The International Monetary System: Where Are We and Where Do We Need to Go?
IMF Working Papers, November 5, 2013
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Bibliographic details
- Authors: Rakesh Mohan, Michael Debabrata Patra, Muneesh Kapur
- Published: November 5, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475514148.001
Summary
- The North Atlantic financial crisis of 2008-2009 has spurred renewed interest in reforming the international monetary system, which "has been malfunctioning in many aspects."
- Large and volatile capital flows have promoted greater volatility in financial markets, leading to recurrent financial crises.
- There is a renewed focus on the broader role of central banks, moving away from narrow price stability monetary policy frameworks, to ensure domestic macroeconomic and financial stability.
- Because international monetary cooperation might be difficult, though desirable, central banks in major advanced economies need to internalize the implications of their monetary policies for the rest of the global economy to reduce the incidence of financial crises.
Findings and analysis
- Capital flow dynamics:
- "Large and volatile capital flows" increase financial market volatility and contribute to recurrent financial crises.
- Central bank policy scope:
- A shift is necessary from "narrow price stability monetary policy frameworks" to a broader role incorporating financial stability objectives.
- International coordination:
- International monetary cooperation is desirable but may be difficult to achieve; therefore, major advanced-economy central banks should internalize cross-border spillovers of their policies.
Policy recommendations and implications
- Central banks in major advanced economies should:
- Internalize the international implications of their monetary policies.
- Adopt broader frameworks that account for domestic macroeconomic and financial stability, beyond narrowly defined price stability mandates.
- Emphasis on reducing the incidence of financial crises by mitigating volatile capital flows and cross-border policy spillovers.
Publication and metadata
- Authors: Rakesh Mohan, Michael Debabrata Patra, Muneesh Kapur
- Date: November 5, 2013
- Series: Working Paper No. 2013/224
- Issue: 224
- Volume: 2013
- Pages: 49
- DOI: https://doi.org/10.5089/9781475514148.001
- Stock No: WPIEA2013224
- ISBN: 9781475514148
- ISSN: 1018-5941
- Subject: Balance of payments; Capital flows; Currencies; Financial crises; Financial regulation and supervision; Financial sector policy and analysis; Financial sector stability; International monetary system; Money
- Keywords: Asia and Pacific; capital flow; Capital flows; central banks; Currencies; currency internationalization; developing economy; East Asia; financial asset; Financial sector stability; financial stability; foreign exchange; Global; global economy; gold standard; IMS feed; IMS performance; international monetary system; Mexican peso; Middle East; multipolar IMS; net capital; North Africa; post-Bretton Woods IMS; pound sterling; reserve currency; risk diversification; short-term debt; WP
Working Paper. "The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy."