlif`v + Tbªîplª`îiªlkª`lrkqofbpªtfqeªiôdbª`roobkqª^``lrkqªpromirpbpªqlªâlmqªmlif`fbp qe^qª_llpqªaljbpqf`ªabj^ka+ª@efk^ªe^pª^ªmôqf`riôivªfjmloq^kqªolibªqlªmi^vªebob) ^kaªtbªôbªe^mmvªqlªobmloqªqe^qªqebª@efkbpbªdlsbokjbkqªe^pªab`fabaªqlªbj_ôhªlk ^ªpfdkfcf`^kqªmoldo^jªqlªfkòb^pbªaljbpqf`ª`lkprjmqflkªåª_lqeªmofs^qbª^kaªmr_if`ªå _vª_llpqfkdªpmbkafkdªlkªfkco^pqor`qrob)ªebîqe)ªbar`^qflk)ª^kaªpl`fîªqo^kpcbop+ª Tbªôbªmôqf`riôivª`lk`bokbaªqe^qªqebªcfk^k`fîªòfpfp)ªtefèªe^pªîobâvªefq bjbodfkdªjôhbqp)ªtfiiªe^sbªbsbkªjlobªpboflrpª`lkpbnrbk`bpªfkªqebªtbbhpªqlª`ljb cloªqebªpq^_fifqvªlcªqebfoª_^khfkdª^kaªcfk^k`fîªpvpqbjp+ªT bªtbi`ljbªqebªòb^qflkªlc qebªkbtªPeloq*QbojªIfnrfafqvªC^`fifqvª%PIC&ª^qªqebªFkqbok^qflkîªJlkbqô vªCrka)ª^ka qebªCbaboîªObpbo sbÖpªkbtªpt^mªc^`fifqfbpªcloªclroªbjbodfkdªjôhbqªb`lkljfbp+ªQebpb `lrkqofbpªôbªqebª`^prîqvªlcªcfk^k`fîªbu`bppbpªqe^qªôbªklqªlcªqebfoªltkªalfkd+ªPlªtb bjme^pfpbªqe^qª^``bppªqlªqebªPICªtfiiª_bª^s^fi^_ibªqlªîiªabsbilmfkdª`lrkqofbpªqe^qªôb âsbopbivª^ccb`qbaª_vªqebªcfk^k`fîªqro_ribk`bªbj^k^qfkdªcoljªqebªpr_mofjbªcîilrq+ª Croqebo)ªD4ªjbj_boªdlsbokjbkqpªbjme^pfpbªqe^qªqebvªpq^kaªobâvªqlªbum^ka qebpbªc^`fifqfbpª^pªkbbaba)ªfkª`^pbªqebvªôbªklqªprccf`fbkqªqlªobpqlobªpq^_fifqvªqlªjôhbqp+ Tbªîplªtbi`ljbªqebªab`fpflkª_vªqebª@efkbpbªdlsbokjbkq)ªabpòf_baªfkªdob^qboªabq^fi

15 VOX Research-based policy analysis and commentary from leading economists fkªqebª^``ljm^kvfkdª`ljjrkfnr¤)ªqlªj^hbª^s^fi^_ibªmôqªlcªfqpªclobfdkª`roobk`v obpbosbª^ppbqpªqltôapª^kªbum^kabaªpt^mªc^`fifqvªfkªprmmloqªlcªdil_îªcfk^k`fîªpq^_fi * fqv+ Qebªtbbhpª^kaªjlkqepªêbâªtfiiª_bªqo vfkdªqfjbpªcloªb`lkljf`ªmlif`vj^hbop bsbovtebob)ª^pªqebvªqo vªqlª`lkq^fkªqebªcîilrqªcloªlrqmrqª^kaªbjmilvjbkq+ªO^fpfkd qoâbª_ôofbopª^d^fkpqªfjmloqpªtfiiª_bª^ªqbjmq^qflk)ªbpmb`fîivªtebkª`roobk`fbpªcir`qr* ^qbªplªjrè+ª?rqªqebªbumbofbk`bªtfqeªqebªDob^qªAbmobppflkªqb^èbpªrpªqe^qªqefpªfpªqeb probpqªt^vªqlªj^dkfcvªqebª`lpqpªlcªqebªòfpfp)ª^kaªqlªpmobâªfqªqlªlqeboª`lrkqofbp+ªEbk`b qebªjlpqªpboflrpªèîibkdbªcloªqebªdil_îªqoâfkdªobdfjbª^qªqebªmobpbkqªfpªqlªbkprob qe^qªqebªcfk^k`fîª^kaªb`lkljf`ªòfpfpªalbpªklqªibâªqlª^ªsf`flrpª`vìbªlcªmolqb`qflk * fpj)ªdob^qivªbu^`bo_^qfkdªqebªb`lkljf`ªaltkqrok+ª Plªtbªglfkqivª`ljjfqªlropbisbpªfkªmr_if`ªqlªklqªo^fpfkdªmolqb`qflkfpqª_ôofbopªfk obpmlkpbªqlªmbo`bfsbaªqeob^qpªqlªbjmilvjbkqªcoljªfjmloqp+ªTbªcroqeboª^phªqebªpbòb* qôf^qªlcªqebªT loiaªQoâbªLod^kfp^qflkªqlªjlkfqloª^kaªobmloqªrkfi^qboîªè^kdbpªfk qoâbªmlif`v)ªtfqeªqebªmromlpbªlcª"k^jfkdª^kaªpe^jfkd"ªD/-ªjbj_bopªqe^qªabmôq coljªqefpª`ljjfqjbkq+ª Qebªrkcliafkdªcfk^k`fîªòfpfpªe^pªjâbªfqª^jmivªìbôªqe^qªtbªkbbaª^ªkbtªobdri^ * qlovª^mmol^èªqlªcfk^k`bªåª_lqeªaljbpqf`îivª^kaªfkqbok^qflkîiv+ªQebªoribpªqe^qªdls* bokªcfk^k`fîªdil_îfp^qflkªkbbaªqlª_bªobqelrdeqªqlªbkprobªqe^qªcfk^k`bªpbo sbpªfqpªmof* jôvªdlîpªåªîil`^qbªp^sfkdªqlªefde*obqrokªmolgb`qpª^kaªbke^k`bªofph*peôfkdªåªtfqe * lrqªibâfkdªqlªfkpq^_fifqvª^kaªòfpbp+ªLroªafp`rppflkpªe^sbªobsbîbaªqe^qªqebobªbufpq dob^qªafccbobk`bpª^jlkdpqªrpªtfqeªobpmb`qªqlªlroªobpmb`qfsbªkbbapª^kaªqebobclobªtfqe obpmb`qªqlªeltªqlª^èfbsbªqebpbªbkap+ª>ªhbvªèîibkdbªtfiiª_bªqebobclobªqlªpqofhbª^k ^mmolmof^qbª_î^k`bª_bqtbbkª`ljjlkªfkqbok^qflkîªobdri^qflkp)ªlkªqebªlkbªe^ka) ^kaªpm^`bªcloªaljbpqf`ª^mmol^èbpªqe^qªj^vªafsbodbªcoljªeôjlkfpbaªobdri^qflkp)ªlk qebªlqebo+ªOb`bkqªbumbofbk`bªe^pªq^rdeqªrpªqe^qªqebobªj^vªkbbaªqlª_bª^ªdob^qboªolibªclo qebª^`qfsbªj^k^dbjbkqªlcªfkqbok^qflkîªcfk^k`fîªciltpª_vªdlsbokjbkqp+ª AbpfdkfkdªqebªkbtªÜqo^ccf`ªoribpîªcloªfkqbok^qflkîªcfk^k`bªtfiiªq^hbª`lkpfabo^_ib qfjbª^kaªqelrdeq+ªT bªe^sbª^phbaªlroªjfkfpqbopªlcªcfk^k`bªqlªbpq^_ifpeª^ªefde*ibsbi tlohfkdªdolrmªqe^qªtfiiª`lksbkbª^pªpllkª^pªmo^`qf`îivªcb^pf_ibªqlªpbbhªtfaboªfkmrq) ^kaªò^cqª^ªco^jbtlohªcloªafp`rppflkª^jlkdªebâpªlcªdlsbokjbkqp+ªAbpmfqbªlroªafc * cbobk`bpªlkªqebªabq^fip)ªtbªpeôbª^ª`ljjlkªdlî7ªqlªj^hbªfkqbok^qflkîªcfk^k`bªp^cb cloªqebªtloiaªb`lkljvªåª^kaªklqªqebªlqeboªt^vªôlrka+$ª

About the author

A^kf Olaofh fp O^cfn Eôfof Molcbpplo lc Fkqbok^qflkî Mlifqf`î B`lkljv ^q EôsôaÖp Glek C+ Hbkkbav Pèlli lc Dlsbokjbkq+ Eb e^p mr_ifpeba tfabiv fk qeb ôb^p lc b`lkljf` absbi* lmjbkq) fkqbok^qflkî b`lkljf`p) ^ka mlifqf`î b`lkljv ^ka ^rqeloba pbsboî _llhp) fkìra* fkd E^p Dil_îfw^qflk Dlkb Qll Cô< %.664&) ^ka) jlpq ob`bkqiv) Lkb B`lkljf`p) J^kv Ob`fmbp7 Dil_îfw^qflk) Fkpqfqrqflkp) ^ka B`lkljf` Doltqe %/--4&+ Fk /--4 eb t^p ^tôa* ba qeb fk^rdroî >i_boq L+ Efopèj^k Mofwb lc qeb Pl`fî P`fbk`bp Obpbôè @lrk`fi+ Eb fp ^ @BMO Obpbôè Cbiilt+

16 Some suggestions for the G20 on November 15th

Willem H. Buiter London School of Economics and CEPR

D/- ibâbop pelria _bqqbo `lloafk^qb qebfo òfpfp ÖcfobcfdeqfkdÖ bccloqp fkìrafkd ob`^mfqîfp^* qflkp) ibkafkd drô^kqbbp) cfp`î bum^kpflkp) ^ka qluf`*^ppbq sîr^qflkp+ Qebv pelria îpl pbq fk jlqflk fkpqfqrqflkî obclojp7 %f& bpq^_ifpefkd ^ kbt D4,5 %RP) BR) G^m^k) @efk^) Fkaf^) ?o^wfi) P^raf >o^_f^ ^ka mlppf_iv Orppf^ lo Plrqe >cof`^& tfqe qeb FJC ^p fqp pbòbqôf^q8 %ff& _llpqfkd FJC ibkafkd `^m^`fqv) ^ka8 %fff& òb^qfkd ^ rkfcloj dil_î obdri^qlov co^jbtloh clo o^qfkd ^dbk`fbp ^ka clo iôdb) efdeiv*ibsbo^dba fkpqfqrqflkp tfqe pfdkfcf`^kq òlpp*_loabo ^`qfs* fqfbp+

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Fire-fighting measures >`qflkpªqlª_bª`lkpfabobaªfkìrab7 .& Qob^provªdrô^kqbbpªcloªòlpp*_loaboªfkqbo_^khªibkafkd)ªlo )ªbnrfsîbkqiv)ª`bkqoî _^khpª^`qfkdª^pªrkfsbopîª`lrkqbomôqvªlcªi^pqªobploqªfkªrkpb`robaªfkqbo_^kh qo^kp^`qflkp)ªfkìrafkdªòlpp*_loaboªrkpb`robaªfkqbo_^khªibkafkdª^ka _looltfkd+ /& J^ka^qlovªob`^mfqîfp^qflkªlcª_^khpªqlª^ªrkfclojªfkqbok^qflkîªpq^kaôaªtbiiªfk bu`bppªlcªqebª?^pbiªFFªo^qflp+ª Dlsbokjbkqpªpelriaªqbiiª_^khpªfkªqebfoªgrofpaf`qflkpªqlªo^fpbªqebfoªqfboªlkbª`^mfqî o^qflpªql)ªp^v)ª.."ª_vª^ª`boq^fkªa^qb+ªFcªqebªpeloqcîiª`^kklqª_bªjâbªrmª_vªqebªabâ * ifkbªcoljªmofs^qbªplro`bp)ªqebªpq^qbªtfiiªfkgb`qªqebª_î^k`b)ªbfqeboªfkªqebªclojªlcªloaf * kôvªbnrfqvªloªqeolrdeª`lksboqf_ibªmobcbobk`bªpeôbp+ 0& >ª`lloafk^qbaªdil_îªcfp`îªbum^kpflk)ªjlari^qbaª_vªÖ^_fifqvªqlª_looltÖ+ª @lrkqofbpªtfqeªpqolkdboªdlsbokjbkqª_radbq)ª`roobkqª^``lrkqª^kaªbuqbokîª^ppbqªmlpf* qflkpªpelriaªbkdfkbboª^ªpqolkdboªcfp`îªpqfjrirp8ª@efk^ª^kaªDboj^kvªpelriaªalªjlob tefibªqebªRPª^kaªRHªalªibpp+ 1& Cfp`îª_^fi*lrqpªlcªâs^k`baªfkarpqofîª`lrkqofbpªtelpbªpvpqbjf`îivªfjmloq^kq _^khpªe^sbª^ªplisbk`vªd^mªqe^qªbu`bbapªqebªdlsbokjbkqÖpªcfp`îª`^m^`fqv + Qebªmol_ibjªlcªpvpqbjf`îivªfjmloq^kqª_^khpªloªlqeboªcfk^k`fîªfkpqfqrqflkpªtelpb kbbaªcloªbuqbokîªobplro`bpª_bvlkaªte^qª`^kª_bªcfk^k`baªmofs^qbivªbu`bbapªqebªcfp`î `^m^`fqvªlcªfqpªdlsbokjbkq)ªfpªklqªlkivª`lkcfkbaªqlªpjîiª`lrkqofbpªtfqeªiôdbª_^kh * fkdªpb`qlopª^kaªqebfoªltkª`roobk`fbp+ªPtfqwboi^ka)ªAbkjôh)ªPtbabk)ª>rpqoîf^ª^ka KbtªWbî^kaªôbªsrikbo^_ib)ª_rqªplªôbª?bidfrj)ªFobi^ka)ªqebªKbqeboi^kapª^ka Irubj_lrod)ªbsbkªqelrdeªqebvªôbªjbj_bopªlcªqebªbrolªôb^+ª QebªRHªalbpªe^sbª^ªiôdb)ªfkqbok^qflkîivªbumlpbaª_^khfkdªpb`qlo +ªQebªofphªlcª^

17 VOX Research-based policy analysis and commentary from leading economists

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18 What G20 leaders must do to stabilise our economy and fix the financial system bu`e^kdbªo^qbp)ªpr_gb`qªqlªqebª`lkpqo^fkqªqe^qªklª`lrkqovªe^pªsbqlªmltboª%.5"ªlcªqeb qlq^iªslqbpªloªjlob&+

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About the author

Tfiibj ?rfqbo fp Molcbpplo lc Brolmb^k Mlifqf`î B`lkljv ^q qeb Brolmb^k Fkpqfqrqb lc qeb Ilkalk Pèlli lc B`lkljf`p ^ka Mlifqf`î P`fbk`b) e^sfkd q^rdeq ^q Mofk`bqlk) Vîb ^ka @^j_ofadb+ Eb t^p ^ jbj_bo lc qeb Jlkbqôv Mlif`v @ljjfqqbb lc qeb ?^kh lc Bkdi^ka %.664*/---&) @efbc B`lkljfpq ^ka Pmb`fî >asfpbo ql qeb Mobpfabkq ^q qeb Brolmb^k ?^kh clo Ob`lkpqor`qflk ^ka Absbilmjbkq %B?OA& %/---*/--2&) ^ka ^ `lkpriq^kq ^ka âsfplo ql qeb Fkqbok^qflkî Jlkbqôv Crka) Qeb Tloia ?^kh) Qeb Fkqbo*>jbof`^k Absbilmjbkq ?^kh) qeb

