The International Monetary System After the Financial Crisis

64 Pages Posted: 12 Feb 2011

See all articles by Ettore Dorrucci

Ettore Dorrucci

European Central Bank (ECB)

Julie McKay

European Central Bank (ECB)

Date Written: July 21, 2010

Abstract

The main strength of today’s international monetary system – its flexibility and adaptability to the different needs of its users – can also become its weakness, as it may contribute to unsustainable growth models and imbalances. The global financial crisis has shown that the system cannot afford a benign neglect of the global public good of external stability, and that multilateral institutions and fora such as the IMF and the G20 need to take the initiative to set incentives for systemically important economies to address real and financial imbalances which impair stability. We draw this core conclusion from a systematic review of the literature on the current international monetary system, in particular its functioning and vulnerabilities prior to the global financial crisis. Drawing from this analysis, we assess the existing and potential avenues, driven partly by policy initiatives and partly by market forces, through which the system may be improved.

Keywords: International monetary system, international liquidity, financial globalisation, global imbalances, capital flows, exchange rates, foreign reserves, surveillance, global financial safety net, savings glut, Triffin dilemma, International Monetary Fund, Special Drawing Rights, G20

JEL Classification: F02, F21, F31, F32, F33, F34, F53, F55, F59, G15

Suggested Citation

Dorrucci, Ettore and McKay, Julie, The International Monetary System After the Financial Crisis (July 21, 2010). ECB Occasional Paper No. 123, Available at SSRN: https://ssrn.com/abstract=1646277 or http://dx.doi.org/10.2139/ssrn.1646277

Ettore Dorrucci (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 13440 (Phone)
+44 69 1344 6000 (Fax)

Julie McKay

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
+49 69 13440 (Phone)
+44 69 1344 6000 (Fax)

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