DOCSLIB.ORG

Building an International Monetary and Financial System for the 21St Century: Agenda for Reform

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Building an International Monetary and Financial System for the 21St Century: Agenda for Reform Building an International Monetary and Financial System for the 21st Century: Agenda for Reform Building an International Monetary and Financial System for the 21st Century: Agenda for Reform eBook published by the Reinventing Bretton Woods Committee Proceeedings of the conference organized by the Committee in New York City, November 24–25 2009 Marc Uzan Founder and Executive Director www.rbwf.org eBook ©2009 Reinventing Bretton Woods Foundation. All rights reserved. The Way Forward Over the last fourteen years, The Reinventing Bretton woods Committee has closely been involved in the debate of improving and reforming the global financial architecture. Our name speaks for itself. In 2008, call for a new bretton woods, Bretton woods 2 has been mentioned by Prime Minister Gordon Brown, President Nicolas Sarkozy among others. Since the heads of State Summit in Washington in November 2008, the global economy is decelerating at an unprecendented level and a sense of disarray, and a loss of confidence world wide is now spreading. This crisis is not any more a crisis of the center versus the periphery, it is a global crisis, economic, financial and political. This crisis is our collective failure not to have taken decisions to improve and change the paradigm during the period of emerging markets crisis of the 1990’s and during the debate of the best way to resolve the global imbalances in the world. In fact, the external imbalance and the internal imbalance of major countries in the world between surplus countries and deficit countries are at the origin of this debacle. So how to explain that Heads of state mention a new bretton woods where at the end, there is no mention at all not even the word exchanges rates or currencies in the G20 heads of state communique? Are we missing something? Maybe we are realizing that the world is not ready for globalisation. Markets went ahead believing that the political structures will follow. In fact, this crisis demonstrate more than ever that national level is the only level that matters. No one is ready for a global financial regulator, for a global central bank, for a global single currency. So we will need to live with a patchwork of cooperation wich are going to be more and more complicated to manage. That transition will be complex as we don’t really have a global financial macro theory to understand the episode of the last 12 months. From our perspective, 1. On the architecture, G20 should serve as the forum formally for countries to agree to adopt best practices/international standards. The IMF should provide its advice, support to the G20. The Financial Stability Forum should be made into a permanent body, with a broader membership, reporting to G20. 2. On lender of last resort functions, regulators should rethink the global approach to liquidity management and develop guidelines for lender of last resort policies. There is an urgent need to clarify and institutionalize central bank swap arrangements. 3. On bank regulation, a complete revision of Basel 2 is needed, including tighter leverage ratios, and the regulatory arrangements must be made compatible with incentives to private actors to discipline the market better. 4. On exchange rates, work should begin immediately on how to restore discipline in the international monetary system. If this is deemed to be “unrealistic”, then we have to face the fact that the world faces a succession of crises, each one worse than its predecessor, and that these are beyond out scope to manage with existing instruments. At present the stark choice is between another Great Depression, another bigger New Asset Bubble, and a return to International Socialism, including rigid controls on international exchanges and bank credit. The only way to preserve freedom for a liberal financial and trading order is to build a new financial architecture. Marc Uzan Founder and Executive Director Reinventing Bretton Woods Committee Building an International Monetary and Financial System for the 21st Century: Agenda for Reform Contents Conference Summary Edited by Sandrine Merckaert . 1 Avoiding International Financial Crises Mark Allen . 11 Building an International Monetary and Financial System for the 21st Century: Agenda for Reform Sven W .Arndt . 21 Could Another Currency Provide Liquidity To Financial Markets? Christopher Avenarius . 