19 VOX Research-based policy analysis and commentary from leading economists

B?OA) qeb Brolmb^k Rkflk ^ka ^ krj_bo lc k^qflkî dlsbokjbkqp ^ka dlsbokjbkq ^dbk* `fbp+ Pfk`b /--2) eb fp ^k >asfplo ql Dliaj^k P^èp Fkqbok^qflkî+ Eb e^p mr_ifpeba tfab* iv lk pr_gb`qp prè ^p lmbk b`lkljv j^òlb`lkljf`p) jlkbqôv ^ka buè^kdb o^qb qeblov) cfp`î mlif`v) pl`fî pb`rofqv) b`lkljf` absbilmjbkq ^ka qo^kpfqflk b`lkljfbp+ Eb fp ^ @BMO Obpbôè Cbiilt+

20 Reforming global economic and financial governance

Raghuram Rajan University of Chicago, ex-Chief Economist of the IMF

D/- ibâbop pelria cl`rp lk dil_î dlsbok^k`b ^ka pelria _llpq qeb FJCÖp cfk^k`fî cfob* mltbo+ Dil_î cfk^k`fî `lloafk^qflk obnrfobp ^ _olâbo dolrm qe^k qeb D4 lo D/-+ Qeb BR pelria dbq lkiv lkb è^fo fk qeb ]D/-($ ql îilt _olâbo obmobpbkq^qflk+ Qeb Pbòbqôf^q clo qefp dolrm pelria _b ^ obclojba FJC+ Qeb FJCÖp ibkafkd `^m^`fqv pelria _b fjjbaf^qbiv fkòb^pba _v îiltfkd qeb Crka ql ibsbo^db fqp jbj_bo nrlq^p ^q ^ o^qfl lc _bqtbbk 2 ^ka .- ql .+

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21 VOX Research-based policy analysis and commentary from leading economists pel`hpªqe^qª`lrkqofbpªôbªpr_gb`qªql)ªbpmb`fîivªtebkªmofs^qbª`^mfqîªpbfwbpªrm+ªQebªpfwb lcªobplro`bpª^s^fi^_ibªqlªjriqfi^qboîªfkpqfqrqflkpªifhbªqebªFJCªe^pªklqªhbmqªm^`bªtfqe qebªpfwbªlcªmlqbkqfîªpel`hpª^kaªqebªkbbapªlcªiôdbªbjbodfkdªjôhbqp+ª

Key issues for the November 15th meeting Fkªqebªfkqbobpqpªlcªpm^`b)ªFªtfiiªcl`rpªfkªte^qªcliiltpªlkª ë Dlsbok^k`b)ª^kaª ë Qebª^s^fi^_fifqvªlcªbjbodbk`vªcfk^k`b+ª Moldobppªlkªqebpbªqtlªcolkqp)ªfkfqf^qbaª_vªqebªfkqbok^qflk^iª`lkcbobk`bªfkªKlsbj_bo /--5)ªtlriaª_bªbklojlrpivª_bkbcf`f^i+ª

Governance: A G20+ with only one seat for the EU nations Qebobªfpªìbôivª^ªkbbaªcloª_bqqboªfkqbok^qflkîªb`lkljf`ªafîldrb)ªc^`fifq^qbaª_vª^k fjmôqfîªpbòbqôf^qªqe^qªi^vpªqebªfpprbpªlkªqebªq^_ib+ªQebobªfpªjbofqªfkªe^sfkdªlkivª^ cbtªhbvªmôqf`fm^kqpªplªqe^qªqebobªfpªafîldrbª^kaªklqª^ªclojri^f`ªobpq^qbjbkqªlcªmlpf* qflkp+ª ë QebªD*4ªfpªmol_^_ivªqllªpjîiª^kaªrkobmobpbkq^qfsb8 ë QebªD*/-ªfpªmol_^_ivª^qªqebªifjfqªlcªte^qªjfdeqªtloh)ª_rqªrkcloqrk^qbiv )ªfpªpqfii rkobmobpbkq^qfsb+ª Jlobªqelrdeqªkbbapªqlª_bªdfsbkªqlª`lkpqfqrqfkdª^ªdolrmª`lkpfpqfkdªlcªîiªj^gloª`lrk* qofbp)ªtfqeªpljbªobmobpbkq^qflkªlcªpjîiboª`lrkqofbpª^kaªobdflkpªqeolrdeªolq^qfkd pb^qp)ª^kaªpljbªpmb`fîªfksfqbbpª_^pbaªlkªqebªobibs^k`bªlcªqebªqlmf`+ª Lkbªè^kdbªqe^qªtlriaªebimªj^hbªprèª^ªdolrmªcb^pf_ibªfpªqlªe^sbª^ªpfkdibªpb^qªclo qebªBR+ªQebªklk*BRª`lrkqofbpªfkªqebªD*/-ªmirpªqebªBRªtlriaªj^hbª.3)ªqlªtefè `lriaª_bªâabaª1ª`lrkqofbpªlkª^ªolq^qfkdª_^pfp)ªloª_^pbaªlkªqlmf`+ªIbqªrpª`îiªqefpªqeb D*/-(ªfkªte^qªcliiltp+

A reformed IMF as the G20+ secretariat Qebªl_sflrpªpbòbqôf^qªfpªqebªFJC+ªRkcloqrk^qbiv)ªqebªCrkaªprccbopªqebª_roabkªlcªefp * qlov)ª^kaªfqpªl_gb`qfsbpª^kaªdlsbok^k`bªôbªpqfiiªklqªprccf`fbkqivªqo^kpmôbkqªplª^pªql j^hbªfqªtfabivªqorpqbaª_vªbjbodfkdªjôhbqp+ªQefpªe^jmbopªfqpªcrk`qflkfkdª^pª^kªelk* bpqª_olhbo+ªFjmloq^kqªobclojpªôbªkbbabaª^qªqebªCrka)ªfkìrafkd7 ë ?olâbkfkdªfqpªj^ka^qbª_bvlkaªbuè^kdbªo^qbªpro sbfii^k`b)ªtefèªqbkapªqlªmrq lkivªbjbodfkdªjôhbqpªrkaboªpòrqfkv) ë J^hfkdªqebªCrkaªpbic*cfk^k`fkdªplªqe^qªfqªalbpªklqªe^sbªqlªhbbmªdlfkdª_^`hªql hbvªpeôbeliabopª%tefèªbccb`qfsbivªdfsbpªqebjª^ªsbqlªlsboªCrkaª^`qfsfqfbp&) ë Bifjfk^qfkdª^kvª`lrkqovÖpªlccf`fîªsbqlªmltboªlsboªj^gloªab`fpflkp) ë J^hfkdªqebªèlf`bªlcªj^k^dbjbkqªqo^kpmôbkqª^kaªk^qflkîfqv*kbrqoî)ª^kaª ë >iiltfkdªqebªCrkaÖpª^dbka^ªqlª_bªpbqª_vªqebªjlobªobmobpbkq^qfsbªD*/-(ªabpòf_ba ^_lsb+ª Bsbkªtefibªqebpbªè^kdbpªôbªfkªqo^fk)ªqebobªfpªjbofqªfkª_bbcfkdªrmªqebªCrkaÖpªdil_î prosbfii^k`bªrkfq)ª^kaªmboe^mpªîiltfkdªfqªqlªobmloqªafob`qivªqlªqebªD*/-()ª^kaªqlªqeb FJC@ª%Fkqbok^qflkîªJlkbqôvª^kaªCfk^k`fîª@ljjfqqbb&)ªtfqelrqªfqpªlmfkflkpª_bfkd eb^sfivªbafqbaª^kaªcfiqbobaª_vªqebªCrkaÖpª?lôaªlcªDlsboklop+ªQebªCrkaÖpªjriqfi^qboî

22 What G20 leaders must do to stabilise our economy and fix the financial system prosbfii^k`bªpelriaªcl`rpªjlobªpeômivªlkªbjbodfkdªofphpªåªqefpªfkslisbpªpqobkdqebk * fkdªj^òl*cfk^k`fîª^kîvpfpª^kaªbôivªtôkfkdªpvpqbjp+ª>iplªqebªD*/-(ªpelriaªcl`rp lkªqebªfabkqfcf`^qflkªlcªobjbafbpªtebkªpboflrpªofphpªôbªaf^dklpbaªåªebobªbôivª`llo * afk^qflkªtfqeªlqeboªmlif`vj^hfkdª^kaªâsfplo vª^dbk`fbpªtlriaªebim+ª

Changed role for the IMF and World Bank Boards Qebobªfpªpljbªjbofqªfkªafp`rppfkdªtebqeboªqebobªfpª^kvªkbbaªcloªqebªCrkaª^kaªqeb Tloiaª?^khªqlª`lkqfkrbªqlªe^sbªmboj^kbkqª_lôap)ª^kª^k^èolkfpjªqe^qªa^qbpªcolj qebªqfjbªtebkªafpq^k`bpªtbobªiôdbª^kaª`ljjrkf`^qflkªafccf`riq+ªQelpbª_lôapª`lria _bªob`lkpqfqrqbaªjrèªifhbªqebª_lôapªlcª`lomlo^qflkp)ªtfqeªnrôqboivªjbbqfkdp)ª^ka ^ªcl`rpªlkª_olâªdlsbok^k`bªo^qeboªqe^kªlkªj^k^dbjbkqªabq^fip+ªQebªjfa*ibsbiªcrk`* qflkôfbpªtelªkltªôbªlkªqebª_lôaª`lriaªqebkª_bªobmi^`baª_vªefde*ibsbiªabmrqfbp) telªcivªfkªcloªjbbqfkdp)ª^kaªtlriaªe^sbª^ªdob^qboª`^m^`fqvªqlªrkaboq^hbªafîldrb+ Fkabba)ªfkªqfjbpªlcªòfpfp)ªqebª_lôap)ª`lkpfpqfkdªlcªefde*ibsbiªcfk^k`bªjfkfpqo v abmrqfbp)ª`lriaªb^pfivªqrokªfkqlªòfpfpªj^k^dbjbkqªqb^jpªqe^qª`lloafk^qbª^kvª`liib` * qfsbªobpmlkpb)ªjrèª^pªqebªD*4ªabmrqfbpªalªqla^v +

Financing firepower QebªFJCªe^pª^kª^ddobd^qbªibkafkdª`^m^`fqvªlcª^_lrqª!/2-ª_fiiflk)ªmol_^_ivªprccf`fbkq fcª^ªkrj_boªlcªpjîiª`lrkqofbpªôbªfkªqolr_ib)ª_rqªfkprccf`fbkqªfcª^ª`lrmibªlcªiôdbª`lrk* qofbpªc^`bªmol_ibjp+ªFcªqebªjriqfi^qboîªpvpqbjªalbpªklqªe^sbªâbnr^qbªcfobmltbo ) `lrkqofbpªtfiiªe^sbªqlªobivªlkª_fi^qboîªôo^kdbjbkqp)ªtfqeªîiªqebªafccf`riqfbpªqe^qªfq bkq^fip+ªFqªfpªklqªqe^qªobplro`bpªôbªklqª^s^fi^_ibª^jlkdpqªbjbodfkdªjôhbqpª^kaªfkarp* qofîª`lrkqofbp+ªQebªkbbaªfpªqlªcfkaª^ªt^vªqlªmlliªqebj+ Prèªobplro `bpªôbªkbbabaªqlª_rfiaª`lkcfabk`bªfkªbjbodfkdªjôhbqpª%qebªpt^m ôo^kdbjbkqpª^kklrk`baª_vªqebªCbaªtfqeªclroªbjbodfkdªjôhbqpªtbobª^ªmltbocriª^ka tbi`ljbªpfdkîªqlªfksbpqlop&+ªJloblsbo)ªfcªtbªalªklqefkdªqlªâaobppªqefpªfpprb)ªtbªtfii pbqªrmªpboflrpªmol_ibjpªcloªqebªcrqrob+ªT bªtfiiªbjbodbªcoljªqebªòfpfpªtfqeªj^kv `lrkqofbpª^qqbjmqfkdªqlª_rfiaªobpbo sbpªqeolrdeªbumloq*ibaªpqo^qbdfbpª^kaªj^k^dba buè^kdbªo^qbp)ª^ddo^s^qfkdªqebªabj^kaªfj_î^k`bpªqe^qªôbª^qªqebªebôqªlcªqebª`ro * obkqªòfpfp+

Incremental is insufficient Qebªobplro`bpª^qªqebªCrkaÖpª`ljj^ka)ªafp_rop^_ibªqeolrdeªifdeq*`lkafqflkîfqvªc^`fi * fqfbpªifhbªqebªkbtªPeloqªQ bojªIfnrfafqvªC^`fifqvªpelriaª_bªjriqfmifbaª_vª^kªloaboªlc j^dkfqrab+ªLkbªmlppf_fifqvªfpªqlªbum^kaªqebªCrkaÖpªôo^kdbjbkqpªqlª_looltªcolj `lrkqofbpªtfqeªiôdbªobpbosbp)ªloªcoljªcfk^k`fîªjôhbqp+ªFkªloaboªqlªifjfqªqebªif^_fifqv lcªjbj_boª`lrkqofbp)ªtefibª^qªqebªp^jbªqfjbª_ofkdfkdªqo^kpmôbk`vªqlªqebªmol`bpp) qebª`roobkqªnrlq^pªlcªjbj_boª`lrkqofbpª`lriaª_bªqob^qbaª^pªqebªbnrfqvª`^mfqîª_^`h * fkdªqebª_looltfkd+ªQefpªfpªpfjmivª^ªclojîfp^qflkªlcªqebªilpp*peôfkdªôo^kdbjbkqªqe^q `roobkqivªbufpqp+ª>qªklojîªcfk^k`fîªfkpqfqrqflkªibsbo^dbªo^qflpªlcª.-ªqlª.)ªqebªCrka `lriaª_looltªrmªqlª.-ªqfjbpªjbj_boªnrlq^pªlcª!01-ª_fiiflk+ªBsbkªfcªfqªj^fkq^fkp ibsbo^dbª^qªjlobª`lkpbos^qfsbªibsbipªlcª2ªloª3ªqlª.)ªqefpªtfiiª_bª^ªpfwb^_ibªbum^kpflkªlc mlqbkqfîªcrkaªobplro`bpªqlª^_lrqª!/ªqofiiflk)ªbklrdeªqlªabîªtfqeªjlpqªbsbkqrîfqfbp+ Fabîiv)ªqefpª`^m^`fqvªtlriaªkbsboª_bªq^mmba)ª_rqªfqªfpªfjmloq^kqªqlªòb^qbªfq+

23 VOX Research-based policy analysis and commentary from leading economists

About the author

O^dero^j O^g^k fp qeb Bof` G+ Dib^èbo Afpqfkdrfpeba Pbosf`b Molcbpplo lc Cfk^k`b ^q qeb Rkfsbopfqv lc @ef`^dlÖp Doâr^qb Pèlli lc ?rpfkbpp) e^sfkd _bbk qeb FJCÖp @efbc B`lkljfpq %B`lkljf` @lrkpbiilo ^ka Afob`qlo lc Obpbôè& _bqtbbk /--0 ^ka /--3+ Eb `roobkqiv è^fop ^ efde*ibsbi `ljjfqqbb pbq rm _v qeb Fkaf^k Mi^kkfkd @ljjfppflk lk Fkaf^k cfk^k`fî pb`* qlo obcloj+ Eb e^p mr_ifpeba tfabiv fk pèliôiv glrokîp ^ka ob`bkqiv tofqqbk %tfqe Irfdf Wfkdîbp& qeb _llh P^sfkd @^mfqîfpj colj qeb @^mfqîfpqp+ Eb e^p pbosba lk qeb bafqlofî _lôa lc qeb >jbof`^k B`lkljf` Obsfbt ^ka qeb Glrokî lc Cfk^k`b+ Fk /--0) eb tlk qeb >jbof`^k Cfk^k`b >ppl`f^qflkÖp Cfpèbo ?i^`h Mofwb+

