© 2000 International Monetary Fund

© 2000 International Monetary Fund

Production and figures: IMF Graphics Section Typesetting: Alicia Etchebarne-Bourdin

Library of Congress Cataloging-in-Publication Data

Reforming the international monetary and financial system/editors, Peter B. Kenen, Alexander K. Swoboda.

  • p. cm.

Papers presented at a conference held May 28-29, 1999 at the IMF headquarters in Washington, D.C.

  • Includes bibliographical references.

  • ISBN 9781557758354

  • 1. International finance—Congresses. I. Kenen, Peter B., 1932- II. Swoboda, Alexander K.

  • HG3881 .R362 2000




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  • Preface

  • Acknowledgments

  • Abbreviations

  • Contributors

    • Part I. Key Issues of Reform

  • 1 Overview

    • Peter B. Kenen and Alexander K. Swoboda

  • 2 International Financial and Monetary Stability: A Global Public Good

    • Michel Camdessus

      • Part II. Maintaining Stability Under High Capital Mobility

  • 3 The Euro, Yen, and Dollar: Making the Case Against Benign Neglect

    • Benoît Cœuré and Jean Pisani-Ferry

  • Comments

    • Let Exchange Rates Float

      • Alan S. Blinder

    • Foreign Exchange Origins of Japan’s Liquidity Trap

      • Ronald McKinnon

    • The Case for Benign Neglect

      • Horst Siebert

  • 4 Moderating Fluctuations in Capital Flows to Emerging Market Economies

    • Michael Mussa, Alexander K. Swoboda, Jeromin Zettelmeyer, and Olivier Jeanne

  • Comments

    • Lessons from the Czech Experience

      • Oldrich Dedek

    • Emerging Market Crises: Origins and Remedies

      • Rudiger Dornbusch

    • Who Is to Blame for the Crises?

      • David Folkerts-Landau

    • Policy Options for Capital Importers

      • Roberto Zahler

  • 5 When Capital Inflows Suddenly Stop: Consequences and Policy Options

    • Guillermo A. Calvo and Carmen M. Reinhart

  • Comments

    • The Balance Between Adjustment and Financing

      • Montek S. Ahluwalia

    • The Balance Between Structural and Macroeconomic Adjustment

      • Yoon Je Cho

    • Can the Right Balance Be Achieved?

      • Jeffrey A. Frankel

    • On Dysfunctional Adjustment and Financing

      • Peter B. Kenen

  • 6 Is Greater Private Sector Burden Sharing Impossible?

    • Barry Eichengreen

  • Comments

    • Private Sector Participation in Crisis Prevention and Resolution

      • William R. Cline

    • On Debt Management and Collective-Action Clauses

      • Pablo E. Guidotti

    • More Private Sector Involvement and Less Official Financing

      • J. de Beaufort Wijnholds

    • Private Sector Burden Sharing

      • Martin Wolf

  • Part III. The Role of the International Monetary Fund

  • 7 The Role of IMF Advice: A Postcrisis Examination

    • Takatoshi Ito

  • Comments

    • Evaluating IMF Programs

      • Mohsin S. Khan

    • The Case of Thailand

      • Kiettisak Meecharoen

    • A Mixed Record for IMF Advice

      • John Williamson

    • Mexico as a Benchmark Case

      • Guillermo Ortiz Martinez

  • 8 Refocusing the Role of the International Monetary Fund

    • David Lipton

  • Comments

    • On the Financial Role of the IMF

      • Jack Boorman

    • The Low-Income Countries’ Stake in IMF Reform

      • Kwesi Botchwey

    • Would Reforming the IMF Stabilize Global Finance?

      • Charles W. Calomiris

    • Ideas on Reforming the International Financial System

      • Yung Chul Park

    • Some Lessons from the Russian Crisis

      • Tatiana Paramonova

        • Part IV. Conclusion

  • 9 Key Issues in International Monetary and Financial Reform: A Personal Record of the Conference

    • Alexander K. Swoboda and Jeromin Zettelmeyer

  • Conference Program

The following symbols have been used throughout this volume:

… to indicate that data are not available;

— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

- between years or months (e.g., 1998-99 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

/ between years (e.g., 1998/99) to indicate a fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.


In the spring of 1999, the International Monetary Fund’s Research Department convened a Conference on Key Issues in Reform of the International Monetary and Financial System. The conference was held at IMF headquarters in Washington, D.C., on May 28 and 29,1999.

The timing of the conference was no accident. Relative calm was returning to the world’s financial markets after the succession of crises that had shaken them and caused severe output losses in many emerging market economies. This seemed an appropriate time to engage, not so much in yet another examination of the specific causes of the crises, as in an appraisal of the policy responses and a broader evaluation of the implications for what, by then, had come to be labeled the “architecture of the international monetary and financial system.” We also felt that it was important not to lose the momentum for reform that the crises had created. To that end, the conference was designed, first, to broaden the debate on international financial architecture to more general issues on international and financial reform and, second, to give an opportunity to experts outside the usual official policy forums to contribute critically to issues central to the debate on strengthening the international financial architecture.

The conference was organized by Alexander Swoboda of the Graduate Institute of International Studies in Geneva, currently serving as Senior Policy Advisor in the Research Department, in collaboration with Peter Kenen of Princeton University. A large number of individuals played an important role in making the conference possible and in bringing this volume to completion. When I first proposed that the Research Department convene a conference on international monetary and financial reform, I received the immediate and enthusiastic support of the then-Managing Director of the IMF, Michel Camdessus, who gave the keynote address, and of the IMF’s First Deputy Managing Director, Stanley Fischer, who concluded the conference.

