The International Monetary Fund (IMF) was designed to offer temporary financial assistance to member countries experiencing balance of payments difficulties. However, for a relatively large number of countries the use of IMF resources became prolonged; the Philippines was an extreme example of this. In sharp contrast, since 2000 the Philippines has made no further use of IMF resources and has graduated from the Fund. This article investigates the reasons underpinning graduation in the case of the Philippines and discovers that not only did changed economic circumstances moderate the need to borrow from the IMF, but also political factors made incumbent governments more reluctant to turn to the Fund. Drawing on the Philippines as a case study, the article extracts more general lessons relating to graduation and raises the issue of whether graduation is always desirable. Although a number of studies have examined the prolonged use of IMF resources in considerable depth, up to now the phenomenon of graduation has been largely ignored. This article aims to fill a gap in the academic literature.

For many years the international macroeconomic policy trilemma, which argues that it is impossible to simultaneously have a pegged exchange rate, monetary independence and an open capital account, has provided a theoretical foundation for open economy macroeconomics and international monetary economics. The original form of the trilemma has been criticised and modified to suggest that its corners can be rounded and that the constraints imposed by it may be circumvented in the short run. The trilemma has also been criticised for ignoring the importance of financial stability. The most extreme allegation has been that the trilemma does not exist at all because flexible exchange rates do not provide effective insulation from a global financial cycle and that therefore countries only have a choice between monetary autonomy and capital controls. Much of the research in international monetary economics since the inception of the trilemma has tended to focus on its key elements, particularly in terms of exchange rate policy and capital controls, in a world that exhibits increasing financial globalisation. The research agenda recently embarked upon by the International Monetary Fund under the umbrella of the Integrated Policy Framework (IPF) concentrates on how countries should respond to the volatility of international capital flows. This article provides a summary of the evolution of international monetary economics in the context of the trilemma, as well as a measured and constructive critique of the IPF. In so doing, it assesses the current state and future direction of open economy macroeconomics and international monetary economics.

The Eurozone crisis in the early 2010s was a landmark event. However, markets did not seem to see it coming. It was only once the crisis had begun that markets received a wake-up call, and risk premia began to rise sharply. Markets then began to act in a way that was more consistent with the efficient markets hypothesis. However, in the subsequent aftermath of the crisis, risk premia have fallen again, even though a number of conventional indicators of vulnerability, for example in the form of fiscal imbalances and indebtedness, suggest that some members of the Eurozone remain vulnerable. Shocks in the form of the COVID-19 pandemic and the Ukraine war are likely to expose this vulnerability and increase the risks of there being another crisis. There are various scenarios in terms of the future of the Eurozone. These have different implications for the probability of there being a crisis. Another crisis remains a distinct possibility. Are markets assessing the risks appropriately, or is it that, having woken up following the last crisis, they may have gone back to sleep? Are they underestimating the risks of another Eurozone crisis?

Although there are global differences in rates of inflation, a sharp acceleration in inflation during 2021/22 occurred in most parts of the world. Measurement matters. Differences exist between headline and core rates of inflation. These reflect the composition of inflation. This is not the first time in the post-1945 period that inflation has accelerated and reached a relatively high level. Looking at earlier episodes may help in understanding the recent acceleration. Accumulated inflation theory also helps in explaining what’s going on. There are a number of factors at work both on the supply side and the demand side, although their contribution varies across countries. Macroeconomic policy designed to manage aggregate demand will play a key role in tackling inflation, but supply-side and labour-market issues are also important. In predicting the future of inflation, the central question is whether or not a higher rate of inflation becomes embedded in expectations.

