Boughton, J. (2014) “Restoring financial stability with economic growth“, VoxEU Organisation, 15 Σεπτεμβρίου.
The international financial system is not working fine and reforms of regional and global institutions are much needed. This column discusses some of the transformations that the IMF could implement in order to keep pace with the changes in the world economy. One problem for the credibility of the IMF is the G20 in its current design and organisation. Institutional reforms, however, should be combined with advances in economic policy in order to promote economic growth and financial stability.
No one would argue seriously any longer that the international financial system is working just fine. When the politicians and central bankers who govern the International Monetary Fund and the World Bank gather in Washington this October, much of the talk will be about the refusal of the US Congress to pass legislation that would reform the IMF. Without that reform, almost everyone agrees, the IMF will gradually slip into irrelevance as the fast-growing emerging markets continue to beef up their own financial defences and combine to introduce new regional institutions that bypass or marginalise the septuagenarian institutions in Washington.
The rise of regional banks and funds can play a positive role as long as they are willing and able to work in tandem with the global institutions. The Chiang Mai Initiative has taken this high road and provides both regional surveillance and the prospect of regionally controlled financing to countries that also seek global support from the IMF. Even the wealthy and proud European Union has seen fit in recent years to work together with the IMF to restore financial stability in its weaker economies. These initiatives can serve as role models while other regions are developing similar institutions and practices.
Continuing success requires not only that regional institutions cooperate globally, but also that the global institutions be effective and have both the resources and the political support to do their jobs well. Ratification of the currently proposed reform package by the US Congress is the first essential step toward securing this future (Truman 2014). It would make permanent the increase in financial resources that was hastily assembled in the wake of the Global Financial Crisis in 2009, and it would ensure that the financing of the IMF was obtained equitably across the Fund’s global membership. It would transfer a measure of influence within the institution from the established powers, mainly in Europe, to the emerging market countries that more nearly resemble the world economy of the future. Together with reforms that the IMF is already implementing from inside – new ways of providing policy advice and conditions to member countries—these external reforms will help the Fund keep pace with changes in the world economy.
Σχετικές αναρτήσεις:
- Ekkehard Ernst (2014) “Backing the wrong horse, The solution to ease mass unemployment is at hand, but policymakers across Europe are too blind to see it“, The European Magazine, 02 Σεπτεμβρίου.
- Cline, R. W. (2014) Managing the Euro Area Debt Crisis, Washington: Peterson Institute for International Economics, Ιούνιος.
- Brender, A., Pisani, F. & Gagna, E. (2013) The Sovereign Debt Crisis: Placing a curb on growth, Brussells: Centre for European Policy Studies (CEPS).