25 Responding to the Financial Crisis: An Agenda for Global Action Amar Bhattacharya, Kemal Dervis and José Antonio Ocampo . 29 The Past and Future of IMF Reform: A Proposal Michael Bordo and Harold James . 43 A New Bretton Woods? Lawrence J Brainard . 75 Building an International Monetary and Financial System For the 21st Century: Agenda for Reform Martin Castellano . 83 Improving the International Financial Architecture Richard N . Cooper . 93 How to Prevent Future Crises: Create a World Financial Organization Barry Eichengreen . 101. International Financial Architecture Erich Harbrecht . 107 The Icelandic Banking Collapse: A Story of Broken Promises Tryggvi Thor Herbertsson . 115 Building an International Monetary and Financial System for the 21st Century: Agenda for Reform Olivier Jeanne . 127 Solutions to Restore International Financial Stability Dino Kos . 133. A New Bretton Woods? Ronald McKinnon . 141. Financial Disaster Recovery Ira Millstein and George Vojta . 151 After the Turbulence – Where to next for Emerging Markets? Jens Nystedt . 161 South Centre calls for Revamping the Global Financial Architecture José Antonio Ocampo and Board Members of the South Centre . 173 Will the Crisis Trigger a Revival of the IMF? Jean Pisani-Ferry . 183 Ten Fundamental Issues in Reforming Financial Regulation and Supervision in a World of Financial Innovation and Globalization Nouriel Roubini . 197 Global Financial Crisis and Restructuring the International Monetary System Li Ruogu . 213 Restoring International Financial and Monetary Stability Jeffrey Shafer . 223. Stable Money Is the Key to Recovery Judy Shelton . 233 Restoring International Financial Stability: Five Guidelines for Regulatory Reform Alexander K . Swoboda . 245. International Financial Institutions Reform Proposals George Vojta . 255. APPENDIX CFA Institute Memorandum to the Treasury Select Committee: Accounting and the Banking Crisis CFA Institute . 263. Proposals on the Financial Crisis Club Praxis . 283 Conference Agenda . 293. List of Authors . .297 List of Participants . 301 Sponsors . 309. Building an International Monetary and Financial System for the 21st Century: Agenda for Reform Conference Summary Edited by Sandrine Merckaert What we are witnessing today is not just a crisis in the system, it is a crisis of the system. The global financial framework is broken, and the level of trust in capital markets is at all time lows. As a new step in the globalization process, there should be a focus on enhancing world trade and financial flows, in a way consistent with sustainable economic growth. On November 24-25, 2008, the Reinventing Bretton Woods Committee held a conference in New York City aimed at addressing solutions and proposals to restore international financial and monetary stability. The following summary of the conference emphasizes three fundamental points: 1) financial regulation, oversight and role of the Financial Stability Forum (FSF); 2) emerging economies, lender of last resort; and 3) global imbalances, exchange rate regime. International Coordination on Financial Sector Regulation Participants welcomed the decision to shift discussions from the G7 to the G20. The latter could play the role of an umbrella authority for groups of countries coming together on different issues. With a more policy-oriented approach and a clear focus on financial stability, the G20 should not only recommend, but also monitor implementation of the recommendations. It was proposed that the G20 serve as a forum for countries to formally set an agreement about their commitment to adopt best practice and international standards. The idea that the International Monetary Fund (IMF) provide analysis and recommendations 1 to the G20 was also put forward during the conference. The question was raised whether some form of global authority is needed to look after the stability of the financial system as whole, the same way national regulators look after the safety and soundness of their own system. One speaker proposed the creation of a World Financial Organization, analogous to the World Trade Organization. However, participants mostly viewed a global regulator as too ambitious. On the other hand, the idea of making the FSF into a permanent organization was welcomed. As one panelist pointed out, the FSF, which is a body without statutes, staff, procedures, and formal decision-making powers, has emerged as a powerful organization and has been able not only to design but also to monitor the implementation of some early responses to the crisis. The focus remains on giving more legitimacy to the FSF, which will have the task of producing recommendations, while the IMF will be responsible for implementation. There was a large consensus to broaden the membership of the FSF. Participants encouraged the G20 to follow through on its communiqué and appropriately expand the Forum to include emerging market economies. In a world of nation-states, there is a legitimacy of national decisions which does not exist at the supra-national level. As one speaker highlighted, the current crisis has demonstrated the limitations on global coordination and global cooperation for the regulation and supervision