The COVID-19 pandemic has raised questions about the design of fiscal and monetary policy to assist economic recovery. Modern monetary theory (MMT) strongly argues in favour of substantial and fairly persistent fiscal expansion, claiming that there is neither a near-term capacity constraint, nor a financial one. MMT is, however, not particularly ‘modern’. Many of the basic ideas that it promulgates can be found in fairly standard neo-Keynesian analysis. Advocates of MMT unwisely downplay the potential problems associated with inflation, financial instability and the balance of payments. They also are too dismissive of central bank independence, which has played an important role in anchoring inflationary expectations. To argue in favour of fiscal and monetary expansion in the particular circumstances of the COVID-19 pandemic does not involve endorsing the full MMT approach to macroeconomic policy.

Recent empirical research suggests that structural reform has a significant positive effect on future economic growth. Following the proliferation of structural conditionality in IMF programmes in the 1980s and 1990s, the ‘streamlining’ initiative begun in the early 2000s envisaged a more parsimonious approach designed to increase ‘ownership’ and improve programme implementation. However, there is a potential ‘Goldilocks problem’. While structural conditionality can be too ‘hard’, it can also be too ‘soft’. When is it just right? Empirical evidence on the political economy of structural reform may provide clues to how IMF conditionality could be designed to strengthen its impact on economic growth.

The COVID-19 crisis dramatically illustrates how viruses can rapidly spread across the globe with devastating effects. Increasing trade integration during the ‘first wave’ of globalisation provided a conduit through which economic disturbances could be transmitted between countries. The ‘second wave’ of globalisation involving closer international financial integration has created the potential for much more virulent transmission. This article analyses how the evolution of globalisation has affected the epidemiology of economic and financial crises, and takes the Eurozone crisis as a case study of cross-country contagion. The policy problems associated with the changing nature of transmission are also investigated.

The members of the Eurasian Economic Union (EEU) are continuing to discuss establishing a currency union. Do the characteristics of the EEU economies meet the criteria identified by optimum currency area theory, covering fiscal convergence, exchange rate stability, the symmetry of shocks, the dispersion of inflation and interest rates, and the synchronization of business cycles? This article suggests that the empirical evidence is nuanced. The gains and losses from monetary integration in the EEU would not be equally distributed across member states. As has been the case with the Eurozone, the future prospects for monetary integration in the EEU depend very much on political factors.

Argentina and Turkey experienced currency crises in 2018, having also had crises in 2001. Why do crises recur? There are three generations of model that help to explain in theory why currency crises occur, although in practice the theories need to be amalgamated. The recurrence of currency crises implies that either appropriate lessons have not been learnt or, for some reason, countries have been unable to convert learning into actions. Key lessons are first, avoid excessively large fiscal deficits, rapid credit creation and debt accumulation, and second, reduce economic and financial vulnerability and create better insulation from external shocks. Empirical analysis shows that the causes of the crises in Argentina and Turkey in 2018 were different from those in 2001.

It often is neither possible nor sensible to immediately correct the underlying macroeconomic disequilibria that a financial and economic crisis reveals. To cushion the process of adjustment a global financial safety net is needed: owned reserves, regional financing and borrowing from the International Monetary Fund. Since the Asian crisis of 1997/98 there has been an accumulation of owned reserves amongst emerging economies as a form of self-insurance, along with the development of regional financing arrangements. There are advantages and disadvantages of the various components of all these arrangements and reform needs to take these into account.

At the end of 2017 President Trump signed into law the Tax Cuts and Jobs Act which Republican supporters argue would transform the US economy and stimulate an enduring increase in the rate of economic growth. The motivation behind the legislation appears to be the belief that a reduction in corporate taxation will release a flood of entrepreneurial initiative that will increase investment and, as a consequence, lead to higher wages and sustained faster economic growth. The Reagan administration tried tax cuts before to stimulate growth; not in a conventional neo-Keynesian way aimed at raising aggregate demand, but as a means of strengthening the supply side of the economy. As an economic philosophy, Trumponomics is a rather high-risk strategy. Compared to the early 1980s there is a smaller output gap, a much higher level of national debt and less fiscal space.