24 Not a New Bretton Woods but a New Bretton Woods process

Barry Eichengreen University of California, Berkeley and CEPR

Qeb Klsbj_bo .2qe jbbqfkd pelria bumilob qeb fab^ lc ^ kbt ÔTloia Cfk^k`fî Lod^kfw^qflkÔ qe^q) ifhb qeb TQL) tlria _ibka k^qflkî plsbobfdkqv tfqe dil_îiv ^dobba oribp lk l_ifd^qflkp clo prmbosfpflk ^ka obdri^qflk+ Fq pelria ^dobb ql fjjbaf^qbiv _llpq qeb FJCÖp ibkafkd `^m^`fqv) tfqe k^qflkp ifhb @efk^ `lkqof_rqfkd fk buè^kdb clo ^ obs^jmfkd lc qeb lia D4,5 dolrm fkql ^ kbt D4 %RP) BR) G^m^k) @efk^) P^raf >o^_f^) Plrqe >cof`^ ^ka ?o^wfi& qe^q tlria molsfab ^ molmbo dil_î pqbbofkd `ljjfqqbb+

Kltªqe^qªqebªnr^pefkdªlcªbu`bppfsbªbumb`q^qflkpªfpª`ljmibqb)ªfqªfpªqfjbªqlª^phªte^q `^kªobîfpqf`îivª_bª^``ljmifpebaª_vªebâpªlcªpq^qbªjbbqfkdªfkªT ^pefkdqlkªlk Klsbj_boª.2qe+ ?^pf`ªlofbkq^qflkpªpelriaª_bªl_sflrp+ª ë Ibâbopªpelriaªcl`rpªlkªcfk^k`fîªpq^_fifqv+ª ë Qebvªpelriaª`ljjfqªqlª^ªpbofbpªlcªjbbqfkdp+ª ë Qebvªpelriaªpqofsbªcloª^ªmol`bppªo^qeboªqe^kª^ªnrf`h)ªeliiltª^dobbjbkq+ª ë Qebvªpelriaª^`hkltibadbªqe^qª`lkpbkprp)ªifhbªOljb)ªfpªklqª_rfiqªfkª^ªa^v +

Central challenge: consistent supervision and regulation with comprehensive coverage Qebfoª`bkqoîªèîibkdbªfpªeltªqlªbkprobª`ljmobebkpfsbª^kaª`lkpfpqbkqªprmbo sfpflk ^kaªobdri^qflkªlcªîiªpvpqbjf`îivªpfdkfcf`^kqªcfk^k`fîªfkpqfqrqflkp)ª^kaªòlpp*_loabo cfk^k`fîªfkpqfqrqflkpªfkªmôqf`riô +ªQebªòfpfpªfpª^ªobjfkaboªqe^qªfkâbnr^qbªprmbo sf* pflkª^qªqebªk^qflkîªibsbiª`^kªe^sbªdil_îªobmbo `rppflkp+ª>aaobppfkdªqefpªmol_ibjªfp qebªpfkdibªjlpqªfjmloq^kqªpqbmªqebvª`^kªq^hbªqlªj^hbªqebªtloiaª^ªp^cboªcfk^k`fîªmi^`b+ Qebobªtfiiª_bª`îipªcloª^ªdil_îªobdri^qlo )ªbèlfkdªmolmlpîpªcloª^ªT loiaªCfk^k`fî >rqelofqvª_vªGlekªB^qtbiiª^kaªI^k`bªQ^viloª^ªab`âbª^dl+ª?rqªfqªfpªrkobîfpqf`ªqlªfj^d* fkbªqe^qªqebªRPª^kaªcloªqe^qªj^qqboª^kvª`lrkqovªtfiiªqrokªlsboªqebª`lkar`qªlcªk^qflk* îªcfk^k`fîªobdri^qflkªqlª^kªfkqbok^qflkîª_lav+ª%QebªRPªe^pªîobâvªpfdkîibaªfqpªmlpf* qflkªlkªqefpªnrbpqflk+&ªªObdri^qflkªlcªcfk^k`fîªjôhbqpªfpª^ªsîrbaªk^qflkîªmobold^ * qfsb+ªKlqªbsbkªBRªjbj_boªpq^qbpªe^sbª_bbkªtfiifkdªqlª^dobbªqlª^ªpfkdibªobdri^qlo +ªFk ^kvª`^pbªqebobªfpªqebªmôqf`riôfqvªlcªk^qflkîªcfk^k`fîªpqor`qrobp)ªtefèªmi^`bpªbccb` * qfsbªlsbopfdeqª_bvlkaªqebªdo^pmªlcª^kvªdil_îª_lav +

Create a "World Financial Organisation" in the image of the WTO QebªBrolmb^kªmolmlpîªcloªpnrôfkdªqefpª`fo ìbª_vªòb^qfkdª^ª@liibdbªlcªObdri^qlopªfp tb^hªplrm+ªTbªkbbaªjlobªqe^kªfkcloj^qflkªpeôfkdª^kaªafp`rppflkp+ª?bqqboªtlriaª_b

25 VOX Research-based policy analysis and commentary from leading economists qlªpqofsbªqlªòb^qbª^ªT loiaªCfk^k`fîªLod^kfw^qflkª^kîldlrpªqlªqebªT loiaªQ oâb Lod^kfw^qflk+ª@lrkqofbpªpbbhfkdª^``bppªqlªclobfdkªjôhbqpªcloªcfk^k`fîªfkpqfqrqflkp qebvªèôqboªtlriaªe^sbªqlª_b`ljbªjbj_bopªlcªqebªTCL+ªQebvªtlriaªe^sbªqlªjbbq qebªl_ifd^qflkpªcloªprmbo sfpflkª^kaªobdri^qflkªpbqªlrqªfkªfqpªèôqboª^kaªprmmibjbk * qôvª^dobbjbkqp+ª?rqªeltªqebvªalªplªtlriaª_bªrmªqlªqebj+ªQefpªtlriaªmbojfqªobdr * i^qflkªqlª_bªq^filobaªqlªqebªpqor`qrobªlcªfkafsfarîªcfk^k`fîªjôhbqp+ >kªfkabmbkabkqª_lavªlcªbumboqp)ªklqªrkifhbªqebªTQLÖpªAfpmrqbªPbqqibjbkqªm^kbip) tlriaªqebkªab`fabªtebqeboª`lrkqofbpªe^sbªjbqªqebfoªl_ifd^qflkp+ª>ªcfkafkdªlcªiû fjmibjbkq^qflkªtlriaªe^sbª`lkpbnrbk`bp+ªPmb`fcf`îiv )ªlqeboª`lrkqofbpª`lriaªmol * ef_fqª_^khpªèôqbobaªfkª`lrkqofbpªclrkaªqlª_bªfkªsfli^qflkªcoljªlmbo^qfkdªfkªqebfo jôhbqp+ªQefpªtlriaªmolqb`qªqebjªcoljªqebªabpqor`qfsbªpmfiilsbopªlcªmlloªobdri^qflk+ Fqªtlriaªîplªclpqboª^ªmlifqf`îªb`lkljvªlcª`ljmif^k`b+ªDlsbokjbkqpªpbbhfkdªql pb`robªjôhbqª^``bppªcloªqebfoª_^khpªtlriaªe^sbª^kªfk`bkqfsbªqlªrmdoâbªprmbo sfplov mo^`qf`b+ªObpfabkqªcfk^k`fîªfkpqfqrqflkpªabpfolrpªlcªlmbo^qfkdª^_olâªtlriaª_bª^jlkd qelpbªil__vfkdªcloªqebªobnrfpfqbªobclojp+

Would the US accept a WFO? P`bmqf`pªtfiiªnrbpqflkªtebqeboª`lrkqofbpªifhbªqebªRkfqbaªPq^qbpªtlriaªbsboª^``bmqªe^s* fkdª^kªfkabmbkabkqªm^kbiªlcªbumboqpªabìôfkdªqebªRPªobdri^qlo vªobdfjbªqlª_bªfkâb * nr^qbª^kaª^rqelofwfkdªp^k`qflkp+ª?rqªqefpªfpªgrpqªte^qªqebªTQLÖpªfkabmbkabkqªafpmrqb pbqqibjbkqªm^kbiªalbpªfkªqebª`^pbªlcªqebªqoâbªobdfjb+ªTevªpelriaªcfk^k`bª_bªafccbo * bkq< @ob^qflkªlcª^ªTCLªfpªklqª^ª_b*îiª^kaªbka*îi+ªQ oâfkdªfkªabofs^qfsbªpb`rofqfbp pelriaª_bªjlsbaªlkqlª^kªlod^kfwbaªbuè^kdbªqlªifjfqª`lrkqbomôqvªofph+ª?^pbiªFF pelriaª_bªrodbkqivªobclojbaªqlªo^fpbª^``bmqbaªjb^probpªlcª`^mfqîªâbnr^`v )ªobar`b obif^k`bªlkª`ljjbo `fîªòbafqªo^qfkdpª^kaª_^khpÖªjlabipªlcªsîrbª^qªofph)ª^kaªâaª^ pfjmibªibsbo^dbªo^qfl+ªQebpbªpqbmpª`^kª^kaªpelriaª_bªq^hbkªobi^qfsbivªnrf`hiv+ª?rqª`lj* jbk`fkdªkbdlqf^qflkpªlkª^ªT loiaªCfk^k`fîª>rqelofqvªtlriaª_bªqebªjlpqªfjmloq^kq pfkdibªpqbm+

Why a new international organisation? Fqªtlriaª_bªmobcbo^_ibªqlªòb^qbªqebªTCLª^pª^ªkbtªbkqfqvªo^qeboªqe^kª_rfiafkdªfqªlk qebªmi^qclojªlcª^kªbufpqfkdªfkpqfqrqflkªifhbªqebªFJCªloªqebªCfk^k`fîªPq^_fifqvªClorj+ QebªCfk^k`fîªPq^_fifqvªClorjªfpªaljfk^qbaª_vªqebªD4ª^kaªqebªsôflrpªfkqbok^qflkî lod^kfw^qflkpªtfqeªlkivªElkdªHlkdª^kaªPfkd^mlobª^pªqlhbkª"bjbodfkd*jôhbqªjbj * _bop+"ªQebªFJCªe^pªqebªâs^kq^dbªlcªrkfsbopîªjbj_bopefm)ª_rqªfqpªm^pqª`^mfqî*jô * hbqªprosbfii^k`bªe^pªklqªbu^`qivª`lsbobaªfqªfkªdilo v+ªQebªCrkaª`lkqfkrbpªqlª_bªobdôa* baªtfqeªprpmf`flkªfkª>pf^ª^kaªI^qfkª>jbof`^+ª@lrkqofbpªqebobªtlriaª_bªobir`q^kqªql pfdkªrmªqlª^ªT loiaªCfk^k`fîª>rqelofqvªqe^qªt^pª^ªteliivªltkbaª^kaªlmbo^qbaªpr_ * pfafôvªlcªqebªFJC +ªQefpªobîfqvªfpªîplªbsfabkqªfkªqebªobir`q^k`bªlcªdlsbokjbkqpªifhb @efk^Öpªqlªabmilvªqebfoªobpbo sbpªfkªprmmloqªlcªlqeboª`lrkqofbpª_vªè^kkbiifkdªqebj qeolrdeªqebªCrka+

The other key challenge: boost the IMF's lending capacity Qefpª_ofkdpªrpªqlªqebªlqeboªhbvªèîibkdbªqe^qªjrpqª_bªjbqªqlªj^hbªqebªtloiaª^ªp^cbo cfk^k`fîªmi^`b7ªjl_fifwfkdªqebªobplro `bp)ª_lqeªcfk^k`fîª^kaªmlifqf`î)ªlcªbjbodfkd jôhbqp+ªQebªFJCªabpmbo^qbivªkbbapªâafqflkîªcrkafkdªqlª^faªòfpfpªb`lkljfbp)ª^ka dlsbokjbkqpªifhbª@efk^Öpªôbªqebªildf`îª`lkqof_rqlop+ªQebªnrbpqflkªfpªte^qªqlªdfsb

26 What G20 leaders must do to stabilise our economy and fix the financial system qebjªfkªobqrok+ª Tbª`^kklqª^ccloaª^klqeboªfk`lkìrpfsbªjriqf*vbôªkbdlqf^qflkªlcªkbtªFJCªnrlq^p+ Jlobªbccb`qfsbªtlriaª_bªcloªqebªRP)ªBrolmbª^kaªG^m^kªqlª^dobbªqlª^_^kalkªqebªD4,5) tefèªfpªklªilkdboª^ªprfq^_ibªpqbbofkdª`ljjfqqbbªcloªqebªtloiaªb`lkljv)ªfkªc^slroªlc ^ªkbtªD4ª`ljmlpbaªlcªqebªRP)ªqebªBR)ªG^m^k)ª@efk^)ªP^rafª>o^_f^)ªPlrqeª>cof`^ª^ka ?o^wfi+ªQefpªtlriaªklqªobnrfobªkbdlqf^qflkpª^jlkdªerkaobapªlcª`lrkqofbpªpqobqèfkd lsboª^ªmboflaªlcªvbôpªåªqfjbªtefèªfpªklqª^s^fi^_ibªdfsbkªqebªrodbk`vªlcªqebªq^ph+ªFq tlriaªdfsbª@efk^ª^kaªqebªlqebopª^ªpb^qª^qª^ªq^_ibªqe^qªobîivªj^qqbop+ªFqªtlriaªdfsb qebjªltkbopefmª^kaªqebªpbkpbªqe^qªqebvªe^sbª^ªpq^hbªfkªqebªpq^_fifqvªlcªqebªdil_î b`lkljv+ªQefpªtlriaªklqªbu^`qivª_bª^ªìr_ªlcªabjlò^`fbp)ª_rqªqebkªfqªt^pªqebª]qîh* ql*tel*j^qqbop$ªj^kª^kaªklqªqebª]ìr_*lc*abjlò^`fbp$ªj^kªtelªtlkªqebªRPªbib` * qflk+ Fkªâafqflk)ªBrolmbª`lriaª^dobbªqlª^ªpfkdibªbub`rqfsbªafob`qloªlkªqebªFJCª_lôa) cobbfkdªrmªafob`qlopefmpªcloªbjbodfkdªjôhbqp+ª>kaªtelª_bqqboªqe^kª^ªcô*pfdeqba Brolmb^kªibâboªifhbªAljfkfnrbªPqo^rpp*Hêkªqlª^kklrk`bªqe^qªibâbopefmªlcªqeb Crkaªpelriaª_bªqeoltkªlmbkªqlªqebªjlpqªnrîfcfbaª`^kafa^qbªobdôaibppªlcªk^qflkîf * qv<ªª?rqªtefibªîiªqefpªtlriaª_bªebimcri)ªòb^qfkdª^ªkbtªD4ªtlriaª_bªqebªjlpqªfjmlo * q^kqªpfkdibªpqbm+ PqôqfkdªlkªKlsbj_boª.2qe)ªbsbo vlkbªtfiiªoliiªlrqªqebfoªmbqªfab^p)ªcoljª^ªpr_pq^k * qfîªobsîr^qflkªlcªqebªobkjfk_fªqlª^ªdil_îªpvpqbjªlcªqôdbqªwlkbpªqlª^ªpfkdibªtloia `roobk`v+ª%Vlrªhkltªtelªvlrªôb!&ªª?rqªfqªfpªfjmloq^kqªqlª^slfaªklk*pqôqbopª^ka prmbocirlrpªfkfqf^qfsbp+ª@ob^qfkdª^ªkbtªD4ªkltª^kaª`ljjfqqfkdªqlªbpq^_ifpeª^ªT loia Cfk^k`fîªLod^kfw^qflkªpllkªôbªqebªt^vpªclo tôa+ª