Load more

Recommended publications
  • The UN and the Bretton Woods Institutions
    The UN and the Bretton Woods Institutions New Challenges for the Twenty-First Century Edited by Mahbub ul Haq Special Adviser to UNDP Administrator New York Richard Jolly Deputy Executive Director UNICEF Paul Streeten Emeritus Professor Boston University and Khadija Haq Executive Director North South Roundtable New York Contents Preface List of Abbreviations Conference Participants and Contributors Part 1 Overview Part II The Bretton Woods System I An Historical Perspective H. W Singer 2 The Vision and the Reality Mahhub ul Hag 3 A Changing Institution in a Changing World Alexander Shakoes 4 The Keynesian Vision and the Developing Countries La! Jayawardena 5 An African Perspective on Bretton Woods Adebayo Adedeji A West European Perspective on Bretton Woods Andrea Boltho Part III Reforms in the UN and the BreROn Woods Institutions 7 A Comparative Assessment Catherine Gwin 8 A Blueprint for Reform Paul Streeten A New International Monetary System for the Futu Carlos Massad 10 On the Modalities of Macroeconomic Policy Coordination John Williamson Part IV Priorities for the Twenty-first Century I I Gender Priorities for the Twenty-first Century Khadija Haq 12 Biases in Global Markets: Can the Forces of Inequity and Marginalization be Modified? Frances Stewart 13 Poverty Eradication and Human Development: Issues for the Twenty-first Century Richard folly 14 Role of the Multilateral Agencies after the Earth Summit Maurice Williams 15 New Challenges for Regulation of Global Financial Markets Stephany Griffith-Jones 16 A New Framework for Development Cooperation Mahbub ul Hay Preface With the end of the cold war, the United Nations is experiencing a new lease on life.
    [Show full text]
  • G7 High-Level Conference – Paris, 16 July 2019
    G7 high-level conference – Paris, 16 July 2019 Bretton Woods: 75 years later – Thinking about the next 75 Welcome address by François Villeroy de Galhau, Governor of the Banque de France Press contact: Mark Deen ([email protected]; +33 6 88 56 54 03). Page 1 sur 6 Ladies and Gentlemen, It is a great pleasure to welcome you to this G7 high-level conference dedicated to the next 75 years of the Bretton Woods system… which is a sign of confidence. 75 years ago, John M. Keynes for Britain, Harry Dexter White for the US, Pierre Mendès-France for France inaugurated what we now see as the “golden age” of multilateralism and cooperation. Quite remarkably, the Bretton Woods Conference preceded peace: economic cooperation was seen as a prerequisite for peace. Today, we are unfortunately far away from this spirit: multilateralism is facing a major crisis. Yet the Bretton Woods institutions (BWI) are remarkably resilient, thanks to the commitment of their successive leaders – many of them are here – and to the strength of their history. They are priceless assets – we are probably all convinced of this. But we also know that the current situation is not stable. So, where do we go from here? The worst-case scenario would be an implosion of the system, implying a real step backward, with a rise of protectionism and bilateralism. A more promising scenario – and this is what we should fight for – would be to come out of this crisis stronger by re-building common solutions. For that, we can boast two major achievements, while acknowledging that each of them poses two challenges that we will discuss today: - Thanks to international cooperation including the IMF, we successfully responded to the Great Financial Crisis (GFC).
    [Show full text]
  • E-Development: from Excitement to Effectiveness
    34147 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized E-Development: From Excitement to Effectiveness Edited by Robert Schware Prepared for the World Summit on the Information Society Tunis, November 2005 Global Information and Communication Technologies Department THE WORLD BANK GROUP Washington, D.C. i E-Development: From Excitement to Efficiency ©2005 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com.
    [Show full text]
  • Is the Discount Window Necessary?