After the global economic and financial crisis, the G20 has tried to orchestrate an internationally coordinated approach to economic recovery. In late 2009, the Mutual Assessment Process (MAP) was introduced to minimize risk by reducing global economic imbalances and encouraging economic growth. To implement MAP, the G20 attempted to oversee macro-economic policy at the global level with the International Monetary Fund collecting data and providing technical assistance. Later experience suggests that, in the absence of a global economic crisis, the MAP will continue to lose direction and relevance and is unlikely to become a modality for close international macro-economic coordination.

Global economic imbalances in the mid-2000s reached a level that many commentators viewed as unsustainable. The claim was frequently made that the imbalances contributed significantly to causing the world-wide financial and economic crisis at the end of the decade. Since the mid-2000s the imbalances have shrunk considerably, and their pattern has also changed. This article uses conventional balance of payments theories to examine what may have been happening. It draws on empirical evidence to assess which theories receive the strongest support from the available data. It emerges that most of the adjustment has been brought about by reductions in expenditure in deficit countries. With some notable exceptions, expenditure switching by means of changes in real effective exchange rates has generally made only an extremely modest contribution. The article goes on to contemplate the future evolution of imbalances. The experience with global economic imbalances since the world economic crisis raises many fundamental issues about the future design of the international monetary system. These include the type of adjustment and financing mechanisms embodied in it, as well as the nature of international macroeconomic policy co-ordination.

Understanding why capital moves internationally in the way that it does has become increasingly important as capital accounts have been liberalized and as the size of international capital movements has expanded dramatically. International capital movements exert potentially significant effects on many key macroeconomic variables. The pattern of capital mobility reveals considerable volatility; surges, sudden stops and reversals are common features of the contemporary landscape of financial globalization. This article draws on both economic and behavioural approaches in an attempt to offer a reasonably complete analysis of capital movements and volatility. It also relates the ideas introduced to some specific episodes where international capital volatility has been observed. A better understanding of capital volatility involves recognizing that there is no simple and universally applicable explanation that fits all types of capital in all cases.

Up until the global economic crisis at the end of the 2000s an eclectic approach to fiscal policy seemed to have emerged from the long-standing debates that there had been about it. This largely ruled out using fiscal policy to fine tune the economy. Instead macro policy in advanced economies focused on monetary policy within a framework of inflation targeting. In the depths of the recession, however, and with interest rates approaching a zero lower bound, fiscal policy was dramatically resurrected and a broad global consensus formed around fiscal stimulus. The consensus did not last long and sharp disagreements soon re-emerged, in particular with respect to the speed and nature of fiscal consolidation. Why did these changes in the approach to fiscal policy happen and were they appropriate? Does the available empirical evidence allow us to form conclusions about the impact of fiscal policy or is it still a matter of ‘on the one hand…but on the other’? And how might fiscal policy evolve in the light of recent experience? This article examines these questions.

Much of the evolutionary history of the International Monetary Fund reflects its responses to unanticipated events. The crisis in the Eurozone at the end of the 2000s was largely unexpected. For many years prior to the crisis, the IMF’s clientele had been made up of low income and emerging economies and it was generally assumed that the future pattern of IMF lending would see some of them graduating from the Fund, rather than the Fund once again lending to ‘advanced’ economies. Programs in Greece, Ireland, Portugal and Cyprus confronted the Fund with a range of unfamiliar problems. These cover the IMF as a crisis averter, crisis lender and crisis manager. In particular the conventional design of IMF adjustment programs is not feasible in countries that belong to a monetary union. In this regard the ‘major overhaul’ of conditionality made in the aftermath of the global economic crisis may have been unhelpful. While various reforms could enhance the Fund’s ability to help Eurozone countries in the future, perhaps the main lesson that emerges from this interlude is that it is better for the IMF’s assistance not to be needed in Eurozone countries.

