Nandinghi Dorothy Spring 2010

It suggested the International Monetary System needed repair. This was because; 1) Connections with the world capital markets 2) Apparent strength of contagion through international capital markets

One effect of the Asian Crisis has been to dispel any illusions we may have had about the availability of easy answers to the problems of international macroeconomics and finance.

Currency board Freedom of capital movement Exchange rate stability Capital controls Monetary policy freedom Floating exchange rate

Until 1970-most developing countries maintained exchange controls & limited private capital movements -countries could peg their exchange rates for extended periods exchange rate stability and devaluation of currency on occasion leading to considerable monetary autonomy This was called the ‘‘adjustable peg system’’

In the last 2 decades of the 20 th century; -capital mobility due to lifting of capital controls & improvement of communication technology

Bhagwati & Joseph Stiglitz -Argued that developing countries should keep restrictions on capital mobility to be able to excise monetary autonomy while enjoying stable EXRA Policy makers -Capital controls are impossible to enforce or too disruptive of normal business relations

1) More Transparency 2) Stronger banking system 3) Enhanced Credit Lines 4) Increased equity capital inflows relative to debt inflows

There have been proposals to modify the way the world responds to such crisis; Role and policies of IMF Other Critics Defenders of IMF and some of its critics

Large countries are comfortable with the floating EXRA & International capital mobility Developing countries don't have too much of an option or alternatives( eg Mexico & Brazil, China & Malaysia, Hongkong)