Nanjing and the New International Monetary System
IMF Blog, March 31, 2011
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Bibliographic details
- Authors: Dominique Strauss-Kahn
- Published: March 31, 2011
Context and significance
- Author and date: Dominique Strauss-Kahn, March 31, 2011.
- Occasion: High-level seminar in Nanjing on the international monetary system.
- Regional performance highlighted:
- "Asia now accounts for about a third of the global economy, up from under just a fifth in 1980."
- China "has pulled hundreds of millions of people out of poverty over the past few decades."
- Key concern: Sustaining recent progress amid overheating pressures and volatile capital inflows.
Four pressing issues identified
- Imbalances across and within countries
- Need for stronger cooperation to promote effective global adjustment and discourage policies that lead to global imbalances.
- Existing steps: the G20 Mutual Assessment Process and the IMF’s "spillover reports" for the "five most important systemic economies" that examine cross-border effects of country policies.
- Consideration of "more ambitious ideas, including a strengthening of countries' multilateral obligations and of accountability mechanisms for these."
- No framework to oversee capital flows
- Recognition that capital flows can be destabilizing and "this is something many countries worry about."
- Absence of globally agreed "rules of the road" on how countries should respond to capital flows.
- Evolving view: capital controls were historically not in the IMF toolkit; "Today, we see them more as part of the toolkit, although only in specific circumstances and not, of course, as a substitute for good macroeconomic policies."
- Inadequate global liquidity
- Need to "strengthen the global financial safety net, to reduce the need to 'self-insure' by building up costly reserves buffers."
- Options mentioned:
- "Strengthen partnerships with regional financing arrangements."
- "Improve the predictability of systemic liquidity provision more generally."
- Too few options for safe global assets to meet the demand
- Central question: how to diversify reserve assets.
- Options mentioned:
- Encourage greater international use of currencies other than the "four currently in the SDR basket," including those of large dynamic emerging markets.
- Over the longer term, "the SDR itself could play a greater role."
IMF responses, policy suggestions, and tools
- Strengthen multilateral cooperation and accountability to address imbalances.
- Expand and refine surveillance instruments:
- Continue and build on the G20 Mutual Assessment Process.
- Use and develop the IMF’s "spillover reports" for major systemic economies.
- Broaden policy toolkit for capital flow management:
- Treat capital controls as a conditional, circumscribed policy instrument—not a substitute for sound macroeconomic policies.
- Reinforce global financial safety net and liquidity provision:
- Deepen partnerships with regional financing arrangements.
- Enhance predictability of systemic liquidity provision.
- Diversify reserve asset options:
- Promote international use of additional currencies beyond the "four currently in the SDR basket."
- Consider a larger role for the SDR over the longer term.
Role of Asia and the Nanjing meeting
- Asia's dynamism and recovery leadership were emphasized as critical to the global outlook.
- The Nanjing meeting viewed as "a useful step toward the international monetary system of the future."
- Strengthening partnership between Asia and the IMF: described as "a partnership that I firmly believe will continue to strengthen in the future."
Dominique Strauss-Kahn, March 31, 2011.
Content in this bundle
- 南京研讨会与新的国际货币体系, 2011 年3 月31 日