Economics Commentary


International governance

Comment: Why does Germany take the lead on Greece?

BBC Business Daily interview, radio podcast, 15 June 2015

The negotiations for the continuation of Greece's IMF arrangement are a muddle. It is no longer clear who is negotiating with whom and who sets the terms for the negotiations significantly undermining the multilateral framework on which basis the arrangement was established. [...]

International governance and the BRICS

Boao Review, 14 January 2015

The international financial architecture and its governance model are under pressure to change. One of the most contested issues is the influence of countries at the International Monetary Fund (IMF) and other international financial institutions. The recent establishment of the BRICS Development Bank (DB) and Contingent Reserve Arrangement (CRA) have been seen, at least in part, as a response to the perceived slow progress in reforming the international financial architecture. However, while governance is mostly portrayed as a conflict between advanced economies and emerging markets, the main challenge may well be one between the BRICS and the other emerging markets. The BRICS may need to focus as much on how to share influence with other emerging markets than on how to have their say with advanced economies.[...]

Fed has built a thorny central bank divide

Financial Times, 6 November 2014

Top Federal Reserve officials […] underlined the divide between central banks that have access to the Fed’s dollar swap facility and those that do not [have] a Fed backstop . [...]

International illiquidity and a BRICS payments union

BRICS Economic Think Tank Forum, Beijing 6 November 2014

Ladies and Gentlemen

It is a great pleasure to participate in this timely initiative to reflect on the international financial architecture through the prism of the BRICS countries. The considerable advances BRICS countries have made in the world economy remain in stark contrast to their role in the international financial system. There are few areas where this is more pronounced that in the international monetary sphere. The world economy has remained highly dependent on a narrow set of national currencies to conduct cross border financial transactions. This constitutes a critical vulnerability and disadvantage for BRICS countries. Commemorating the 70-year anniversary of the Bretton Woods Conference this year, it is an opportune moment to think about needed reforms of the international financial architecture. I will try to make the case for a BRICS payments union.[...]

Why does the international monetary system matter?

Johns Hopkins School of Advanced International Studies (SAIS), Washington, D.C. 9 October 2014

Ladies and Gentlemen

It is a great pleasure to be here at U.S. Korea Institute at SAIS. I’m most grateful to the organisers for the opportunity to moderate this outstanding panel. Before we start the discussion, I would like to offer some short introductory remarks focusing on what the Bretton Woods Conference was about, why it should matter to the public and why it offers critical insights for international investors. [...]

BRICS development bank and contingency reserve arrangement

24 July 2014

The establishments of a BRICS development bank (DB) and a contingency reserve arrangement (CRA) seem to indicate new momentum for change in intergovernmental finance and cooperation. It may mark a rebuttal of the existing framework dominated by the main multilateral institutions but also increasing confidence that China and leading emerging markets can do it on their own. It is only a modest start though. [...]

Argentina and sovereign debt restructuring

21 July 2014

The decision of 16 June by the U.S. Supreme Court to deny a petition filed by Argentina in relation to holdout claims serves as an important reminder of persistent major uncertainties in the principles guiding sovereign debt workouts. The petition was to review a decision of the U.S. Courts of Appeals affirming district court orders of 7 December 2011 for full payout to holdouts of Argentina’s 2005 and 2010 debt restructurings. The decision affirms ambiguity of at least five key aspects of sovereign debt restructuring: What equitable distribution or pari passu means, what rateable payments are, the relevance of collective action clauses (CACs), the seniority in distribution of the International Monetary Fund (IMF) and the role of payment agents in dispute cases. Noting that the relevant U.S. court maintains that there are very limited broader implications of its ruling amid the extraordinary circumstances of Argentina, the decision is deemed here to have major adverse repercussions on the incentives for participating in sovereign debt restructurings. This risks unduly inflating the costs of sovereign default.[...]

The IMF must quit the Troika to survive

Financial Times, 17 April 2013

There are many victims of the eurozone crisis but one loser is seldom mentioned: the IMF has suffered considerable collateral damage. It has been dragged along in an unprecedented set-up [...].

Conference: Adjusting the World to the new Realities of the International Financial System

Asian Development Bank Institute, Tokyo, 12 October 2012

The conference focused on the likely permanent effects of the Eurozone crisis discussing the consequences for international financial cooperation and pending institutional deepening in the Eurozone. The Eurozone made significant advances in establishing a financial safety net with the European Stability Mechanism (ESM) but at the same time raising concerns about the relationship between regional and multilateral financial cooperation possibly undermining international economic integration. Increasing reliance on regional financial safety nets contrasts with earlier considerable opposition to establish an Asian Monetary Fund (AMF) during the Asian crisis.[...]

40 years after the end of the dollar standard

27 September 2012

The upcoming 2012 IMF Annual Meetings are unlikely to produce much excitement. Even though persistent talks about currency wars and renewed fears of protectionism may cause severe disruptions to international trade and investments and are normally the sorts of issues that raise alarm bells with policy makers. Exactly 40 years ago at the 1972 IMF Annual Meetings, then U.S. treasury secretary George Shultz did shock the international community with a bold plan to reform the international monetary system and end the special role of the dollar as a reserve currency.[...]

"Putting money where the G20's mouth is?"

11 November 2009

The steady depreciation of the dollar has fuelled renewed doubts about the dollar’s status as the dominant reserve currency. Mean- while, central banks have continued to purchase U.S. treasury secu- rities in droves. While they may no longer have full confidence in the dollar as the dominant anchor of the international monetary system, their net purchases appear to signal otherwise. [...]

U.S. Federal Reserve swap lines

10 November 2008

The U.S. Federal Reserves has extended swap lines to several central banks including to Brazil, Singapore and Korea. The Fed swap network has been in place for decades but its revival has been the clearest indication yet that the Fed is concerned about global dollar liquidity and its potentially disruptive effect for the global financial system. [...]