About the author

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The new international financial architecture requires better governance

Stijn Claessens IMF, University of Amsterdam and CEPR

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Better regulation was needed long ago; the crisis makes it obvious Cfk^k`fîªfkkls^qflkª^kaªfkqbdo^qflkªe^sbªfkòb^pbaªqebªpmbbaª^kaªbuqbkqªqlªtefè pel`hpªôbª_bfkdªqo^kpjfqqbaª^òlppª^ppbqªì^ppbpª^kaª`lrkqofbp+ªFkkls^qflkª^kaªfkqb * do^qflkªe^sbª_iroobaª_lrkaôfbp)ªfkìrafkdª_bqtbbkªpvpqbjf`ª^kaªklk*pvpqbjf`ªfkpqf* qrqflkp+ª Kbtªoribpª^kaªfkpqfqrqflkpªôbªkbbabaªqlªobar`bªpvpqbjf`ªofphp)ªfjmolsbªcfk^k`fî fkqbojbaf^qflk)ª^kaªmolmboivªâgrpqªqebªmbofjbqboªlcªobdri^qflkª^kaªprmbo sfpflkªåªîi qefpªtfqelrqªfjmlpfkdªrkkb`bppô vª_roabkp+ª>``ljmifpefkdªqefpªq^phªtfiiªobnrfob jrèªkbtªqefkhfkd+ªAbpfdkfkdª`lrkqbo*`vìf`î)ªj^òl*morabkqfîªoribpª^kaªobar`fkd

29 VOX Research-based policy analysis and commentary from leading economists pvpqbjf`ªofphªôbªmôqf`riôivªafccf`riq+ªAbpfdkfkdªprèªoribpªfkslisbpªfjmloq^kqªdls * bok^k`bªfpprbp+ªTe^qªmol`bppbpªtfiiª_bªcliiltbaªcloªqebªabsbilmjbkqªlcªqebªoribp) pq^kaôapª^kaª_bpqªmo^`qf`bp<ªªTfiiªfqª^d^fkª_bªalkbªfkªpjîiªdolrmfkdpªlcªmlif`vj^h * bopªcoljªâs^k`baª`lrkqofbp)ªtfqeªjrèªmofs^qbªpb`qloªfkcirbk`b)ªloªtfiiªfqª_bªjlob _î^k`baªqefpªqfjb)ªobmobpbkqfkdª_olâboªfkqbobpqp<ª

Regulatory convergence is not enough, common practices are needed ?olâªmôqf`fm^qflkªfkªoribj^hfkdªtfiiªebimª^pªfqªfkòb^pbpªibdfqfj^`vª^kaªb^pbpªqeb bkclo`bjbkqªlcªoribp+ª?rqªfqªtfiiªklqªprccf`b8ª^ppbppjbkqpªlcªmo^`qf`bpªôbªpqfiiªkbbaba+ Qebªjôhbqª`^kªalªpljbªlcªqefp)ª_rqªqebªòfpfpªe^pª^d^fkª`lkcfojbaªqebªkbbaªcloªmr_ * if`ªpb`qloªfkslisbjbkq+ªEbobªdlsbok^k`bªfpprbpªjrpqª_bªâaobppba7ªTe^qªclojªpelria qefpªjlkfqlofkdªlcªobdri^qlopª^kaªobdri^qflkªq^hb<ªTelªpelriaªalªfq)ªeltªpelriaªfq _bªdlsbokba)ª^kaªeltªpelriaªci^dpª_bªo^fpbaªtebkªoribpªôbªklqªcliiltbaªloªmo^`qf`bp cîiª_befka<ª

More information and enhanced liquidity provisions Qebªòfpfpªe^pªefdeifdeqbaªqebªpfwbªlcªfkcloj^qflkªd^mpªtbªc^`b)ª_lqeªk^qflkîivª^ka fkqbok^qflkîiv+ªJlobª^kaª_bqqboªfkcloj^qflkªfpªkbbabaªfcªjôhbqpª^kaª^rqelofqfbpªôb qlª_bqqboª^ppbppªqebª_rfia*rmªlcªpvpqbjf`ªofph+ª>aaobppfkdªqefpªobnrfobpª^ªobsfbtªlcªoribp lkªqo^kpmôbk`v)ªafpìlprobª^kaªobmloqfkd+ªFkcloj^qflkªobnrfobjbkqpªtfiiªîplªkbbaªql `lsboª^ªjrèªiôdboªpbqªlcªfkpqfqrqflkpªo^kdfkdªcoljªfkpro^k`bª`ljm^kfbpªqlªebadb crkap)ª^kaªlcc*_î^k`bªpebbqªbkqfqfbp+ªJlobªfkcloj^qflkªtfiiªklqªbjbodbª_vªfqpbic+ Jloblsbo)ªqebªqbjmq^qflkªtfiiª_bªqlªelôaªkbtªfkcloj^qflk)ªplªmolmboªdlsbok^k`b pqor`qrobpªôbªkbbabaªqlªbkprobªprccf`fbkqªfkcloj^qflkªfpª^s^fi^_ibªqlªqelpbªtelªkbba fq+ª Qebª`roobkqªòfpfpªe^pªpeltkªqe^qªfkªqfjbpªlcªqrojlfi)ªbsbkª^jlkdªabsbilmbaª`lrk* qofbp)ªifnrfafqvªmolsfpflkªcloªcfk^k`fîªfkpqfqrqflkpªfpªklqªbccf`fbkq)ªibâfkdªqlª`lkcrpflk ^kaªefdeboª`lpqp+ªCloªbjbodfkdªjôhbqpª^kaªabsbilmfkdª`lrkqofbp)ª^ªqbjmloôvªpeloq* ^dbªlcªifnrfafqvª`^kª_bªbsbkªtlopb+ª>d^fkªqla^v )ª^pªe^pªe^mmbkbaª_bclob)ªclobfdk fksbpqlopªôbªo^mfaivªobar`fkdªqebfoªbumlprobpª^kaªj^kvª`lrkqofbp)ªbsbkªqelpbªtfqe lqebotfpbªdllaªcrka^jbkqîp)ªôbªdob^qivªprccbofkdªcoljª"praabkªpqlmp"+ªQebpbªifn * rfafqvªpqo^fkpªb^pfivª_b`ljbªplisbk`vªòfpbpªfcªklqªabîqªtfqeªptfcqivª^kaªbccb`qfsbiv +ª

The lack of a sufficiently large, global liquidity provider QebªFJCÖpªobplro`bpªôbªqllªpjîiªfkªqla^vÖpªtloia+ª>as^k`baª`lrkqofbpÖª`bkqoîª_^khp pt^mªifkbpªôbªqlªa^qbªlkivª^s^fi^_ibªcloªpljbªbjbodfkdª`lrkqofbp+ªTefibªobdflkî mllipªlcªobpbo sbp)ªprèª^pªfkª>pf^)ªmolsfabª^ª_^`hpqlm)ªqebvª`^kª_bªqllªpjîi+ªQebpb ^mmol^èbpª`lriaª_bª_olâbkbaª^kaªbum^kaba7ªqebªCrkaª`^kªdbqªjlobªjlkbv8ªdob^qbo `lloafk^qflkªlkªpt^mpª`^kª_bªmroprba8ª^kaªiôdboªmllipªlcª`bkqoîª_^khªjlkbvª`^k _bªòb^qba+ªCfufkdªqefpª^d^fkªbkq^fipªdlsbok^k`bªpfk`bªte^qªfpªòr`fîªfkªqebªbkaªfpªtel dbqpªqlªab`fabªlkªifnrfafqvªmolsfpflk+ªQebªc^`qªqe^qª_fi^qboîª^kaªobdflkîª^mmol^èbp aljfk^qbªplªcôªprddbpqpªqe^qªqorivªjriqfi^qboîªplirqflkp)ªtfqeª^qqbka^kqªofph*peôfkd ^kaªmllifkdª_bkbcfqp)ªôbªpqfiiªsfbtbaªtfqeªpljbªp`bmqf`fpj+ª>d^fkª_bqqboªdlsbok^k`b ôo^kdbjbkqpª`^kªj^hbªcloªfjmolsbaªlrq`ljbp+ª Fkªqebªbka)ªj^kvªfkqbok^qflkîªcfk^k`fîªô èfqb`qrobªnrbpqflkpªobi^qbªqlª_roabk* peôfkd+ª@lkpfaboªqebªfpprbªlcªfkqbok^qflkîªcfk^k`fîªfkpqfqrqflkp+ªQebªòfpfpªe^pªìbô* ivªrkabop`lobaªqebªqbkpflkªtfqeªobdôaªqlª_lqeªofphªmobsbkqflkª^kaªòfpfpªj^k^db * jbkqª_bqtbbkªk^qflkîivª_lrkabaªprmbo sfplopª^kaªiôdbªcfk^k`fîªfkpqfqrqflkpªqe^q

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About the author

Pqfgk @i^bppbkp fp >ppfpq^kq Afob`qlo fk qeb Obpbôè Abmôqjbkq lc qeb Fkqbok^qflkî Jlkbqôv Crka tebob eb ibâp qeb Cfk^k`fî Pqrafbp Afsfpflk+ Eb fp îpl ^ Molcbpplo lc Fkqbok^qflkî Cfk^k`b Mlif`v ^q qeb Rkfsbopfqv lc >jpqboa^j) e^sfkd q^rdeq ^q Kbt Vloh Rkfsbopfqv _rpfkbpp pèlli) _bclob jlsfkd ql qeb Tloia ?^kh) cfkfpefkd ^p Pbkflo >asfpbo fk qeb Cfk^k`fî ^ka Mofs^qb Pb`qlo Sf`b*Mobpfabk`v lc qeb Tloia ?^kh %/--1*/--3&+ Eb e^p

31 VOX Research-based policy analysis and commentary from leading economists molsfaba mlif`v âsf`b ql bjbodfkd jôhbqp fk I^qfk >jbof`^ ^ka >pf^ ^ka ql qo^kpfqflk b`lkljfbp+ Efp obpbôè e^p _bbk mr_ifpeba fk qeb Glrokî lc Cfk^k`fî B`lkljf`p) Glrokî lc Cfk^k`b) ^ka Nrôqboiv Glrokî lc B`lkljf`p) ^ka eb e^p bafqba pbsboî _llhp) fkìrafkd Fkqbok^qflkî Cfk^k`fî @lkq^dflk %/--.&) ^ka Obplirqflk lc Cfk^k`fî Afpqobpp %/--.&+ Eb fp ^ @BMO Obpbôè Cbiilt+

32 Europe's two priorities for the G20

Daniel Gros Director, Centre for European Policy Studies (CEPS)

D/- jbj_bop pelria _llpq FJC fkabmbkabk`b pl fq `^k ^`q ^p ^ dil_î Ötefpqib_iltboÖ ql ebim `îi qeb kbuq òfpfp+ Qebv pelria îpl pqôq ql _ofkd qeb ob^è lc _^khfkd prmbosfplop jlob fk ifkb tfqe qeb ob^è lc _^khp+ Qeb c^firob lc obdri^qlop ql buè^kdb `lkcfabkqfî fkcloj^qflk iba k^qflkî ^dbk`fbp ql jfpp qeb pvpqbjf` ofph qe^q ôlpb tebk _^khp ^òlpp qeb dil_b cli* iltba pfjfiô pqo^qbdfbp+

Dbkboîp)ªfqªfpªp^fa)ªabpfdkªqebfoªôjfbpªqlªcfdeqªqebªi^pqªtô +ªObdri^qlop)ª_vª^kîldv ) abpfdkªoribpªqlªmobsbkqªqebªi^pqªòfpfp+ª Qefpªbumi^fkpªqla^vÖpªcl`rpªlkªpb`rofqfp^qflkª^kaªo^qfkdª^dbk`fbp8ª^qqbkqflkªtefè fpªjfpafob`qba+ªQebªpb`rofqfp^qflkªjôhbqªe^pªdolrkaªqlª^ªeîqª^kaªqebªjôhbqªsfbtp îiªo^qfkdpªtfqeª^ªebîqevªalpbªlcªp`bmqf`fpj8ªqebpbªqtlªôb^pªpelriaªklqªcfdrobªefde lkªqebª^dbka^ªcloªqebªobclojªlcªqebªdil_îªjlkbqô vªpvpqbj+ª Qebª`roobkqªòfpfpªeâª^ªkrj_boªlcª`^rpbp)ªpljbªlcªtefèª`^kklqª_bªâaobppbaªå jrèªibppªmobsbkqbaªåª_vªbsbkªqebª_bpqªabpfdkbaªdil_îªjlkbqô vªpvpqbj+ªCloªbu^j* mib)ªqebªrkabo*mof`fkdªlcªofphªfkªîjlpqªîiªcfk^k`fîªjôhbqpªrkqfiª/--4ªt^pª^ªdil_î mebkljbklk8ªobdri^qlopª`lriaªklqªe^sbªmobsbkqbaªfq+ªKlkbqebibpp)ªpljbqefkdª`lria e^sbª_bbkªalkb+ª ë Jlkbqôvªmlif`vªpelriaªe^sbªob^`qbaªbôifboªqlªqebª_lljªfkªelrpbªmof`bp)ª^kaª ë Obdri^qlopªpelriaªe^sbªclo `baª_^khpªqlª^``rjri^qbªiôdboªobpbo sbpªcloªqeb qlrdeboªqfjbpªqe^qªeâªqlª`ljbªpllkboªloªi^qbo + Qebªollqª`^rpbpªlcªqebpbªqtlªj^òlp`lmf`ªc^firobpªkbbaªqlª_bªrkabopqllaªmolmboiv _bclobªtbªqovªqlªòb^qbª^ªkbtª?obqqlkªTllap+

Root cause of the macro failures Qebªc^firobªlcª`bkqoîª_^khpªqlªob^`qªqlªqebªofpfkdª_r__ibpªt^pªklqªarbªqlª^ªmlloiv abpfdkbaªdil_îªpvpqbj+ªFqªobmobpbkqbaªqebªaljfk^kqªfablildvªlsboªqebªi^pqªab`âb+ª>k fablildvªtefèªebiaªqe^qª_r__ibpª`lriaª_bª`loob`qivªaf^dklpbaªlkivª^cqboªqebvª_ropq+ Qebªgl_ªlcª`bkqoîª_^khpªt^pªqlªjfkfjfpbªqebªa^j^dbªqlªqebªobîªb`lkljvª_vªiltbo * fkdªfkqbobpqªo^qbp+ª Qefpª^mmol^èªfpªkltªqlqîivªafpòbafqba+ªTefibªtbªôbªrkifhbivªqlªpbbª^klqeboª_r_* _ibªbjbodfkdª^kvqfjbªpllk)ª5--ªvbôpªlcªcfk^k`fîªòfpbpªqb^èªrpªqe^qªqebobªtfiiª_b ^klqebo+ª>qªqe^qªmlfkq)ªqebªdil_îªjlkbqô vªpvpqbjªtfiiªkbbaª^ªÖtefpqib_iltboÖªåª^k lod^kfp^qflkªtefèªe^pªqebªbumboqfpbªqlªaf^dklpbª^ª_r__ibª^kaªqebªìlrqªqlªj^hbªfqp slf`bªebôa+ª Qebª?FPªafaªobmb^qbaivªtôkª^_lrqªqebª_rfiaªrmªlcªofphªfkªcfk^k`fîªjôhbqp)ª_rqªfqp tôkfkdpªtbobªklqªebbaba+ªQebªFJCªfpªjrèª_bqqboªmi^`baªqlª_bªqebªtloiaÖpªtefpqib * _iltbo)ªf+b+ªqlªillhª^qªqebªj^òlb`lkljf`ªa^kdbopªobpriqfkdªcoljª^kªbu`bppfsbª^``r *

