Christopher Balding Assistant Professor HSBC School of Business Peking University Graduate School Shenzhen

Transcription

1 Christopher Balding Assistant Professor HSBC School of Business Peking University Graduate School Shenzhen

2 Introduction Though potential opportunities for international institutional or policy coordination exist, reaching an agreement will be problematic No clear agreement on institutional, legislative, or policy responses either domestically or internationally International agreement will be hampered by rapidly changing geo-political landscape

3 Bretton Woods Before the Recession Critics called for the winding down of the IMF due to the end of the financial crisis The World Bank is becoming increasingly irrelevant as investment banks dominated project finance The World Trade Organization could not reach an agreement on further reducing trade barriers The Bretton Woods institutions were openly challenged as the foundation for the international economic architecture

4 The Policy Questions for a new Bretton Woods What exactly a new Bretton Woods might look like or if an implicit one already exists remains open Focusing on financial and IMF related questions, three potential policy areas emerge Exchange rates Financial imbalances Capital Market Regulation

5 What is the IMF s role? The IMF is neither political arbiter or an ex ante actor Acting as a multilateral economic adviser, the IMF dispenses advice around widely accepted principles The IMF does not have the legal mandate or interest in enforcing exchange rate or financial principles Member states have no desire for the IMF to assume such a political role Capital markets regulation would be better left to technical groups rather than new institutions

6 The GeoPolitical Landscape: 1945 and 2009 GDPD Shares in 1945 GDP Shares in 2008

7 The Political Economics of 2009 The only major fixed exchange rate is between the United States dollar and the Chinese yuan While other states are interested in the outcome, this is unlikely to turn into a multilateral issue Financial imbalances are a problematic but unlikely to become a multilateral matter Large deficit and surplus states will seek to negotiate with each other bilaterally Large deficit and surplus states will not cede additional powers to the IMF

8 The Trinity of Monetary GeoPolitics in 2009 The United States does not have the political or economic capital to push through a Bretton Woods system alone China has neither the desire to or broad political leadership to establish a new system Europe does not possess the unified political strength or the rapidly growing economies to lead

9 The Character Actors of International Monetary Relations The Middle East oil exporting nations have a significant interest in a fixed or very stable exchange rate mechanisms Japan as a major holder of United States treasury and major East Asian economy will play a key role establishing any new financial architecture It will be vital to procure the support of emerging markets like Brazil, Russia, and India but currently unlikely based upon current politics

10 Conclusion Lack of cohesive policy proposals about what might comprise a new Bretton Woods Many economic policy matters more conducive to bilateral negotiations rather than multilateral institutions The increased relatively parity and rapid change in the international economy does not lend itself to the establishment of broad international agreements