Nandinghi Dorothy Spring 2010 ECONOMIC CRISIS IN ASIA It suggested the International Monetary System needed repair This was because Connections with the world capital markets Apparent strength of contagion through international capital markets ID: 499349
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Slide1
REFORMING THE WORLD’S FINNANCIAL‘‘ARCHITECTURE’’
Nandinghi Dorothy
Spring 2010Slide2
ECONOMIC CRISIS IN ASIA
It suggested the International Monetary System needed repair. This was because;
Connections with the world capital markets
Apparent strength of contagion through international capital marketsSlide3
CAPITAL MOBILITY AND THE TRILEMMA OF THE EXCHANGE RATE REGIME
One effect of the Asian Crisis has been to dispel any illusions we may have had about the availability of easy answers to the problems of international macroeconomics and finance.Slide4
BASIC MACROECONOMIC POLICY TRILEMMA FOR OPEN ECONOMIES.There are 3 goals that most countries share;
Currency board
Freedom of capital movement
Exchange rate stability
Capital controls
Monetary policy freedom
Floating exchange rateSlide5
Puzzle facing the would be reformers can be summarized as;
Until 1970-most developing countries maintained exchange controls & limited private capital movements
-countries could peg their exchange rates for extended periods
exchange rate stability and devaluation of currency on occasion
leading to considerable monetary autonomy
This was called the ‘‘
adjustable peg system
’’ Slide6
Puzzle facing the would be reformers can be summarized as;
In the last 2 decades of the 20
th
century;
-capital mobility due to lifting of capital controls & improvement of communication technologySlide7
DIFFERENT ECONOMIST’S views;
Bhagwati & Joseph Stiglitz
-Argued that developing countries should keep restrictions on capital mobility to be able to excise monetary autonomy while enjoying stable EXRA
Policy makers
-Capital controls are impossible to enforce or too disruptive of normal business relationsSlide8
PROPHYLACTIC MEASURES
More Transparency
Stronger banking system
Enhanced Credit Lines
Increased equity capital inflows relative to debt inflowsSlide9
COPING WITH THE CRISIS
There have been proposals to modify the way the world responds to such crisis;
Role and policies of IMF
Other Critics
Defenders of IMF and some of its criticsSlide10
Large countries are comfortable with the floating EXRA & International capital mobilityDeveloping countries don't have too much of an option or alternatives( eg Mexico & Brazil, China & Malaysia, Hongkong)
A CONFUSED FUTURE