A Development-Friendly Reform of the International Financial Architecture

Abstract

The current financial crisis demonstrated, once again, the need for deep reforms of the international monetary and financial architecture. This article argues that reforms under way are insufficient, as they are partial in scope and rely excessively on an ad hoc body, the G20. It thus calls for an international architecture that meets two basic criteria. First, it should be comprehensive. This means that a broad range of reforms should be undertaken: better macroeconomic policy coordination; regulatory reform, including cross-border capital flows; ample countercyclical IMF and development financing with limited conditionality; global monetary reform; and the creation of an international debt court. Second, inclusive institutions should stand at the center of the new architecture, structured as a multilayered network of global, regional, and national financial institutions.