The dilemma facing policymakers is how to combine the instruments they have available in the form of fiscal, monetary and exchange rate policy to achieve the targets of internal and external balance. Shortly before the global economic and financial crisis in 2008 most economies appeared to be close to internal balance, but many of them deviated from external balance either in the form of large current account deficits or surpluses. In the aftermath of the crisis and for most advanced economies there was a sharp departure from internal balance, and policymakers in these countries faced a daunting challenge to restore it. The challenge was much less severe for many emerging economies. This article examines whether the analytical framework devised by Meade, Mundell and Fleming in the 1950s and 1960s provides a suitable basis for describing and evaluating the options open to them. It also uses this framework to examine and briefly assess the strategies pursued by the US, China and Greece, and to explain why economists continue to disagree on what policies are appropriate.

The world economy has been experiencing a period of great and dramatic change. In part this has been associated with the rapid emergence of China, the BRICs and other newly industrialising economies. Evolution in the world economy is quickly changing the structure of global output and trade. It is also having implications for the pattern of international capital flows. Alongside these evolutionary changes, the ‘shock’ of the global economic and financial crisis that erupted in 2008 has brought about further changes. Confidence in the efficiency of financial markets has been adversely affected, if not undermined, and consensus over the design of macroeconomic policy has been replaced by substantial areas of division and confusion. The changes have generated broad areas of uncertainty, which in turn have adverse consequences for global economic performance. This article explores these changes and goes on to analyse the issues they raise in terms of managing the world economy. It assesses approaches based on enhanced global economic governance, coalitions based on economic characteristics or regional proximity and economic nationalism.

Consensus in macroeconomics helps policymakers formulate a coherent and logically consistent group of policies. At different times in the post-war era there has been consensus around first Keynesian and then monetarist ideas. Economic crises have frequently brought one type of consensus to an end, allowing another to be formed. For much of the 1990s and 2000s there seemed to be consensus built on compromise about the way in which fiscal and monetary policy should be used. However, this collapsed with the global financial and economic crisis. For a brief interlude, a Keynesian consensus re-emerged, but this did not last. At present, there are sharp divisions among economists concerning the effects of macroeconomic policy, and this means that life has become much more confusing for policymakers. This article explores what has been going on, and considers the implications for the future.

From a position some years ago where the euro was seen as set to challenge the dollar as the world’s leading currency, there are now serious concerns that the ongoing Eurozone crisis will lead to some countries eventually withdrawing from it, beginning a process of European monetary disintegration. In retrospect, insufficient attention was paid to the economics of optimum currency area theory when the Eurozone was set up, and too much to the apparent political imperatives of European unity. Reversing the process of European monetary integration is not straightforward. There are significant uncertainties, but there are also serious doubts as to whether the reforms needed to sustain the Eurozone in its current form will be introduced. The withdrawal of some of the weaker economies does not signal the end of the euro. By analogy, while some marriages are based on close compatibility, and are successful and long lasting, others encounter irreconcilable differences. In these cases divorce, although unpleasant and stressful, may be the preferred outcome.

Following the global financial and economic crisis, and beginning in mid-2009, there has been a surge of capital into Asian and Latin American emerging economies. While capital inflows have a good side, they also have a bad side. This will be particularly pertinent when the increase in inflows occurs rapidly and when the flows take the form of relatively short-term and debt-related investments. These have been characteristics of the recent surge. Concerns about exchange rate appreciation and the macroeconomic effects of foreign exchange market intervention, as well as the effects on domestic asset and housing markets, have led countries to introduce capital controls of one form or another. Having favoured a move towards greater capital account liberalisation in the 1990s, the IMF’s attitude to controls has moderated, and it is now trying to establish a framework to guide the use of capital flow management measures. This article analyses the issues involved and discusses the chances of such a framework being effective.