    Charles W. Calomiris Charles W Calomiris is associate professor of finance, University of Illinois at Urbana-Champaign; faculty research fellow, National Bureau of Economic Research; and visiting scholar at the Federal Reserve Bank of St. Lou/s. Greg Chaudoin, Thekla Halouva and Christopher A. Williams provided research assistance. The data analysis for this article was conducted in part at the University of Illinois and the Federal Reserve Bank of Chica got 11~Jsthe Discount Window Necessary? A Penn Central Perspective N RECENT YEARS, ECONOMISTS have come Some economists (Goodfmiend and King, 1988; to question the desirability of granting banks Bordo, 1990; Kaufman, 1991, 1992; and Schwartz, the privilege of borrowing from the Federal 1992) have argued that there is no gain from al- Reserve’s discount window. The discount win- lowing the Fed to lend through the discount dow’s detractors cite several disadvantages. window. These cmitics argue that open market First, the Fed’s control over high-powet-ed operations can accomplish all legitimate policy money can be hampered. tf bank borrowing be- goals without resort to Federal Reserve lending havior is hard to predict, open market opera- to banks. Clearly, if the only policy goal is to tions cannot pem’fectly peg high-powered money, peg the supply of high-powered money, open which somne economists believe the Fed should market operations are a sufficient tool. Similar- do. Second, there are microeconomic concerns ly, the Fed could peg interest rates on traded about potential abuse of the discount window securities by purchasing or selling them. Any argument for a possible role for the discount (Schwartz1 1992).
    [Show full text]
  • The Oecd at the Turn of the Century: the World's Window on Globalization
    THE REINVENTING BRETTON WOODS COMMITTEE THE OECD AT THE TURN OF THE CENTURY: THE WORLD'S WINDOW ON GLOBALIZATION Conference Report and Recommendations April 4-5, 1997 New York City May 1997 CONTENTS Foreword .......................................................................................................................... 3 Executive Summary ........................................................................................................ 5 Recommendations ........................................................................................................... 7 Introduction ..................................................................................................................... 10 CHAPTER ONE: Why the OECD Needs Reform Part I. The Loss of Identity of the OECD ................................................ 13 Part II. A Pioneer and Interdisciplinary Institution .................................. 16 CHAPTER TWO: Regaining an Identity as the World's Window on Globalization Part I. A Window on Globalization ........................................................ 19 Part II. The OECD at the Crossroads of Cooperation between Old and New World's Major Players ............................................................................... 21 Part III. An Undisputed Forum for Assisting Non- and Future Members .. 23 CHAPTER THREE: Challenges Ahead: Membership, Governance and Visibility Part I. Definition of a Clear Membership ............................................... 26 Part II. Improving Efficiency by Reforming
    [Show full text]
  • Liquidity at Risk Joint Stress Testing of Liquidity and Solvency Risk
    Liquidity at Risk Joint Stress Testing of Liquidity and Solvency Risk Rama Cont & Artur Kotlicki University of Oxford Laura Valderrama International Monetary Fund 1 Solvency stress testing 2 Solvency Risk • Solvency risk is driven by the difference in firm’s asset values and its liabilities. • Bank stress testing, which has become a key tool for bank supervisors, has also mainly focused on solvency risk. • Regulation of insurance companies also focused on solvency risk (Solvency II, Swiss Solvency test). • However, solvency risk does not give the full picture – we have spectacular failures of SIFIs due to lack of liquidity: • Bear Stearns held excess capital at the time of its default. • AIG, which failed to fulfill large payment triggered by a downgrade, was not insolvent at the time of failure. • Banco Popular, which failed through a lack of liquidity in 2017, displayed a capital ratio 6:6% in the 2016 EBA adverse scenario. 3 Liquidity Risk and Default • Liquidity risk: failure to meet a short-term payment obligation. • Default of payment is the legal definition of default. • Inherent risk to instability in short-term funding (e.g. debt roll-over risk) and cash-flows (e.g. variation margin). • Supervision and regulation of bank liquidity: • Liquidity Coverage Ratio (LCR): banks to hold liquidity provision for expected outflows over 30-day time horizon. • Net Stable Funding Ratio (NSFR): limits over-reliance on short-term wholesale funding and aims to increase funding stability. • Liquidity stress testing: e.g. ECB’s 2019 sensitivity analysis of liquidity risk (LiST) typically done separately from solvency stress testing. 4 Liquidity Risk Defining liquidity requires the introduction of a horizon T.
