Reforming the International Monetary System

Centre for Economic Policy Research, London

The international financial and monetary system must adapt to the global economy’s upcoming challenges by laying down the foundations for renewed world macroeconomic and financial stability.

The non-system that characterises the world economy since the collapse of the Bretton Woods Agreement is the object of much criticism in terms of exchange rate volatility; abrupt reversal of private capital flows; persistent and ‘upstream’ external imbalances (net capital flows moving from emerging to rich countries); asymmetry in the adjustment mechanisms between borrowing and lending countries; asymmetry in the adjustment mechanisms between the United States, whose currency lies at the centre of the current arrangement, and the rest of the world; and excessive accumulation of foreign reserves by emerging countries. Moreover, some consider this ‘system’ to be an aggravating factor—or even a trigger—of the financial imbalances at the root of the recent financial crisis

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