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Mr. Robert C. Effros

Abstract

Volume III, edited by Robert C. Effros, contains the collected views of banking and legal experts, gathered at the third IMF-sponsored seminar of central banks general counsels. Matters of both international and domestic concern are addressed. The contributors analyze topics covering developments in international financial institutions; the progress of the European Union toward monetary union and a unified banking and securities market; the economic reform of Latin America; the resolution of the debt crisis; and banking regulations and reform in the United States, the United Kingdom, and Canada.

Mr. Helge Berger, Mr. Giovanni Dell'Ariccia, and Mr. Maurice Obstfeld
The paper makes an analytical contribution to the revived discussion about the euro area’s institutional setup. After significant progress during the euro crisis, the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual issues raised by the evolution and architecture of Europe, and the tradeoffs involved. A thorough look at the underlying economic issues suggests that in the long run, EMU will benefit from progressing along three mutually supporting tracks: introduce more fiscal risk sharing, helping to make the sovereign “no bailout” rule credible; complementary financial sector reforms to delink sovereigns and banks; and more effective rules to discourage moral hazard. This evolution would ensure that financial markets provide incentives for fiscal discipline. Introducing more fiscal union comes with myriad legal, technical, operational, and political problems, raising questions well beyond the remit of economics. But without decisive progress to foster fiscal risk sharing, EMU will continue to face existential risks.
International Monetary Fund

This 2012 Article IV Consultation—Selected Issues Paper on Euro Area Policies argues that the creation of a common eurozone financial stability architecture is an immediate priority to restore the viability of the Economic and Monetary Union. The paper presents a narrative of the various stages of the banking and sovereign crisis since the Summer of 2011. It also characterizes the downward spirals at play in periphery euro area countries and describes the process of financial de-integration within the euro area.

Mr. Andrew Berg, Mr. Paolo Mauro, Mr. Michael Mussa, Mr. Alexander K. Swoboda, Mr. Esteban Jadresic, and Mr. Paul R Masson

Abstract

This paper examines the consequences of heightened capital mobility and of the integration of developing economies in increasingly globalized markets for the exchange rate regimes of the industrial, developing, and transition economies. It builds upon previous studies by IMF staff on various aspects of the exchange rate arrangements of member countries, consistent with the IMF's role of surveillance over its members exchange rate policies.

International Monetary Fund

Abstract

Regional integration is not new. It has been a continuing part of the post-World War II trade landscape. Recently, however, it has attracted increased interest. Existing arrangements have been, or are being, extended in their membership and deepened in their coverage; old arrangements are being revived; and new regional groupings are being formed. The three distinctive features of this trend are: the “conversion” of the United States to the regional approach; the emergence of regional arrangements among industrial and developing countries; and an apparent move away from inward-oriented toward more outward-oriented arrangements among developing countries, particularly in the Western Hemisphere. In developing countries, these developments are being accompanied in many cases by unilateral trade liberalization.

Mr. Andrew Berg, Mr. Paolo Mauro, Mr. Michael Mussa, Mr. Alexander K. Swoboda, Mr. Esteban Jadresic, and Mr. Paul R Masson

Abstract

The exchange rate regimes in today’s international monetary and financial system, and the system itself, are profoundly different in conception and functioning from those envisaged at the 1944 meeting of Bretton Woods establishing the IMF and the World Bank. The conceptual foundation of that system was of fixed but adjustable exchange rates to avoid the undue volatility thought to characterize floating exchange rates and to prevent competitive depreciations, while permitting enough flexibility to adjust to fundamental disequilibrium under international supervision. Capital flows were expected to play only a limited role in financing payments imbalances and widespread use of controls would insulate the real economy from instability arising from short-term capital flows. Temporary official financing of payments imbalances, mainly through the IMF, would smooth the adjustment process and avoid undue disturbances to current accounts, trade flows, output, and employment.

International Monetary Fund

Abstract

An assessment of the economic costs and benefits of regional integration depends on the yardstick against which these are judged.3 Theoretical arguments and historical experience suggest that nondiscriminatory free trade is the “first best” policy option, both from global and individual country perspectives. This chapter identifies the economic benefits and costs of regional trading arrangements relative to the status quo, that is, relative to a policy of maintaining unchanged levels of protection.4 There are two types of gains and losses: static—those stemming from a once-and-forall reallocation of an existing stock of capital, labor, and other resources; and dynamic—those associated with the effects of regional economic integration on productive capacity and potential output (dynamic perspective). For simplicity, the discussion in this chapter focuses, unless otherwise specified, on the benefits and costs of customs unions—which entail liberalization of intraregional trade coupled with a common external trade policy vis-à-vis the outside world.

Mr. Andrew Berg, Mr. Paolo Mauro, Mr. Michael Mussa, Mr. Alexander K. Swoboda, Mr. Esteban Jadresic, and Mr. Paul R Masson

Abstract

Since the creation of the IMF at Bretton Woods, the international exchange rate regime has undergone very substantial changes, which may be broken down into four main phases. The first was a phase of reconstruction and gradual reduction in inconvertibility of current account transactions under the aegis of the Marshall Plan and the European Payments Union, culminating in the return to current account convertibility by most industrial countries in 1958. The second phase corresponds to the heyday of the Bretton Woods system and was characterized by fixed, though adjustable, exchange rates, the partial removal of restrictions on capital account transactions in the industrial countries, a gold-dollar standard centered on the United States and its currency, and a periphery of developing country currencies that remained largely inconvertible. The end of convertibility of the dollar into gold in the summer of 1971 was a first step toward the breakdown of this system, which collapsed with the floating of major currencies in early 1973, This marked the beginning of the third phase.

Mr. Andrew Berg, Mr. Paolo Mauro, Mr. Michael Mussa, Mr. Alexander K. Swoboda, Mr. Esteban Jadresic, and Mr. Paul R Masson

Abstract

The developing and transition countries whose exchange arrangements are the subject of this section cover a very broad range of economic development—from the very poorest to the newly industrialized economies with per capita incomes at levels that categorize them, along with industrial countries, as “advanced economies.” Correlated with the level of economic development, but not perfectly so, are both the degree of domestic financial sophistication and the extent of involvement with the global economic system, especially modern, global financial markets. The 30 or so countries that are most advanced in this last regard are commonly referred to as the “emerging markets.”

International Monetary Fund

Abstract

There is great potential for increases in the number of regional integration arrangements in Europe, the Western Hemisphere, Africa, Asia-Pacific, and the Middle East—and in their overlap in terms of membership. (Tables 1–4 list existing as well as prospective arrangements.)