    [Show full text]
  • Markets Committee Central Bank Collateral Frameworks and Practices
    Markets Committee Central bank collateral frameworks and practices A report by a Study Group established by the Markets Committee This Study Group was chaired by Guy Debelle, Assistant Governor of the Reserve Bank of Australia March 2013 This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2013. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 92-9131-926-0 (print) ISBN 92-9197-926-0 (online) Preface In July 2012, the Markets Committee established a Study Group to take stock of how collateral frameworks and practices compare across central banks and the key changes they have undergone since mid-2007. This initiative followed from the fact that, in the light of recent experience with market stress and other underlying changes in the financial landscape, many central banks have re-examined and adapted their collateral policies. It is also a natural extension of the Committee’s previous work on central bank monetary policy and operating frameworks. The Study Group was chaired by Guy Debelle, Assistant Governor of the Reserve Bank of Australia. The Group completed an interim report for review by the Markets Committee in November 2012. The finalised report was presented to central bank Governors of the Global Economy Meeting in early March 2013. The subject matter of this study is of core relevance to central banking. I believe the report could become a reference piece for those who are interested in central bank liquidity operations in different jurisdictions. Moreover, given the growing attention focused on collateral-related issues in the broader financial system, this report, which covers one specific area of collateral practices, could also serve as factual input to the wider debate.
    [Show full text]
  • The Bretton Woods Agreement
    The Bretton Woods Agreement Is Welby canopied when Silvanus parallelising affettuoso? Venational and unfadable Sayers pollutes her banking retitled paternally or assibilated imperishably, is Silvan telling? Underdone Barbabas laveer, his perdurability horseshoes shotguns discretionarily. While the relief was based on some central bank intervention most notably from company Bank of England it somewhat self-regulating apply a remarkable. A New Look send the Bretton Woods Agreement St Louis Fed. Here are subsidiaries or directors, bretton woods conference, particularly in addition, the adjustable peg, monetary policy makers that violate them. The Bretton Woods system that emerged from the conference saw the creation of two global institutions that count play important roles today the. The Bretton Woods Agreement was approved in 1944 to address the financial concerns of post-war reconstruction and recovery In this lesson we did review. Treasury to foreign reserves to lead to operate through trade agreements succeed. Resources for The Bretton Woods Agreement Historical. But for decades the Bretton Woods institutions have drawn hefty criticism for imposing neoliberal economic policies involving financial. Imf monitors currency hoping to control speculative attacks of payments deficit and its intolerable legalism and to provide a half to timely topics. The Bretton Woods Institutions are the eye Bank discount the International. Mass consumption to experience. Thus facilitating their higher ecu was created problems that took on to keep their sales. Bretton Woods-GATT 19411947 Milestones 19371945. Is a model whereby countries can pursue economic policies with openness and fixed exchange rates or domestic support policy autonomy which greatly. The agreement on bretton woods agreement to be accomplished through an open markets? Bretton Woods system therefore we conceive the baby out pin the.
