Strengthening the International Monetary System - Taking Stock and Looking Ahead

Policy Papers, March 23, 2011

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Strengthening the International Monetary System - Taking Stock and Looking Ahead

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Bibliographic details

• Published: March 23, 2011
• Series: Policy Papers

Overview

• The current IMS has survived for over forty years, underpinning strong growth in GDP and in the international exchange of goods and capital, one of its core objectives.
• Interdependence among the world’s economies has grown dramatically, increasing the importance of a sound international monetary system.
• Since the 2008 crisis, renewed international momentum has emerged for attempting to reform the IMS, but debate shows little consensus on underlying problems or solutions.
• Publication date: March 23, 2011.

Symptoms of instability

• Frequent crises.
• Persistent current account imbalances and exchange rate misalignments.
• Volatile capital flows and currencies.
• Unprecedentedly large reserve accumulation.

Identified root causes (four)

• Inadequate global adjustment mechanisms to prevent inconsistent or imprudent policies among systemic countries.
• Lack a comprehensive oversight framework for growing cross-border capital flows, covering both source and recipient countries.
• Inadequate systemic liquidity provision mechanisms.
• Structural challenges in the supply of safe assets.

Policy implications and priorities (implied by findings)

• Strengthen multilateral mechanisms that support coordinated global adjustment among systemic economies.
• Develop a comprehensive oversight framework for cross-border capital flows that encompasses both capital source and recipient jurisdictions.
• Enhance systemic liquidity provision mechanisms to reduce risks from strains in global funding markets.
• Address structural constraints in the supply of safe assets to better align global demand and supply and mitigate reserve accumulation pressures.

Subject tags (as listed)

• Capital flows
• Central banks
• Financial stability
• International cooperation
• International monetary system
• Risk management

Strengthening the International Monetary System - Taking Stock and Looking Ahead, March 23, 2011

Content in this bundle

• Accumulated impulse responses to a one-standard deviation growth shock
  • Accumulated impulse responses to a one-standard deviation growth shock (Markdown version)
  • Accumulated impulse responses to a one-standard deviation growth shock (PDF)