33 VOX Research-based policy analysis and commentary from leading economists jri^qflkªlcªibsbo^db+ª?rqªqefpªtlriaªobnrfobªè^kdb+ªQebªFJCªtlriaªe^sbªqlª_bªprc * cf`fbkqivªfkabmbkabkqªcoljªfqpªmlifqf`îªj^pqbop)ªf+b+ªfqpªiôdboªjbj_bop)ªbpmb`fîivªqeb RP+ª

The G20's first priority: Boost IMF independence >ªcfopqªfqbjªlkªqebª^dbka^ªcloªobclojªlcªqebªD/-ªpelriaªqerpª_bªklqªlkivª^kªbuqbka * baªobjfqªcloªqebªFJCªqlªillhª^qªcfk^k`fîªjôhbqªpq^_fifqv )ª_rqªîplª^ªjrèªefdebo abdobbªlcªfkabmbkabk`bªplªqe^qªfqª`^kª^`qrîivªtôkªlcªa^kdbopªbsbkªfcªqefpªfpªmlifqf * `îivªfk`lksbkfbkqªcloªfqpªj^gloªpeôbeliabop+ªQebªòb^qflkªlcªqebªrkfcfbaªBrolª>ob^ FJCªobmobpbkq^qflkªjfdeqª_bªpqbmªfkªqefpªafob`qflkª^pªfqªtlriaª_ob^hªqebªRPªsbqlªlk òfqf`fpjªlcªRPªmlif`v+

The G20's second priority: matching the reach of banks' and supervisors' Qebªpb`lkaªj^òlp`lmf`ªc^firobªjbkqflkbaª^_lsbª%iûªprmbo sfpflkªlcª_^khp&ªpqbjp j^fkivªcoljªqebªc^`qªqe^qªprmbosfpflkªobj^fkbaªk^qflkîªtefibªqebªiôdboª_^khpªlmbo* ^qbaªfkòb^pfkdivªqo^kpk^qflkîiv+ª Qebªmol_ibjªfpªmôqf`riôivªpbsbobªfkªBrolmbªtebobª^ªalwbkªiôdbª`ljmibuªfkqbok^* qflkîª_^khfkdªdolrmpªe^sbªbjbodba+ªQebpbªôbªqllªiôdbªqlªc^fi)ª_rqªpljbªlcªqebjªôb îplªqllªiôdbªqlª_bªp^sbaª_vªqebfoªeljbª`lrkqo vªîlkb+ª K^qflkîªprmbosfplopªîiltbaªqefpªqlªe^mmbkª_b`^rpbªqebvªmbo `bfsbaª^pªqebfoªjfp * pflkªj^fkivªqlªebimªqebfoªltkªk^qflkîªè^jmflkp+ªQefpªmbo `bfsbaª`ljmbqfqflk ^jlkdªk^qflkîªprmbo sfplopªjb^kqªqe^qªqebvªafaªklqªcl`rpªlkªqebfoªj^fkªjfppflkªå `lkqoliifkdªofphªq^hfkd+ªFqªîplªobpqof`qbaªbuè^kdbªlcªòr`fîª`lkcfabkqfîªfkcloj^qflk ^jlkdªk^qflkîªprmbosfplop+ªQefpªc^firobªqlªbuè^kdbªfkcloj^qflkªjb^kqªqe^qªk^qflk* îªobdri^qlopª`lriaªklqªpbbªqebªpvpqbjf`ªofphªqe^qªôfpbpªtebkªîiª_^khpªcliiltªqebªp^jb pqo^qbdv+ K^qflkîªprmbosfplopªtbobª`lkcfabkqªqe^qªqebªpfqr^qflkªt^pªrkaboª`lkqoliª_b`^rpb qebvªrkaboqllhªj^kvªpqobppªqbpqp+ª?rqªklkbªlcªqebpbªpqobppªqbpqpª`lriaªobsbîªqebª`lk * pbnrbk`bpªlcªmol_ibjpªôfpfkdªpfjriq^kblrpivªfkªjlobªqe^kªlkbªjôhbqª_b`^rpbªkl k^qflkîªobdri^qloªeâª^``bppªqlªfkcloj^qflkªcoljªlqeboª`lrkqofbp)ª^kaªqebobªt^pªkl Brolmb^kªfkpqfqrqflkªqlªillhª^qªqebªpq^_fifqvªlcªqebªBrolmb^kª_^khfkdªpvpqbjª^p telib+

Internationally-integrated banking with national supervision spells trouble Qebª`lkìrpflkªfpªìbôªåª^kªfkqbok^qflkîivªfkqbdo^qbaª_^khfkdªjôhbqªfpªklqª`lj * m^qf_ibªtfqeªbuìrpfsbivªk^qflkîª_^khfkdªprmbo sfpflk+ªQlªa^qb)ªBrolmb^kªmlif`vj^h* bopªe^sbªobcrpbaªqlªob`ldkfpbªqefp+ªQebªi^qbpqªCobkèªMobpfabk`vªmolmlpîªjbkqflkp lkivªqebªòb^qflkªlcªpl*`îibaªÖ`liibdbpÖªlcªprmbo sfplop+ªQefpªtfiiªklqª_bªbklrde+ >qª^ªjfkfjrj)ªBRªk^qflkîªprmbo sfplopªtfiiªe^sbªqlªcliiltªqebªp^jbª%Brolmb^k& orib_llhªqlª^slfaª^ªo^`bªqlªqebª_lqqljª^pªk^qflkpª`ljmbqbªlkªiûfqv +ªQebvªjrpqªîpl obdriôivªbuè^kdbªîiªfkcloj^qflkª`lk`bokfkdªpvpqbjf`îiv*fjmloq^kqªfkpqfqrqflkpªpl qe^qªpvpqbjf`ªofphª`^kª_bªob`ldkfpbaªbôiv+ª Qebªp^jbªabdobbªlcª`llmbo^qflkª^jlkdªprmbo sfplopªtlriaªifhbtfpbª_bªkbbabaªclo qebªpjîiªkrj_boªlcª_^khpªqe^qªôbªpvpqbjf`îiv*fjmloq^kqª^qªqebªdil_îªibsbi+ªFqªfp rkifhbivªqe^qªqefpª`^kª_bªlod^kfpbaª^qªqebªdil_îªibsbi)ªeltbsbo)ªfcªfqªalbpªklqªe^mmbk cfopqªtfqefkªBrolmb+ Brolmbª`lriaªe^sbª_bbkªqebªj^gloªaofsfkdªclo `bªcloª^ªobclojbaªdil_îªjlkbqô v pvpqbj+ª?rqª^pªilkdª^pªqebªBRªfpªklqª^_ibªobclojªfqpªltkªfkqbokîªlod^kfp^qflkªfqpª`lk*

34 What G20 leaders must do to stabilise our economy and fix the financial system qof_rqflkªtfiiªobj^fkªjfklo+ªDfsbkªqe^qªqebªRPªe^pªklªpqolkdªfkqbobpqªfkªè^kdfkdªqeb pq^qrpªnrlªfqªfpªqerpªifhbivªqe^qªifqqibªtfiiªè^kdb+ª Kbsboqebibpp)ªD/-ªibâbopªpelriaªci^dªqebªfpprbªcloªcroqeboªafp`rppflk+ªFcªqebªa^j * ^dbªpmobâpªjrèªcroqebo)ªqebªildf`ª^kaªfkabbaªqebªkb`bppfqvªlcªBrolmb^kª^kaªdil_î `lloafk^qflkªlcª_^khªprmbosfpflkªj^vªj^hbªfqpbicªcbiqªclo`bcriivªbklrdeªqlªlsbomlt* boªk^qflkîªgbîlrpfbpª^kaªalr_qp+ªFkªqebªjb^kqfjb)ªBrolmb^kªibâbopªpelriaªdbqªqebfo ltkªelrpbªfkªloabo+ª

About the author

A^kfbi Dolp fp qeb Afob`qlo lc qeb @bkqob clo Brolmb^k Mlif`v Pqrafbp %@BMP&) e^sfkd tlohba ^q qeb FJC %.650*.653&) _bbk ^k B`lkljf` >asfplo ql qeb Afob`qlo^qb Dbkboî FF lc qeb Brolmb^k @ljjfppflk %.655*.66-&) âsfplo ql qeb Brolmb^k Môif^jbkq %.665*/--2&) jbj_bo lc qeb @lrk`fi lc B`lkljf` >asfplop lc qeb Cobkè Jfkfpqbo lc Cfk^k`b %/--0*/--2&8 jbj_bo lc qeb Cobkè @lkpbfi aÖ>kîvpb B`lkljfnrb %/--. å /--0&+ Pfk`b >mofi /--2) eb pbosbp ^p Mobpfabkq lc P^k M^lil FJF >ppbq J^k^dbjbkq+ Eb e^p q^rdeq ^q qeb Brolmb^k @liibdb %K^qlifk& ^p tbii ^p ^q sôflrp rkfsbopfqfbp ^òlpp Brolmb+ Efp MeA fp colj qeb Rkfsbopfqv lc @ef`^dl+ Eb fp bafqlo lc B`lkljfb Fkqbok^qflkîb ^ka bafqlo lc Fkqbok^qflkî Cfk^k`b) e^sfkd mr_ifpeba tfabiv fk fkqbok^qflkî ^`âbjf` ^ka mlif`v*lofbkqba glrokîp) ^ka e^p ^rqeloba krjbolrp jlkldo^mep ^ka clro _llhp+

Returning to narrow banking

Paul De Grauwe University of Leuven and CEPR

?r__ibp ^ka ò^pebp e^sb _bbk môq lc cfk^k`fî jôhbqp clo `bkqrofbp+ >iiltfkd _^khp * tefè fkbsfq^_iv _loolt peloq ^ka ibka ilkd * ql dbq abbmiv fkslisba fk cfk^k`fî jôhbqp fp ^ ob`fmb clo afp^pqbo+ Qeb plirqflk fp ql obpqof`q _^khp ql qoâfqflkî) kôolt _^khfkd tfqe qo^* afqflkî lsbopfdeq ^ka drô^kqbbp) tefib obnrfofkd cfojp lmbo^qfkd fk cfk^k`fî jôhbqp ql jlob ìlpbiv j^qè qeb ^sbo^db j^qrofqfbp lc qebfo ^ppbqp ^ka if^_fifqfbp+

Qebobª`^kª_bªklªalr_qªqe^qª^ªobclojªlcªqebªfkqbok^qflkîªcfk^k`fîªpvpqbjªfpªkb`bppôv qlª^slfaªcrqrobªòfpbp+ªEltbsbo )ªqebªD*/-ªjbbqfkdªpelriaªîplª^slfaª^kª^dbka^ªqe^q q^hbpªlkªqllªj^kvªmol_ibjp+ªQebªibâbopªkbbaªqlªcl`rpªlkªqebªbppbkqfîªmol_ibjªåªqeb fkqbok^qflkîª_^khfkdªòfpfpª^kaªqebªc^`qlopªqe^qªibaªqlªqefpªòfpfp+ª

Banks inherent instability Fqªfpªrpbcriªqlªpqôqªcoljªqebª_^pf`p+ª?^khpªôbªfkªqebª_rpfkbppªlcª_looltfkdªpeloqª^ka ibkafkdªilkd+ªFkªalfkdªplªqebvªmolsfabª^kªbppbkqfîªpbo sf`bªqlªqebªobpqªlcªrp)ªf+b+ªqebv òb^qbªòbafqªqe^qªîiltpªqebªobîªb`lkljvªqlªdoltª^kaªbum^ka+ªQefpªòbafq*òb^qflk pbosf`b)ªeltbsbo)ªfpª_^pbaªlkª^kªfkebobkqivªco^dfibªpvpqbj+ªFcªqebª_^khpÖªabmlpfqlopªlo ibkabopªôbªdofmmbaª_vª`liib`qfsbªafpqorpqª^kaªîiªab`fabªqebvªt^kqªqebfoªjlkbvª_^`h) _^khªtfiiªdlª_olhb8ªqebªjlkbvªfpªklqªqebobªpfk`bªqebªabmlpfqpªtbobªfksbpqbaªfkªfiifn * rfaª^ppbqp+ªQefpªfpªeltª^ªifnrfafqvªòfpfpªbormqp)ªpbqqfkdªfkªjlqflkª^kªabsfifpeª`vìbªlc fkplisbk`vª^kaªkbtªifnrfafqvªòfpbp+ª

Repeal of stability regulation TbªibôkbaªcoljªqebªDob^qªAbmobppflkªqe^qªfkªloaboªqlª^slfaªprèªòfpbpªtbªe^sbªql ifjfqªofphªq^hfkdª_vª_^khbop+ª Tbªrkibôkbaªqefpªibpplkªarofkdªqebª.65-pª^kaª.66-pªtebkªqebª_^khfkdªpb`qloªt^p moldobppfsbivªabobdri^qba)ªqerpªdfsfkdª_^khpªlmmloqrkfqfbpªqlªpbbhªefdeªofphªfksbpq * jbkqp+ªQebª`rijfk^qflkªlcªqefpªabobdri^qlo vªjlsbjbkqªt^pªqebªobmbîªlcªqebªDi^pp* Pqb^dîiª>`qªfkª.666ªrkaboªqebª@ifkqlkª>ajfkfpqo^qflk+ªQefpªbkabaªqebªpbmô^qflkªlc qebª`ljjbo`fîª^kaªfksbpqjbkqª_^khfkdª^`qfsfqfbpªfkªqebªRPªåª^ªpbmô^qflkªqe^qªeâ _bbkªfkªmi^`bªpfk`bªqebª.60-pª_^khfkdª`lii^mpb+ªObmbîªlcªqebªDi^pp*Pqb^dîiª>`q lmbkbaªqebªd^qbpªcloªRPª_^khpªqlªq^hbªlkªqebªcriiªm^klmivªlcªofphvª^ppbqpª%pb`rofqfbp) abofs^qfsbpª^kaªpqor`qrobaªmolar`qp&ªbfqeboªafob`qivªlkªqebfoª_î^k`bªpebbqpªloªfkaf * ob`qivªqeolrdeªlcc*_î^k`bªpebbqª`lkarfqp+ª Pfjfiôªmol`bppbpªlcªabobdri^qflkªl``roobaªbipbtebob)ªfkªmôqf`riôªfkªBrolmb)ª_iro * ofkdªqebªafpqfk`qflkª_bqtbbkªfksbpqjbkqª^kaª`ljjbo `fîª_^khp)ª^kaªfkªqebªmol`bpp òb^qfkdª"rkfsbopîª_^khp"+ªFqªkltª^mmbôpªqe^qªqefpªabobdri^qlovªmol`bppªe^pªpltkªqeb pbbapªlcªfkpq^_fifqvªfkªqebª_^khfkdªpvpqbj+ª