    [Show full text]
  • 7Th International Young Finance Scholars' Conference
    7th International Young Finance Scholars' Conference 12-13 JULY 2021 Event Programme ZOOM PHBS UK CAMPUS Register at http://www.pku.org.uk/iyfs 1 Table of Contents Programme Overview ................................................................................................................................... 3 Welcome to the 7th IYFS Conference .............................................................................................................. 4 Registration .................................................................................................................................................. 5 How to register ......................................................................................................................................................5 Where to find your tickets ......................................................................................................................................5 What to do if your tickets are missing .....................................................................................................................5 Conference Organization .............................................................................................................................. 5 About Zoom breakout rooms .................................................................................................................................5 Eventbrite online event page..................................................................................................................................6
    [Show full text]
  • U.S. Policy in the Bretton Woods Era I
    54 I Allan H. Meltzer Allan H. Meltzer is a professor of political economy and public policy at Carnegie Mellon University and is a visiting scholar at the American Enterprise Institute. This paper; the fifth annual Homer Jones Memorial Lecture, was delivered at Washington University in St. Louis on April 8, 1991. Jeffrey Liang provided assistance in preparing this paper The views expressed in this paper are those of Mr Meltzer and do not necessarily reflect official positions of the Federal Reserve System or the Federal Reserve Bank of St. Louis. U.S. Policy in the Bretton Woods Era I T IS A SPECIAL PLEASURE for me to give world now rely on when they want to know the Homer Jones lecture before this distinguish- what has happened to monetary growth and ed audience, many of them Homer’s friends. the growth of other non-monetary aggregates. 1 am persuaded that the publication and wide I I first met Homer in 1964 when he invited me dissemination of these facts in the 1960s and to give a seminar at the Bank. At the time, I was 1970s did much more to get the monetarist case a visiting professor at the University of Chicago, accepted than we usually recognize. 1 don’t think I on leave from Carnegie-Mellon. Karl Brunner Homer was surprised at that outcome. He be- and I had just completed a study of the Federal lieved in the power of ideas, but he believed Reserve’s monetary policy operations for Con- that ideas were made powerful by their cor- gressman Patman’s House Banking Committee.
    [Show full text]
  • The Political Economy of the Bretton Woods Agreements Jeffry Frieden
    The political economy of the Bretton Woods Agreements Jeffry Frieden Harvard University December 2017 1 The Allied representatives who met at Bretton Woods in July 1944 undertook an unprecedented endeavor: to plan the international economic order. To be sure, an international economy has existed as long as there have been nations, and there had been recognizable international economic orders in the recent past – such as the classical era of the late nineteenth and early twentieth century. However, these had emerged organically from the interaction of technological, economic, and political developments. By the same token, there had long been international conferences and agreements on economic issues. Nonetheless, there had never been an attempt to design the very structure of the international economy; indeed, it is unlikely that anybody had ever dreamed of trying such a thing. The stakes at Bretton Woods could not have been higher. This essay analyzes the sources of the Bretton Woods Agreements and the system they created. The system grew out of the international economic experiences of the previous century, as understood through the lens of both history and theory. It was profoundly influenced by the domestic politics of the countries that created the system, in particular by the United States and the United Kingdom. It was molded by the conflicts, compromises, and agreements among the signatories to the agreement, as they bargained their way up to and through the Bretton Woods Conference. The results of those complex domestic and international interactions have shaped the world economy for the past 75 years. 2 The historical setting The negotiators at Bretton Woods could look back on recent history to help guide their efforts.
    [Show full text]
  • The Discount Window Refers to Lending by Each of Accounts” on the Liability Side
    THE DISCOUNT -WINDOW David L. Mengle The discount window refers to lending by each of Accounts” on the liability side. This set of balance the twelve regional Federal Reserve Banks to deposi- sheet entries takes place in all the examples given in tory institutions. Discount window loans generally the Box. fund only a small part of bank reserves: For ex- The next day, Ralph’s Bank could raise the funds ample, at the end of 1985 discount window loans to repay the loan by, for example, increasing deposits were less than three percent of total reserves. Never- by $1,000,000 or by selling $l,000,000 of securities. theless, the window is perceived as an important tool In either case, the proceeds initially increase reserves. both for reserve adjustment and as part of current Actual repayment occurs when Ralph’s Bank’s re- Federal Reserve monetary control procedures. serve account is debited for $l,000,000, which erases the corresponding entries on Ralph’s liability side and Mechanics of a Discount Window Transaction on the Reserve Bank’s asset side. Discount window lending takes place through the Discount window loans, which are granted to insti- reserve accounts depository institutions are required tutions by their district Federal Reserve Banks, can to maintain at their Federal Reserve Banks. In other be either advances or discounts. Virtually all loans words, banks borrow reserves at the discount win- today are advances, meaning they are simply loans dow. This is illustrated in balance sheet form in secured by approved collateral and paid back with Figure 1.
    [Show full text]