Michael Mussa

Economic Counsellor and Director,

Research Department

International Monetary Fund


The conference was shepherded from the first invitation letter to the departure of the last participant by an extraordinarily efficient, but always smiling, team composed of Norma Alvarado, Celia Burns, Cynthia Galang, and Patricia Medina. Verna Samson also lent a hand. We are truly grateful to them. Many others gave advice and support; among them, Peter Isard deserves a special word of thanks. Among those who helped to type and retype various parts of the manuscript, special thanks are due to Sylvia Brescia and again to Cynthia Galang.

We would be remiss if we did not record a deep debt of gratitude to Michael Mussa who gave unstintingly of his time and ideas in defining the themes of the conference, in helping us identify potential authors and participants, and in planning this volume. Staff members of the External Relations Department edited the final manuscript and coordinated the production process.



Association of South East Asian Nations


Bonds, Equities, and Loans Database


Bank for International Settlements


Contingent Credit Line


Certificate of deposit


Consumer price index


European Central Bank


Council of the Ministers of the Economy and Finance


Economic and Monetary Union


Exchange rate mechanism


European Union


Foreign direct investment


General Arrangements to Borrow


Global Development Finance


Group of Seven


Group of Twenty-Two


Heavily indebted poor country


International Accounting Standards Committee


International Organization of Securities Commissions


Japanese government bonds


Long-Term Capital Management


New Arrangements to Borrow


Organization of Economic Cooperation and Development


Purchasing power parity


Poverty Reduction and Growth Facility


Special Drawing Right


Supplemental Reserve Facility


Value at risk


World Economic Outlook


Wholesale price index


Montek S. Ahluwalia is a member of the Planning Commission of India.

Alan S. Blinder is Professor of Economics and Co-Director of the Center for Economic Policy Studies in the Department of Economics at Princeton University.

Jack Boorman is Director of the Policy Development and Review Department at the International Monetary Fund.

Kwesi Botchwey is Director of the African Development Group at the Harvard Institute for International Development.

Charles W. Calomiris is Professor of Finance and Economics at the Columbia Graduate School of Business at Columbia University.

Guillermo A. Calvo is Professor of Economics in the Economics Department of the University of Maryland.

Michel Camdessus is former Managing Director of the International Monetary Fund.

Yoon Je Cho is Professor at the Graduate School of International Studies at Sogang University in Korea.

William R. Cline is Deputy Managing Director and Chief Economist of the Institute of International Finance in Washington, D.C.

Benoît Cœuré is Head of the Exchange Market and Economic Policy Division at the French Ministry of the Economy, Finance, and Industry.

Oldrich Dedek is Vice Governor of the Czech National Bank.

Rudiger Dornbusch is Professor of Economics and International Management in the Department of Economics at the Massachusetts Institute of Technology.

Barry Eichengreen is John L. Simpson Professor of Economics and Political Science in the Department of Economics at the University of California at Berkeley.

David Folkerts-Landau is Chief Economist and Managing Director of the Deutsche Bank in London.

Jeffrey A. Frankel is James W. Harpel Professor of Capital Formation and Economic Growth at the Kennedy School of Government, Harvard University.

Pablo E. Guidotti is former Deputy Minister of Finance and Secretary of the Treasury at the Ministry of Economy of Argentina.

Takatoshi Ito is former Professor at the Institute of Economic Research at the Hitotsubashi University in Tokyo and is currently Japan’s Deputy Vice Minister of Finance for International Affairs.

Olivier Jeanne is an Economist in the Research Department at the International Monetary Fund.

Peter B. Kenen is Professor of Economics and International Finance and the Director of the International Finance Section at Princeton University.

Mohsin S. Khan is Director of the IMF Institute.

David Lipton is former Senior Associate at the Carnegie Endowment for International Peace in Washington, D.C.

Ronald I. McKinnon is Williams D. Eberle Professor of Economics at Stanford University.

Kiettisak Meecharoen is Assistant Governor of the Bank of Thailand.

Michael Mussa is Economic Counsellor and Director of the Research Department at the International Monetary Fund.

Guillermo Ortiz Martinez is Governor of the Bank of Mexico.

Tatiana Paramonova is First Deputy Chairman at the Central Bank of the Russian Federation.

Yung Chul Park is Professor in the Department of Economics at Korea University and Chairman of the Board of Directors of the Korea Exchange Bank.

Jean Pisani-Ferry is Senior Economic Advisor at the French Ministry of the Economy, Finance, and Industry.

Carmen Reinhart is Professor at the School of Public Affairs at the University of Maryland.

Horst Siebert is President of the Kiel Institute of World Economics.

Alexander K. Swoboda is Senior Policy Advisor and Resident Scholar in the Research Department at the International Monetary Fund (on leave from Geneva’s Graduate Institute of International Studies).

J. de Beaufort Wijnholds is Executive Director at the International Monetary Fund.

John Williamson is former Chief Economist for the South Asia Region of the World Bank and is a Senior Fellow at the International Institute of Economics.

Martin Wolf is Associate Editor and Economics Commentator at the Financial Times in London.

Roberto Zahler is President of Zahler & Co. in Santiago, Chile.

Jeromin Zettelmeyer is an Economist in the Research Department of the International Monetary Fund.