37 VOX Research-based policy analysis and commentary from leading economists

The critical lack of a firebreak Cfk^k`fîªjôhbqpªe^sb)ªcloª`bkqrofbp)ª_bbkªdofmmbaª_vªpmb`ri^qfsbªcbsbopªqe^qªe^sbªiba qlª_r__ibpª^kaªò^pebp8ª_r__ibpª^kaªò^pebpªôbª^kªbkabjf`ªcb^qrobªlcªcfk^k`fîªjô * hbqp+ª?rqªcfk^k`fîªjôhbqªmol_ibjpªalªklqª^rqlj^qf`îivª^ccb`qª_^khp+ªFkªqebªjlpq ob`bkqªòfpfp)ª_r__ibpª^kaªò^pebpªtlriaªklqªe^sbª_bbkª^ªj^gloªmol_ibjªeâª_^khp klqª_bbkªfkslisbaªplªabbmivªfkªcfk^k`fîªjôhbqp+ª?^khfkdªpb`qloªabobdri^qflk)ªtefè pqôqbaªfkªqebª.65-p)ªfpªte^qªbumlpbaªqebª_^khpªplª`^q^pqolmef`îivªqlªqebªpmb`ri^qfsb avk^jf`pªfkebobkqªfkªcfk^k`fîªjôhbqp+ª?^khpÖª_î^k`bªpebbqpª_b`^jbªqebªjfoolo fj^dbpªlcª_r__ibpª^kaªò^pebpªl``roofkdªfkªqebªcfk^k`fîªjôhbqp+ª>kªbumilpfsbª`l`h * q^fiªlcªòbafqª^kaªifnrfafqvªofphpªt^pªòb^qbaªqe^qªt^pªt^fqfkdªqlªbumilab+

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About the author

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G20 Summit: What they should achieve

Takatoshi Ito University of Tokyo and CEPR

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41 VOX Research-based policy analysis and commentary from leading economists

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42 What G20 leaders must do to stabilise our economy and fix the financial system

About the author

Q^h^qlpef Fql fp Molcbpplo ^q qeb Rkfsbopfqv lc QlhvlÖp Doâr^qb Pèlli lc B`lkljf`p) e^sfkd q^rdeq ^q qeb Rkfsbopfqv lc Jfkkbplq^) Efqlqpr_^pef Rkfsbopfqv) ^ka Eôsôa %tebob eb ob`bfsba efp MeA fk b`lkljf`p fk .646&+ Eb îpl pbosba ^p Pbkflo >asfplo fk qeb Obpbôè Abmôqjbkq ^q qeb FJC %.661*64& ^ka Abmrqv Sf`b Jfkfpqbo clo Fkqbok^qflkî >cc^fop ^q G^m^kÖp Jfkfpqov lc Cfk^k`b %.666*/--.&+ Eb t^p ^ jbj_bo lc qeb @lrk`fi lc B`lkljf` ^ka Cfp`î Mlif`v %/--3*/--5&) tefè ab`fabp qeb co^jbtloh lc qeb _radbq b^è vbô ^ka fkìrabp qeb Mofjb Jfkfpqbo ^ka qeb Cfk^k`b Jfkfpqbo+ Eb e^p ^rqeloba krjbolrp pèliôiv ôqfìbp ^ka j^kv _llhp fkìrafkd7 Qeb G^m^kbpb B`lkljv) Qeb Mlifqf`î B`lkljv lc qeb G^m^kbpb Jlkbqôv Mlif`v) ^ka Cfk^k`fî Mlif`v ^ka @bkqoî ?^khfkd fk G^m^k+ Eb fp ^ @BMO Obpbôè Cbiilt+

Delivering change. Together.

Wendy Dobson University of Toronto

Ibâbop pelria l_pbosb pbsboî hbv mofk`fmibp7 %f& al kl eôj8 %ff& ^slfa cfkdbo mlfkqfkd8 %fff& jlabo^qb bumb`q^qflkp lc dil_î ^`qflk8 %fs& _b rk^kfjlrp fk pbib`qfkd ^ cbt dlîp ^ka qebk abifsbo+ Qeb moflofqfbp pelria _b ql ^dobb ^ `lebobkq obdri^qlov co^jbtloh %kbt oribp) klq ^ kbt fkpqfqrqflk&) e^pqbk FJC obpqor`qrofkd) pqfjri^qb qeb obî b`lkljv ^ka mboj^kbkqiv obmi^`b qeb lia D4 tfqe qeb D/-+

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Where to start Cfopq)ªibâbopªpelriaªpqôqª_vª^dobbfkdªlkª^ª`lebobkqªfkqbok^qflkîªco^jbtlohªcloªobd * ri^qfkdªcfk^k`fîªfkpqfqrqflkpª^kaªjôhbqpªqe^qªbk`lro^dbpªpqolkdª^kaª^mmolmof^qb lsbopfdeqªtfqefkª`lrkqofbpª^pªtbiiª^pªobjlsfkdªqebªòlpp*`lrkqo vªd^mpª^kaªfk`lkpfp * qbk`fbpªqe^qªmolsfabªillmelibpª^kaªlmmloqrkfqfbpªcloªobdri^qlo vªô_fqo^db+ª QebªCfk^k`fîªPq^_fifqvªClorj)ªòb^qbaªlkª^ª?FPª%?^khªcloªFkqbok^qflkîªPbqqibjbkqp& mi^qclojª^cqboªqebª.664*65ª>pf^kªòfpbp)ªfpª^ªdllaªpqôq+ªFqªîobâvªmoljlqbpª`llmbo^ * qflkª^jlkdªk^qflkîªprmbo sfplopªlcªcfk^k`fîªfkpqfqrqflkpªfkslisbaªfkªqebªfkpro^k`b) pb`rofqfbpª^kaªclobfdkªbuè^kdbªjôhbqp+ªFqªalbpªqebªp^jbªcloªcfk^k`fîªfkco^pqor`qrob fkpqfqrqflkpª^pªòbafqªo^qfkdª^dbk`fbp)ª^``lrkqfkdªpq^kaôap)ª^kaªlqebop+ªIbâbop pelriaªpqobkdqebkªfqpªj^ka^qbªqlªabsbilmª_bpq*mo^`qf`bªdrfabifkbpª^kaªrkfsbopîªpq^k* aôapªqlªdrfabªqebªobclojpªlcªk^qflkîªobdri^qlop+ª @bkqoîª_^khpªe^sbªabjlkpqo^qbaªqe^qªfqªfpªmlppf_ibªqlªe^sbª^ª`lebobkqªfkqbok^ * qflkîªco^jbtlohªqe^qª^èfbsbpªqebªp^jbªbkapªfkªafsbopbªk^qflkîªb`lkljfbp+ª@bkqoî _^khªdlsboklopªjbbqªobdriôivªfkªrkobjôhbaªjbbqfkdpª^qªqebª?FP8ªqebvªe^sbª_bbk `llmbo^qfkdªnrf`hivª^kaªpb^jibppivªqlªprmmloqªdil_îªifnrfafqvª^pªcôª_^`hª^pªqebª.654 pql`hªjôhbqªòfpfp+ªQebfoªob`loaªfpªklqªmbocb`q)ªeltbsbo +ªQebvªafaªklqªmboprâbªRP jlkbqôvª^rqelofqfbpªqlªqfdeqbkªiûªjlkbqô vªmlif`vªfkªob`bkqªvbôp)ªkloªe^sbªqebv `lksfk`baªqebª@efkbpbªdlsbokjbkqªqe^qªqebª`bkqoîª_^khÖpªeb^svªcl`rpªlkªbuè^kdb o^qbªj^k^dbjbkqª`lkqof_rqbpªqlªdil_îª^pªtbiiª^pªaljbpqf`ªafpqloqflkpª^kaªfj_î * ^k`bp+ª

Hasten IMF restructuring Pb`lka)ªibâbopªpelriaªpmbbaªrmªFJCªobpqor`qrofkd+ªFqªe^pªqebªkb`bppôvªbumboqfpbª^ka jbj_bopefmªqlª_bªqebªibkaboªlcªi^pqªobploq+ª?rqªfqªklªilkdboªe^pªqebªobplro`bpªloªìlrq+ª QebªFJCªjrpqªobpqlobªqebªqorpqªlcª>pf^kªdlsbokjbkqpª^kaªè^kdbªfqpªdlsbokfkd

45 VOX Research-based policy analysis and commentary from leading economists pqor`qrobªqlªdfsbªìlrqªqlªqelpbªtelª`^kªmolsfabªobplro `bp)ªfkìrafkdªdlsbokjbkqp tfqeªplsbobfdkªtbîqeªcrkap+ªFqpª`liib`qfsbªbumbofbk`bªåªe^sfkdªe^kaibaªjlobªqe^k lkbªerkaobaª_^khfkdªòfpbpªåªfpª^ªplro `bªlcªpfdkfcf`^kqªbumboqfpb+ªFqªe^pªjbè^kfpjp cloªbjbodbk`vªcfk^k`bª^kaªcloª`lkar`qfkdªj^òlb`lkljf`ªprosbfii^k`bªqlªqo^`hªòlpp* `lrkqovªcfk^k`fîª^kaªb`lkljf`ªifkh^dbp+ªFqpªCfk^k`fîªPb`qloª>ppbppjbkqªMoldo^jp %CP>Mp&ªôbª^ªplro `bªlcªòbaf_ibª^kaª`ljmobebkpfsbª^kîvpfpª^kaªâsf`bªåªîqelrde lkbªqe^qªqebªRPªfdklobaª%qebªFJCÖpªtôkfkdpªlcªfjmbkafkdªmol_ibjpªfkªfqpªpro sbfi* i^k`bªobmloqpª^kaªpbjf*^kkrîªprosbvpªlcªqebªtloiaªb`lkljvªtbkqªiôdbivªrkebbaba+&ª

Help the real economy Qefoa)ªD/-ªibâbopªpelriaª^``loaª^ªefdeªmoflofqvªqlªqebªobîªb`lkljv +ª Buqbokîªfj_î^k`bpªpqfiiªkbbaªqlª_bªobar`baª_vªdlsbokjbkqpªâlmqfkdªk^qflkî mlif`fbpªqe^qªôbªdllaªaljbpqf`ªmlif`vª^pªtbii+ª>ªtloofpljbªabsbilmjbkqªfpªqebªdolt* fkdªmbo`bmqflkªqe^qªdil_îfp^qflkªfpª_âªcloªqebªjfaaibªì^pp+ª >ªpqolkdªmibadbª_vªibâbopªqlªbpèbtªmolqb`qflkfpjªfpªbppbkqfî+ªQebª_bpqªpfdkîªlc prèª`ljjfqjbkqªfpªqlª`ljmibqbªqebªAle^ªOlrkaª_vªvbôÖpªbka+ªQebªibpplkpªcoljªqeb .60-pªabjlkpqo^qbªqebªafp^pqolrpª`lkpbnrbk`bpªlcªqoâbªmolqb`qflkfpjª^kaªi^`hªlc jrqrîªqorpqª^kaª`llmbo^qflkª^jlkdªdlsbokjbkqp+ªK^qflkîfpjª^kaªmolqb`qflkfpj qorjmbaªqebªdil_îªmr_if`ªfkqbobpqª^kaªqebªòfpfpªabbmbkba+ªQefpªjrpqªklqª_bªîiltba qlªe^mmbkª^d^fk+ª

Establish a new ‘G7’ to match New Century realities Clroqe)ªibâbopªpelriaªmboj^kbkqivªobpqor`qrobªqebªdil_îªibâbopÖªdolrm+ªQefpªfpªklq ^ªqlmf`ªqe^qªpelriaªqlmªqebª^dbka^ª_b`^rpbªfqªtfiiªrpbªîiªqebª"luvdbk)"ª_rqªfqªfpª^k fjmloq^kqªlkb+ªD*/-ªjbj_bopefmªfpª_^pbaªlkªòfqbof^ªlcªb`lkljf`ªpfdkfcf`^k`bª^ka il`^qflkªtefèªdfsbªfqªibdfqfj^`v+ªFqªpelriaªobmi^`bªqebªD*4ª^pªqebªobdriô)ªklqªgrpqªòf* pfpªj^k^dbjbkq)ªibâbopÖªclorj+

Pitfalls to avoid Qebobªôbªqtlªpfdkfcf`^kqªmfqcîipªqlª^slfa+ª .& Qebªdo^kaflpbªdil_îªprmbo*obdri^qlo+ª QefpªtlkÖqªcivª_b`^rpbªdlsbokjbkqpªtfiiªklqª`babªk^qflkîªplsbobfdkqv +ªKloªpelria qebvªpfk`b)ªqlª_bªbccb`qfsb)ªobdri^qlopªkbbaªqlª_bªsbo vªhkltibadb^_ibª^_lrqªqebªfkpqf * qrqflkpªqebvªlsbopbb+ª>ªdil_îªobdri^qloªc^fipªqefpªqbpq+ªPfwbª^kaªob^èª`^kklqªj^hbªrm cloªqebªkb`bppô vªmolufjfqvª^kaªcl`rpª^kaªtlriaªsbo vªifhbivªe^sbªkbd^qfsbªrkfk * qbkabaª`lkpbnrbk`bp+ª /& Qllªjrèªdlsbokjbkqªfkqbosbkqflk+ª Qebobªfpª^ªqbkabk`vªarofkdª^ªcfk^k`fîªòfpfpªqlªbjme^pfpbªfkpq^_fifqvª^kaªrkc^fokbpp lsboªqebªdoltqeª_bkbcfqpªlcªlmbkª`^mfqîªjôhbqp+ª@olpp*`lrkqo vªpqrafbpªpeltªqe^q `lrkqofbpªtfqeªabbmboª^kaªjlobªplmefpqf`^qbaªcfk^k`fîªpvpqbjpªe^sbªdoltkªc^pqbo _b`^rpbª`^mfqîª`^kª_bªîil`^qbaªjlobªbccf`fbkqiv+ªFkafsfarîªtbicôbªfpªîplªmoljlqba tebkªelrpbeliapª`^kªl_q^fkªòbafqªqlªpjllqeªqebfoª`lkprjmqflkªobnrfobjbkqp qeolrdeªqfjb+ªQebª`lpqpªlcªqebª`roobkqªòfpfpªôbª^ppl`f^qbaªtfqeªqebªabcf`fbk`fbpªlc dlsbokjbkqpª^kaªk^qflkîªobdri^qlovªpvpqbjp)ªjlpqªob`bkqivªfkªqebªRP)ªklqªtfqeªif_ * boîfpbaª^kaªlmbkªcfk^k`fîªjôhbqp+ Fkòb^pbaªdlsbokjbkqªltkbopefmªlcª_^khpª^kaªcfk^k`fîªfkpqfqrqflkpªt^pªbppbkqfî qlªqebfoªobp`rb+ªVbqªrkibppªdlsbokjbkqpªpbiiªaltkªqebfoªpq^hbpªfkª^ªqfjbivªt^vªfkªqeb

46 What G20 leaders must do to stabilise our economy and fix the financial system jlkqepª^kaªvbôpªêbâ)ªtbª`^kªbumb`qªqlªpbbª_rob^rò^qpª^kaªmlifqf`f^kpªpr_pqfqrq * fkdªcloªqebªjôhbqªfkªmf`hfkdªtfkkbopª^kaªilpbopª^kaªfkqbo sbkfkdªfkª_^khªpqo^qbdfbp ^kaªa^fivªab`fpflkªj^hfkd+ªT bªtfiiªîplªpbbªdlsbokjbkqpªfkªhbvªbjbodfkdªjôhbqp j^fkq^fkªqebfoªltkbopefmª^kaª`lkqoliªlcª_^kh*aljfk^qbaªcfk^k`fîªpvpqbjpªåª^kªlrq* `ljbªqe^qªtlriaªmbombqr^qbªqebªefdeª`lpqªlcª`^mfqîªcloªpjîiªbkqobmobkbrofîªdoltqe bkqbomofpbpªqe^qª_^khpªperkª^pª_rpfkbppªqe^qªfpªqllªofphv +ª

