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Finance & Development, September 1999

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A quarterly magazine of the IMF
  September 1999
Volume 36, Number 2
Financial Architecture

Reforming the International Financial Architecture
Alexander Swoboda
On May 28-29, the IMF's Research Department held a conference, "Key Issues in Reform of the International Monetary and Financial System," with a twofold purpose: to broaden the debate on international financial architecture to issues of international and financial reform more generally and to allow experts outside the usual policy forums, notably from academe, to contribute to that debate.

The Case Against Benign Neglect of Exchange Rate Stability
Beno�t Coeur� and Jean Pisani-Ferry
Large fluctuations in the exchange rates of major currencies can be extremely costly, not only for the countries directly involved but also for the rest of the world. In this article, the authors propose a framework for international cooperation in stabilizing exchange rates.

Moderating Fluctuations in Capital Flows to Emerging Market Economies
Michael Mussa, Alexander Swoboda, Jeromin Zettelmeyer, and Olivier Jeanne
What challenges and constraints face proposals to moderate and cope with volatility in international capital flows, and how can international public intervention and regulation help to forestall and mitigate future crises?

Capital Flow Reversals, the Exchange Rate Debate, and Dollarization
Guillermo A. Calvo and Carmen M. Reinhart
More frequent and increasingly severe crises are encouraging emerging market economies to seek means to make themselves less vulnerable to sudden stops in capital flows. Capital controls have been widely discussed, but dollarization may offer a longer-term and more market-friendly solution.

Is Greater Private Sector Burden Sharing Impossible?
Barry Eichengreen
Finding ways to "bail in" the private sector is an important element of crisis prevention and resolution. Yet no mechanisms are universally applicable, and some proposed strategies could precipitate the crises they were meant to forestall.

International Monetary System

Evolving Cooperation and Coordination in Financial Market Surveillance
Hans Tietmeyer
How should existing arrangements for the surveillance and supervision of the international financial system be adapted to the challenges posed by increasingly integrated markets? New initiatives, including setting up the Financial Stability Forum, have recently been taken in this area.

The IMF and the Lender-of-Last-Resort Function: An External View
Curzio Giannini
Recent financial crises have led to renewed interest in having an international lender of last resort. Would this make sense and, if so, would it be appropriate for the IMF to play such a role?

Large Capital Flows: Causes, Consequences, and Policy Responses
Alejandro L�pez-Mej�a
Large capital inflows can bring considerable economic benefits to developing countries but, if not properly managed, can also cause economies to overheat, increase exchange rate volatility, and lead eventually to large outflows. How can governments maximize the benefits from capital inflows while minimizing the risks?


Incomes Policy, Equity Issues, and Poverty Reduction in Transition Economies
Grzegorz W. Kolodko
Ensuring that income is fairly distributed is always a concern of policymakers, but such a focus is especially important during the early years of systemic change and contraction in transition economies. It is often difficult, when formulating policy in these countries, to resolve income distribution issues because of their social and political implications. Poland's experience suggests that fast growth makes a resolution easier.

The Role of the Currency Board in Bulgaria's Stabilization
Anne-Marie Gulde
Bulgaria's latest stabilization program, which included the introduction of a currency board, marked the end of a period of economic turmoil and near-hyperinflation. What accounts for its success?

Commodity Prices

Do Commodity Price Shocks Last Too Long for Stabilization Schemes to Work?
Paul Cashin, Hong Liang, and C. John McDermott
Shocks to world commodity prices can have a profound impact on the economies of both exporting and importing countries. However, the longer it takes for a price shock to reverse itself, the less likely it is that price stabilization schemes will be viable.


The Asian Financial Crisis: What Have We Learned?
Timothy Lane
Now that the Asian crisis is behind us, what lessons can we draw from the experience, and how can we use this knowledge to forestall future crises and minimize damage from those that occur?

Impact of Asia's Financial Crisis on Cambodia and the Lao PDR
Ngozi Okonjo-Iweala, Victoria Kwakwa, Andrea Beckwith, and Zafar Ahmed
Studies of the impact of the East Asian financial crisis on Cambodia and the Lao PDR highlight the importance of macroeconomic management, particularly in the face of serious shocks.

The Chinese State as Corporate Shareholder
Harry G. Broadman
Despite China's commitment to reforming state-owned enterprises, many are still not operating like commercial businesses. Although some of the enterprise reforms have worked, others have led to unanticipated problems. This article outlines some measures that could improve the process.

Corporate Balance Sheets and Macroeconomic Policy
Dale F. Gray and Mark R. Stone
The relationship between corporate balance sheets and a country's macroeconomy is receiving increased attention from policymakers in many countries, especially those most affected by the Asian crisis. How can policymakers assess problems in the corporate sector and prevent or ameliorate crises?


Letter from the Editor

Book Reviews

Derivatives: The Wild Beast of Finance by Alfred Steinherr—Charles Kramer

Going Global: Transition from Plan to Market in the World Economy edited by Padma Desai—Eric Clifton

China's Unfinished Economic Revolution by Nicholas R. Lardy—Aasim M. Husain

The Wealth of the World and the Poverty of Nations by Jahangir Amuzegar—Hassanali Mehran

Letters to the Editor