Crises will happen again: Listen to IMF warnings next time Cfkîiv)ªtbªpelriaªe^sbªklªfiirpflkp+ªCfk^k`fîªfkpqfqrqflkpªtfiiª`lkqfkrbªqlªfkkls^qb ^kaªcfk^k`fîªobdri^qlopªtfiiª`lkqfkrbªqlª_bªlkbªpqbmª_befka+ªTebkªobdri^qlopª^kaªqeb FJCªtôkªlcªfjmbkafkdªmol_ibjpªarofkdªqebªkbuqª_llj)ªmlifqf`f^kpª^kaªjôhbqªmô * qf`fm^kqpªpelriaªifpqbkª^kaªobdri^qlopªpelriaª^`qªfkªqfjbivªt^vp+ª?rqªtfiiªqebv<

About the author

Tbkav Al_plk fp Molcbpplo ^q qeb Rkfsbopfqv lc Qlolkql ^ka Afob`qlo lc qeb Fkpqfqrqb clo Fkqbok^qflkî ?rpfkbpp %Olqj^k Pèlli lc J^k^dbjbkq&) e^sfkd mobsflrpiv _bbk Mobpfabkq lc qeb @+A+ Eltb Fkpqfqrqb %@^kâ^Öp ibâfkd fkabmbkabkq b`lkljf` mlif`v obpbôè lod^kfw^* qflk&+ Peb t^p >ppl`f^qb Abmrqv Jfkfpqbo lc Cfk^k`b fk Lqq^t^ ^ka fp ^ klk*bub`rqfsb afob`* qlo clo @^kâf^k `ljm^kfbp fk cfk^k`b) bkbodv ^ka ifcb p`fbk`bp) ^p tbii ^p Sf`b @e^fo lc qeb @^kâf^k Mr_if` >``lrkq^_fifqv ?lôa+ Ebo obpbôè cl`rpbp lk bjbodfkd jôhbq b`lkljfbp) b`lkljf` fkqbdo^qflk fk Kloqe >jbof`^) qeb fkqbok^qflkî cfk^k`fî pvpqbj) obdflkî ^ka dil_î dlsbok^k`b) ^ka @^kâf^k mr_if` mlif`v fpprbp+

East Asia's Self-managed Reserve Pooling Arrangement and the global financial architecture

Yung Chul Park Seoul National University

Qeb D/- ibâbop pelria ob`ldkfpb qeb pq^_fifpfkd olib qe^q BrolmbÖp obdflkî cfk^k`fkd ôo^kdbjbkqp mi^v fk qeb dil_î pqor`qrob ^ka bk`lro^db qeb `ljmibqflk lc ^ `loobpmlkafkd ôo^kdbjbkq fk B^pq >pf^+ D/- k^qflkp pelria `lii^_lo^qb ql j^hb qeb POM> ^ òbaf_ib obdflkî ibkabo+ Qefp obnrfobp bkiôdfkd qeb POM>Öp obpbosb mlli) bkprofkd qe^q ^qq^èba mlif* `v `lkafqflkp ôb kl jlob pqofkdbkq qe^k qeb FJCÖp PIC) ^ka j^hfkd qeb afp_ropbjbkq mol`bpp pqo^fdeqclotôa ^ka bumbafqflrp+

>qªqebª?bfgfkdª>pf^*BrolmbªJbbqfkdª%>PBJ&ªfkªL`ql_bo )ªibâbopªmibadbaªqe^qªqebv tlriaª"rkaboq^hbªbccb`qfsbª^kaª`ljmobebkpfsbªobclojªlcªqebªfkqbok^qflkîªjlkbqôv ^kaªcfk^k`fîªpvpqbjªfkª`lkpriq^qflkªtfqeªîiªpq^hbeliabopª^kaªqebªobibs^kqªfkqbok^ * qflkîªcfk^k`fîªfkpqfqrqflkpªfkìrafkdªqebªFJCªqlªebimªpq^_fifpbªqebªfkqbok^qflkî cfk^k`fîªpfqr^qflkª%>PBJª/--5&+"ª Te^qªolibªfpªqebobªcloªobdflkîªcfk^k`fîªôo^kdbjbkqpªfkªqebªdil_îªpqor`qrob<ªClo bu^jmib)ª`lriaªlkbª_rfiafkdª_il`hªlcªqebªkbtªpvpqbjª_bª^kªôo^kdbjbkqªifhbªB^pq >pf^ÖpªPbic*j^k^dbaªObpbo sbªMllifkdª>oo^kdbjbkqª%POM >&ªqe^qªòb^qbpªifnrfafqvªprm * mloqª^jlkdªB^pqª>pf^kªk^qflkpª%qebª>PB>Kªk^qflkpªmirpª@efk^)ªG^m^k)ª^kaªHlob^&<ª

Why regional arrangements can help Qebobªôbªpbsboîªob^plkpªqlªqefkhªqe^qªobdflkîªcrkafkdªôo^kdbjbkqpª`lriaª`ljmib * jbkqªFJCªfkªbke^k`fkdªbccf`fbk`vª^kaªpq^_fifqv+ªLkbªobdflkîªcrkafkdªôo^kdbjbkqªå qebªBrolwlkbª^kaªfqpªmobab`bpplopªåªe^pªîobâvª`lkqof_rqbaªqlªabbmboªb`lkljf`ªfkqb* do^qflkªlcªBrolmbª^kaªabsbilmbaªfkqlª^ªòfqf`îª`ljmlkbkqªlcªqebªfkqbok^qflkîªcfk^k* `fîªpvpqbj+ªJ^kvªfkªB^pqª>pf^ª_bifbsbªqebvª`lriaªobmif`^qbªqebªbumbofbk`b+ª >ªpb`lkaªôdrjbkqª`lk`bokpªqebªFJCÖpªfkpqfqrqflkîªtb^hkbppbp+ª>qªib^pqªfkªB^pq >pf^)ªqebªFJCªe^pªklqªobd^fkbaªfqpªòbaf_fifqvª_b`^rpbªfqªe^pªplªcôªobcrpbaªqlªbkd^dbªfk co^khª^kaª`lkpqor`qfsbªafîldrbªtfqeª>pf^kªpq^hbeliabop+ªFkpqbâªfqªe^pªpfjmiv bumi^fkbaªfqpªboolopªfkªqebª.664ª>pf^kªòfpfpªtfqeªlmbkkbppª^kaªerjfifqvª%Q ^h^df /--5&+ª>klqeboªtb^hkbppªfpªqebªFJCÖpªifjfqbaªobplro `bp8ªqebvªôbªklqªiôdbªbklrdeªql j^hbªqebªFJCªqebªibkaboªlcªcfopqªobploq)ªqlªp^vªklqefkdªlcªqebªibkaboªlcªi^pqªobploq+ªQefp fpªtebobªobdflkîªibkabopª`lriaªebimª_vªglfkfkdªclo `bpªtfqeªqebªFJCªqlªmolsfabªâaf * qflkîªcrkapªcloªbjbodbk`vªibkafkd+ª>ªqefoaªfkpqfqrqflkîªtb^hkbppªfpªqe^qªqebªFJC j^vªpfjmivªe^sbªqllªjrèªdolrkaªqlª`lsboªdfsbkªqebªtfabªafccbobk`bpª^jlkdª_olâ bjbodfkdª^kaªabsbilmfkdªb`lkljfbp+ª @lrkqofbpªfkªpljbªobdflkpªj^vªkbbaªjlobªqe^kªqebªFJCÖpªjlkfqlofkdª^kaªpro sbfi* i^k`bªpbosf`bpªfkªj^k^dfkdªqebfoªj^òlb`lkljf`ªmlif`fbp+ªFkªabsbilmjbkqªcfk^k`fkd) qebªolibªlcªqebªT loiaª?^khªfpª`ljmibjbkqbaª_vª^ªiôdbªkrj_boªlcªobdflkîivªpmb * `fîfpbaªabsbilmjbkqª_^khp+ª?vªqebªp^jbªqlhbk)ªqebobªfpªklªob^plkªtevªqebobªpelria

49 VOX Research-based policy analysis and commentary from leading economists

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50 What G20 leaders must do to stabilise our economy and fix the financial system

About the author

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The New Bretton Woods agreement

Guillermo Calvo Columbia University

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53 VOX Research-based policy analysis and commentary from leading economists

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About the author

Drfiibojl @îsl fp Molcbpplo lc B`lkljf`p) Fkqbok^qflkî ^ka Mr_if` >cc^fop ^q @lirj_f^ Rkfsbopfqv e^sfkd q^rdeq mobsflrpiv ^q qeb Rkfsbopfqv lc Mbkkpvis^kf^ ^ka Jôvi^ka+ Eb fp Mobpfabkq lc qeb Fkqbok^qflkî B`lkljf` >ppl`f^qflk rkqfi /--5) ^ka t^p @efbc B`lkljfpq lc qeb Fkqbo*>jbof`^k Absbilmjbkq ?^kh %/--.*/--3&) Pbkflo >asfplo fk qeb Obpbôè Abmôqjbkq lc qeb FJC %.655*.660&) ^ka e^p âsfpba pbsboî dlsbokjbkqp fk I^qfk >jbof`^ ^ka B^pqbok Brolmb+ Eb tlk qeb Hfkd Gr^k @ôilp Mofwb fk B`lkljf`p fk /---) ^ka qeb @ôilp Af^w*>ibg^kaol Mofwb fk /--3+ Eb e^p mr_ifpeba tfabiv fk pèliôiv glrokîp ^ka fp qeb ^rqelo lc pbsboî _llhp) jlpq ob`bkqiv Bjbodfkd @^mfqî Jôhbqp fk Qrojlfi7 ?â Ir`h lo ?â Mlif`v< %/--2&+

A New Bretton Woods system should curb boom and bust

Vijay Joshi and David Vines Oxford University; Oxford University and CEPR

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TefibªpljbªD/-ªibâbopªelmbªqebªKlsbj_boª.2qeªPrjjfqªtfiiªi^vªqebªclrka^qflkp cloª^ªÖKbtª?obqqlkªT llapÖ)ªj^kvªôbªp`bmqf`îª^kaªtbªpeôbªqefpªsfbt +ªQebª.611 ?obqqlkªTllapª@lkcbobk`bªt^pªmob`babaª_vªqeobbªvbôpªlcªafccf`riqªafp`rppflkpª^jlkd qebªRP)ªRH)ª^kaªlqeboªk^qflkp+ª QebªD/-ªibâbopªpelriaªpqôqª^ªmol`bppªqe^qªtfiiªbsbkqrîivªmolar`bª^dobbjbkqª^cqbo qebªmobpbkqªòfpfpªe^pªpr_pfaba+ª>qªqefpªjbbqfkd)ªqebvªpelriaªi^vªlrqªqebªbppbkqfîªbib * jbkqpªlcª^ªkbtªpvpqbj+ªTbªôdrbªqe^qª_bqqboªcfk^k`fîªobdri^qflkªfpªlkivªlkbªlcªqebpb bibjbkqp+ª Qebªoliibo`l^pqboªofabªqe^qªqebªtloiaªb`lkljvªe^pª_bbkªlkªqefpªab`âbªe^pªobsbîba ^ªp`^kaîlrpivªofphvªcfk^k`fîªpvpqbj+ªFqªe^pªîplªobsbîbaª^ªofphvªfkqbok^qflkîªjlkb * qôvªpvpqbjªqe^qªbk`lro^dbaª_lljª^kaª_rpqª`vìbp+ªFcªqebªD/-ªibâbopª^fjªqlª_rfiaª^ ÖKbtª?obqqlkªT llapÖªpvpqbj)ªqebvªtfiiªe^sbªqlªâaobppªjlobªqe^kªcfk^k`fîªobdri^ * qflk+ªPfk`bª`roobkqªfkqbok^qflkîªjlkbqô vªôo^kdbjbkqpªqbkaªqlªcrbiªfkpq^_fifqv )ªqeb kbtªpvpqbjªjrpqªîplªâaobppªjlkbqô vªôo^kdbjbkqp+ª

A boom-and-bust international monetary system >kªfjmloq^kqªcb^qrobªlcªqebªoliibo `l^pqboªofabªt^pªbu`bppªp^sfkdp)ªbpmb`fîivªfkªB^pq >pf^+ªCloªbu^jmib)ªfkªFkalkbpf^)ªHlob^ª^kaªQe^fi^ka)ªfksbpqjbkqªcbiiª_vª.-"ªlcªDAM ^cqboªqebª>pf^kªcfk^k`fîªòfpfp)ª^kaªe^pªpq^vbaªaltk+ª@efk^Öpªp^sfkdpªlrqpqofmmbaªfqp îobâvªsbo vªefdeªfksbpqjbkqp+ªQebªbu`bppªp^sfkdpªtbobªqo^kpi^qbaªfkqlª`roobkq ^``lrkqªpromirpbpªpfk`bªpqbofifwbaªclobfdkªbuè^kdbªfkqbo sbkqflkªhbmqªbuè^kdbªo^qbp rkabosîrba+ª>iiªqefpªjâbªpbkpbªcloªqebªfkafsfarîªk^qflkp+ªFqªîiltbaªqebjªqlª^``r* jri^qbªobpbo sbpª^pªfkpro^k`bª^d^fkpqª^ª.664*pqvibªòfpfpª^kaªfqªclpqbobaªbumloq*iba fkarpqofîfp^qflk+ >pf^kªbu`bppªp^sfkdpªtbobªdobbqbaª_vª>jbof`^kªèb^m*jlkbvªmlif`fbp+ªRPªfkqbobpq o^qbpªtbobª`rqªcoljª3"ªqlª."ªfkª/--.)ªqebkª`rqªcroqeboªqlª."ª^kaªobj^fkbaªbu`bm * qflkîivªiltªcloªqeobbªvbôp+ªQebªobpriqªt^pª`lilppîªelrpfkdª^kaª^ppbqªmof`bª_r__ibp) ^kaªsbovªiôdbª`roobkqª^``lrkqªfj_î^k`bp)ªtfqeªqebªaliiôÖpªobpbo sb*`roobk`vªpq^qrp ^fafkdª^kaª^_bqqfkdª>jbof`^Öpª^_fifqvªqlªorkªj^ppfsbªqoâbªabcf`fqp+ª>iiªqefpªjâbªpbkpb cloªqebªRP+ªQebªRPªfkqbobpqªo^qbªmlif`vªt^pª^kªrkabopq^ka^_ib)ªbsbkªkb`bppô v) obpmlkpbªqlªmobsbkqª>pf^kªbu`bppªp^sfkdpª^kaª`roobkqª^``lrkqªpromirpbpªcoljª`^rpfkd ^ªob`bppflkªfkªqebªRPª^kaªqebªobpqªlcªqebªtloia+

57 VOX Research-based policy analysis and commentary from leading economists

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Fixing the global monetary system Qebªdil_îªòfpfpªqe^qªtbªe^sbªeâª`lriaªqerpªe^sbª_bbkª^sboqbaªlkivª_vª^ªafccbobkq jlkbqôvªpvpqbj+ªQe^qªfpªlkbªbppbkqfîªq^phªcloª^kvªkbtª?obqqlkªT llap+ª Qebªkbtªpvpqbjªpelriaªfkar`bªk^qflkpªqlªj^k^dbªqebfoªj^òlb`lkljfbpªfkªt^vp qe^qªmolar`bªkbfqeboªcfk^k`fîª_r__ibpªkloªiôdbªbuqbokîªfj_î^k`bpª^kaªfk^mmolmof* ^qbªbuè^kdbªo^qbp+ªQefpªfpªbkqfobivªmlppf_ibª^pªk^qflkpª`lriaªmroprbªqeobbªl_gb`qfsbp %qebª`lkqoliªlcªfkci^qflk)ªqebªmobpbo s^qflkªlcªcfk^k`fîªpq^_fifqvª^kaªqebª^slfa^k`bªlc bu`bppfsbªfkqbok^qflkîªfj_î^k`bp&ªtfqeªqeobbªmlif`vªfkpqorjbkqpª%jlkbqô vªmlif`v) obdri^qlovªprmbosfpflk)ª^kaªcfp`îªmlif`v&+ª Fkqbobpqªo^qbpª`lriaªj^k^dbª^ddobd^qbªabj^kaªtfqeªqebª^fjªlcªhbbmfkdªfkci^qflk iltª^kaªrkbjmilvjbkqª^qªprpq^fk^_ibªibsbip+ªBuè^kdbªo^qbpªtlriaªcil^q)ªplª^ª`lrk * qovªtfqeªbu`bppfsbªfkci^qflkªtlriaªo^fpbªfkqbobpqªo^qbpª^kaªîiltªqebªbuè^kdbªo^qbªql ^mmob`f^qb)ªtefibªlkbªtfqeªqllªifqqibªabj^kaªtlriaªiltboªfkqbobpqªo^qbpª^kaªîilt buè^kdbªo^qbpªqlªabmob`f^qb+ª@lrkqofbpª`lriaª_bªobnrfobaªqlªobdri^qbªqebfoªcfk^k`fî pvpqbjpªplª^pªqlªifjfqªpmb`ri^qfsbªofphªq^hfkd+ªCfkîiv )ª`lrkqofbpª`lriaªrpbªcfp`îªmlif * `fbpªqlªhbbmªpmbkafkdª^kaªlrqmrqªprccf`fbkqivªfkªifkbªqlª^slfaªbu`bppfsbªbuqbokî fj_î^k`bp+

How to enforce virtue Qebªsfoqrlrpªmlif`vªqoflªtbªe^sbªlrqifkbaªtlriaªklqª_bªpbic*bkclo`fkd)ª^pªqefpªab`âbÖp oliibo`l^pqboªofabªplªìbôivªabjlkpqo^qba+ªLkbªsbopflkªlcªqebªÖKbtª?obqqlkªT llapÖªå lkbªtefèªtlriaªobnrfobªcôªpqolkdboªdil_îªdlsbok^k`bªqe^kªqebªD/-ªibâbopªpbbj ifhbivªqlª^``bmqªåªtlriaªe^sbªqebªFJCªbkclo `fkdªîiªqeobbªbibjbkqp+ª>ªjlobªplsbo * bfdkqv*cofbkaivªsbopflkªtlriaªjlobªìlpbivªobpbj_ibªqebªlofdfkîª?obqqlkªT llapªpvp* qbjªfkªqe^qªfqªtlriaªlkivªobpqof`qªbuè^kdbªo^qbªjfpîfdkjbkqp+ª Prèª^ªpvpqbjªjfdeqª_bªbklrdeªqlªfkar`bª`lrkqofbpªqlªmroprbªqebªsfoqrlrpªj^òl * b`lkljf`ªmlif`fbpªabpòf_baª^_lsb+ªCloªbu^jmib)ªbu`bppª@efkbpbªp^sfkdpªtfqelrqª^k buè^kdbªo^qbªqe^qªprmmloqbaª^ªqoâbªpromirpªtlriaªe^sbªmolar`baª^ªob`bppflkªfk @efk^ªåªmboe^mpªqofddbofkdª^ª@efkbpbªmlif`vªobpmlkpbªqe^qªtlriaªe^sbªbum^kaba aljbpqf`ªabj^ka+ªIfhbtfpb)ªlsbopmbkafkdªfkªqebªRPªtfqelrqªqebªerdbªqoâbªabcf`fq tlriaªe^sbªmolar`baª^kªlsboeb^qbaªb`lkljvª^kaª^ªabj^ka*a^jmbkfkdªRPªmlif`v obpmlkpb+ª QefpªpvpqbjªtlriaªobnrfobªqebªFJCªqlªabqbojfkbªqebª^mmolmof^qbªbuè^kdbªo^qbªsî* rbpªcloª`lrkqofbpªåªÖcrka^jbkqîªbnrfif_ofrjªbuè^kdbªo^qbpÖ+ªQebªFJCªtlriaªqebkª_b dfsbkªqebªmltboªqlªobnrfobª`lrkqofbpªklqªqlªfkqbo sbkbªfkªprèª^ªt^vª^pªqlªpqbboªqebfo buè^kdbªo^qbpª^t^vªcoljªqebpbªcrka^jbkqîªsîrbp+ª Qefpªtlriaª_bª`lrmibaªtfqeª^ªkbtªpvpqbjªlcªmolsfpflkªlcªfkqbok^qflkîªobpbo sbpªå fkªtefèªfqªtlriaª_bª^dobbaªqe^qªqebªFJCªtlriaªobdriôivªfpprbªPAOpªqlªîiª`lrkqofbp ^kaªîplª_bªdfsbkªqebªmltboªqlªj^hbªbjbodbk`vªfpprbpªlcªPAOpªqlªcfdeqªòfpbp+ªQe^q tlriaªj^hbªfqªrkkb`bppô vªcloª`lrkqofbpªqlªpbbhªqlªorkª`roobkqª^``lrkqªpromirpbpªql ^``rjri^qbªclobfdkªobpbo sbpªcloªfkpro^k`bªob^plkp+ªQebªRP)ªfkªqrok)ªtlriaª_bªibpp qbjmqbaªqlªlsbopmbka)ªpfk`bªfqªtlriaªilpbªqebª"bulo_fq^kqªmofsfibdb"ªlcªfpprfkdªqeb

58 What G20 leaders must do to stabilise our economy and fix the financial system tloiaÖpªobpbosbª`roobk`v+ª Qefpªdil_îªjlkbqôvªpvpqbjªtlriaªîplªfjmivª^ªilppªlcªplsbobfdkqv )ªfkªqtlªt^vp+ Fqªtlriaªifjfqªqebª^_fifqvªlcª`lrkqofbp)ªfkìrafkdªbjbodfkdªjôhbqªb`lkljfbp)ªqlªpbq qebfoªbuè^kdbªo^qbpªfkªt^vpªtefèªeôjªqebªobpqªlcªqebªtloia+ªFqªtlriaªîplªifjfqªqeb ^_fifqvªlcª`lrkqofbpªqe^qªfpprbªobpbo sbp)ªfkªmôqf`riôªqebªRP)ªqlªorkªbu`bppfsbªabcf`fqp+ ?rqªfqªtlriaªîplªifjfqªqebªfk`bkqfsbpªcloª`lrkqofbpªqlª^`qªfkªqebpbªt^vp+ª Fqªtfiiª_bªfjmlppf_ibªqlªdbqª^dobbjbkqªlkª^ªj^gloªolibªcloªqebªFJC )ªlcªbfqeboªlcªqeb ^_lsbªhfkap)ªrkibppªqebªCrkaªfkpmfobpªqorpqª^kaª`lkcfabk`b+ªQe^qªfkªqrokªtfiiªkbbaª^ ollq*^ka*_o^kèªobclojªlcªfqpªdlsbok^k`bªpqor`qrobªqlªobcib`qªqebªè^kdfkdªobîfqfbpªlc qebªtloiaª_î^k`bªlcªb`lkljf`ªmltbo+ª

Is it possible? Lkbªjfdeqªl_gb`qªqe^qª^dobbjbkqªlkªpro sbfii^k`b)ªlcªbfqeboªqebªpqof`qªhfkaªloªqeb tb^hboªhfka)ªtfiiª_bªafccf`riqªqlª^èfbsb+ªFqªtfiiªj^hbªfkolâpªfkqlªk^qflkîªplsbo * bfdkqv+ª?rqªqebª`roobkqªpvpqbj)ªtfqelrqªbccb`qfsbªpro sbfii^k`b)ªtfiiª`lkqfkrbªqlªj^hb _llj*_rpqªlrq`ljbpªifhbiv+ªQe^qªqllªtlriaª_bªsbo vª`lpqiv)ª^pªtbªe^sbªpbbkªob`bkqiv+ª

About the authors

Sfg^v Glpef fp ^ Cbiilt lc Pq GlekÖp @liibdb) Lucloa) ^ka Bjbofqrp Cbiilt lc Jboqlk @liibdb) Lucloa+ Mobsflrpiv eb e^p pbosba ^p B`lkljf` >asfpbo) Jfkfpqov lc Cfk^k`b) Dlsbokjbkq lc Fkaf^) ^ka Pmb`fî >asfpbo ql qeb Dlsboklo) Obpbosb ?^kh lc Fkaf^ fk tefè `^m^`fqfbp eb tlohba ìlpbiv tfqe J^kjle^k Pfkde) qeb ôèfqb`q lc Fkaf^Öp b`lkljf` obclojp ^ka `ro* obkqiv Fkaf^Öp Mofjb Jfkfpqbo+ Pfk`b .663) eb e^p _bbk ^ afob`qlo lc qeb GMJlod^k Fkaf^k Fksbpqjbkq Qorpq+ Eb e^p mr_ifpeba tfabiv ^ka fk pèliôiv glrokîp ^ka fp `roobkqiv tofqfkd %tfqe Ol_boq Phfabiphv& lk qeb b`lkljf`p ^ka mlifqf`p lc dil_îfp^qflk ^ka qeb è^kdfkd _î* ^k`b lc mltbo+

A^sfa Sfkbp fp Molcbpplo lc B`lkljf`p fk qeb B`lkljf`p Abmôqjbkq) Lucloa Rkfsbopfqv) ^ka ^ Cbiilt lc ?îifli @liibdb) Lucloa ^p tbii ^p Afob`qlo lc qeb @bkqob clo Fkqbok^qflkî J^òlb`lkljf`p ^q LucloaÖp B`lkljf`p Abmôqjbkq+ Clojboiv ^ Elr_ilk*Kloj^k Pbkflo Cbiilt ^q qeb ?^kh lc Bkdi^ka) eb e^p âsfpba ^ krj_bo lc fkqbok^qflkî lod^kfp^qflkp ^ka dlsbokjbkqî _lafbp+ Eb e^p mr_ifpeba krjbolrp pèliôiv ôqfìbp ^ka pbsboî _llhp) jlpq ob`bkqiv Qeb >pf^k Cfk^k`fî @ofpfp7 @^rpbp) @lkq^dflk ^ka @lkpbnrbk`bp7 @^rpbp) @lkq^dflk ^ka @lkpbnrbk`bp) tfqe Mfboob*Ofèôa >d¤klo) Jô`rp Jfiibo) ^ka >ubi Tb_bo+ Eb fp ^ @BMO Obpbôè Cbiilt+

Targeted improvements in crisis resolution, not a New Bretton Woods

Erik Berglöf and Jeromin Zettelmeyer EBRD, Stockholm School of Economics and CEPR; EBRD and CEPR

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About the authors

Bofh ?bodiÊc fp @efbc B`lkljfpq ^q qeb B?OA pfk`b /--3) e^sfkd mobsflrpiv _bbk Molcbpplo lc B`lkljf`p ^q qeb Pql`helij Pèlli lc B`lkljf`p) Rkfsbopfq¤ If_ob ab ?orubiibp ^ka Pq^kcloa Rkfsbopfqv+ Eb t^p Afob`qlo lc qeb Pql`helij Fkpqfqrqb lc Qo^kpfqflk B`lkljf`p %PFQB&) Afob`qlo lc qeb @bkqbo clo B`lkljf`p ^ka Cfk^k`fî Obpbôè %@BCFO& fk Jlp`lt) ^ka qeb ?îqf` Fkqbok^qflkî @bkqbo clo B`lkljf` Mlif`v Pqrafbp %?F@BMP& fk Ofd^+ Eb e^p pbosba ^p

62 What G20 leaders must do to stabilise our economy and fix the financial system pmb`fî âsfplo ql qeb Mofjb Jfkfpqbo lc Ptbabk ^ka lk pbsboî dlsbokjbkq `ljjfppflkp ^ka BR*obi^qba m^kbip ^p tbii ^p pbosfkd ^p ^ `lkpriq^kq ql qeb Tloia ?^kh ^ka qeb FJC+ Eb e^p tofqqbk buqbkpfsbiv lk cfk^k`fî `lkqo^`qfkd ^ka `lomlo^qb dlsbok^k`b+ Fk môqf`riô) eb e^p ^mmifba qeblobqf`î fkpfdeqp ql qeb pqrav lc afccbobk`bp _bqtbbk cfk^k`fî pvpqbjp) ^ka pmb`fc* f` ltkbopefm ^ka `lkqoli ôo^kdbjbkqp+ Jlob ob`bkqiv) efp tloh e^p cl`rpba lk _^khormq`v+ Eb fp ^ @BMO Obpbôè Cbiilt+

Gboljfk Wbqqbijbvbo fp Afob`qlo clo Mlif`v Pqrafbp ^q qeb B?OA) e^sfkd mobsflrpiv _bbk Abmrqv Ebâ lc obdflkî pqrafbp fk qeb Tbpqbok Ebjfpmebob Abmôqjbkq lc qeb FJC) ^ka ^k b`lkljfpq fk qeb FJC Obpbôè Abmôqjbkq clo lsbo qbk vbôp+ Efp MeA fp colj JFQ+ Efp obpbôè fkqbobpqp fkìrab cfk^k`fî òfpbp) plsbobfdk ab_q) fkqbok^qflkî cfk^k`fî ôèfqb`qrob ^ka b`lkljf` doltqe+ Eb fp qeb ^rqelo) qldbqebo tfqe Cbabof`l Pqrowbkbddbo lc Ab_q Abc^riq ^ka Ibpplkp colj ^ Ab`âb lc @ofpbp %/--4&+

Save Doha to save the G20 Summit

Ernesto Zedillo Yale University, ex-President of Mexico

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65 VOX Research-based policy analysis and commentary from leading economists

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66 What G20 leaders must do to stabilise our economy and fix the financial system

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About the author

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67 The world is at a dangerous point. Governments and central banks have staunched the bleeding in their financial systems. They seem unprepared, however, for the next round of difficulties that will arise as the recession grows and financial crises spread What G20 leaders must do to emerging markets. Economically and financially, there is a clear sense that things are spiralling out of control again. The G20 meeting in Washington next weekend is an opportunity for the leaders to to stabilise our economy show that they have the will to solve the global crisis. This E-book collects essays on what the G20 should do. The authors – world-class economists from around the globe – identify four priorities for action: and fix the financial system • In the financial sector, act quickly, strengthen and coordinate emergency measures to staunch the bleeding; in the real sector, use fiscal stimulus to get the patient's heart pumping again. Edited by: Barry Eichengreen and Richard Baldwin • Act immediately to strengthen the ability of the IMF and other existing institutions to deal with the crisis in emerging markets.

• Start thinking outside the box about longer term reforms.

• Above all, do no harm.

Political conditions are not propitious, yet the state of the world economy is too delicate to wait. An empty declaration that shows our leaders are unable to agree on priorities will tell investors that the future will resemble the recent past. The wrong outcome from this meeting could damage the world economy rather than repair it.

The authors are: Alberto Alesina, Erik Berglöf, Willem Buiter, Guillermo Calvo, Stijn Claessens, Paul De Grauwe, Wendy Dobson, Barry Eichengreen, Daniel Gros, Refet Gürkaynak, Takatoshi Ito, Vijay Joshi, Yung Chul Park, Raghuram Rajan, Dani Rodrik, Michael Spence, Guido Tabellini, David Vines, Ernesto Zedillo and Jeromin Zettelmeyer.

Centre for Economic Policy Research A VoxEU.org Publication 2nd FLOOR • 53-56 GREAT SUTTON STREET • LONDON EC1V 0DG • TEL: +44 (0)20 7183 8801 • FAX: +44 (0)20 7183 8820 • EMAIL: [email protected]