The concept of ‘currency wars’ has come into popular use in recent years. This article examines various meanings of the phrase and its historical antecedents. It goes on to discuss why currency wars have become the focus of attention and the economic policy weapons that may be used to conduct such wars. It draws attention to the collateral economic damage that may be caused by unleashing these weapons both for the individual countries that use them and for the world economy. The article concludes that, while there may have been occasional currency battles or skirmishes, the empirical evidence does not support the claim that there is widespread currency warfare. However, currency misalignment does exist and correcting it would help induce the international adjustment needed to reduce the global economic imbalances that threaten international financial stability. The problem is to find effective institutional arrangements for encouraging this to happen. Current proposals under discussion that envisage an enhanced role for the IMF and the G20 seem unlikely to be very successful.

The global reserve system has returned to the top of the agenda in debates about international monetary reform. Much of the contemporary discussion draws on familiar issues but it has been given a new relevance in the aftermath of the global financial crisis of 2008/09. One particular focus relates to the composition of international reserve assets and the role of the dollar. Will the dollar’s preeminent position be eroded and will the dollar be replaced by other international currencies? This paper examines the factors that determine a currency’s international status and assesses various candidate currencies including the euro and the Chinese renminbi. It also analyses the Special Drawing Right (SDR ) as an international reserve asset. It concludes that, while there may be advantages in enhancing the SDR ’s role and endeavouring to implement the commitment made in the Second Amendment to the IMF’s Articles of Agreement to encourage it to become the world’s principal international reserve asset, the more likely outcome is that the dollar will retain its status as the main international currency, although it may be joined by other currencies in a multiple currency system.

To some, the G20 offers a representative, legitimate and effective forum for dealing with global economic issues, and represents a distinct improvement on the G8. To others it is seen as still lacking full legitimacy and as being an unlikely institutional vehicle for organising global economic cooperation and coordination. This article assesses these views in the aftermath of the Seoul summit of November 2010. To what extent has the momentum that appeared to have been generated at the London summit in April, 009 been maintained? Many of the more intractable problems facing the world economy were, in fact, deferred in 2009, allowing the impression to be created that there was a higher degree of international consensus than there really was. Moreover, the crisis circumstances at the time placed a high premium on swift policy action. As the crisis has eased, more fundamental disagreements have emerged, and these were reflected by the discussions in Seoul. The reality is likely to be that while it is a useful institution for debate and discussion, and perhaps for helping to resolve disagreement, the achievements of the G20 will probably turn out to be more modest than the London summit might have suggested.

From being widely seen in early 2008 as an institution in decline and irrelevant to many of the problems then facing the world economy, the International Monetary Fund (IMF) has more recently been presented as an international financial institution that is of essential importance in the aftermath of the global financial and economic crisis of 2008/09. There has been a plethora of reforms affecting the amount of resources the IMF can lend, the design of its conditionality and its organisational structure. This article assesses the extent to which these reforms will enable the IMF to enhance its role and improve its operations. It identifies and analyses challenges currently facing the IMF and claims that the future of the IMF depends crucially on the success it exhibits in meeting these challenges.

HIV/AIDS funding appears largely protected in the current crisis, as the two largest programmes – the US PEPFAR Program, and the Global Fund for AIDS, TB and Malaria – are not expected to contract. Moreover, 38% of all GFATM funding over nine funding rounds has not yet been spent by recipient governments, leaving a significant cushion particularly in Sub-Saharan Africa, where almost half of all allocations remain to be spent. Donor funding historically moves procyclically in developing countries, but there have been major shifts in recent years. During the current crisis, World Bank lending expanded by 50% as governments ramped up safety nets. Regionally, only eastern Europe was hit hard. Declining spending on that region’s social programmes has forced longdelayed reforms, but there have been negative impacts on household spending, particularly in health, though education spending has been far less affected.

The financial and economic crisis in Greece in 2009/2010 has reawakened interest in the future of the euro and the eurozone. After briefly explaining its sources, this article focuses on the longer-term issues to which the crisis gives rise. It explores the underlying weaknesses of current eurozone arrangements, and assesses whether the crisis will stimulate reforms designed to remedy them. The analysis suggests that, as with many crises, the one in the eurozone will lead to only relatively modest changes; these are unlikely to go much beyond the fairly ad hoc provision of emergency finance. Fundamental reform based on closer fiscal coordination, orderly insolvency arrangements or the establishment of a European Monetary Fund are unlikely. The break-up of the eurozone also seems unlikely. Indeed the crisis may catalyse structural reforms that in the long term increase the eurozone’s durability. The crisis also has important implications for the IMF.

From a situation as late as 2008, when they were largely unfashionable, special drawing rights (SDR s) have become the centre of attention in discussions about a reformed international monetary system. The G20 and the International Monetary Fund (IMF) have backed a significant additional allocation of SDRs, and China and the United Nations have suggested that this should be followed up with more substantial reforms that diminish the role of the dollar and enhance that of the SDR . These proposals would incorporate a substitution account that allows holders of dollars to swap them into SDR s, but they see this as only one step towards establishing an SDR -based system. This article assesses the issues involved and the contemporary political economy of such proposals, placing them in historical context. It contemplates the likely evolution of the international monetary system, and examines the extent to which the SDR is likely to come back fully into fashion.

As it has for many years, International Monetary Fund conditionality is currently receiving much attention in the context of the global financial crisis. At the beginning of the 2000s the Fund introduced a policy of ‘streamlining’ intended to reduce the amount of conditionality and refocus it, with a view to increasing country ownership and improving programme implementation. This article uses the results of a report by the IMF’s Independent Evaluation Office into structural conditionality to assess the extent to which the initiative delivered on its promises. More significant seem to be the recent changes associated with the global crisis. The article discusses the evolution of conditionality, and assesses the current situation and the prospects for the future.

In the sequence of currency crises in emerging economies in the 1990s, there was an observed reluctance to devalue the exchange rate. Although ultimately adopted, the decision to devalue was usually delayed, often until it could no longer be avoided. While economic explanations of delay are available, they need to be combined with an evaluation of the political implications in order to secure a better understanding of exchange rate inertia. This article presents a political economy interpretation of delayed devaluation. It introduces and discusses the determining factors drawing on available empirical evidence and briefly applies these ideas to a range of specific examples. It also examines why there may be even more impediments in the way of timely revaluation. Since delayed exchange rate adjustment carries economic costs, the article also considers ways in which delay may be minimised.

The IMF presents multilateral surveillance as one of its core responsibilities and has recently sought to enhance this role via a series of multilateral consultations with systemically important countries, designed to coordinate exchange rate and macroeconomic policy in order to reduce the global economic imbalances that threaten the stability of the international financial system. The authors examine the evolution of the IMF's multilateral surveillance and assess what it has achieved. They also investigate what may reasonably be expected from surveillance and, in the light of this analysis, evaluate the outcome of the multilateral consultations. Concluding that there are strict limits on what the Fund can achieve in terms of using multilateral surveillance to avoid economic and financial crises, they also explore areas relating to crisis management where the IMF might be able to make a more important contribution. The Fund needs to temper ambition with reality if it is to maintain credibility as an international financial institution.

The world currently faces a number of economic problems. These include the large global economic imbalances that may prove to be unsustainable; international poverty, where projections suggest that it is unlikely that the Millennium Development Goals will be achieved; and stalled multilateral trade talks that threaten a return to more aggressive protectionism. Although very unfashionable, a new allocation of Special Drawing Rights by the IMF could help to alleviate all of these problems. Clearly, it is most unlikely that one simple policy will resolve all the world’s economic ills, but, at the same time, if the benefits from it could be substantial and the costs minimal, it is worthy of consideration.

Increasing concern has been expressed by both scholars and officials about political bias and influence in the IMF. This is seen as threatening the effectiveness of the institution. But how can the problem be resolved? One way would be to try to create greater political balance by changing quotas and therefore voting rights. In limited form, this is the approach that was adopted at the Fund’s Annual Meetings in Singapore in September 2006. The article critically examines this option. It goes on to explore the idea of granting greater independence to the Fund. Although far from straightforward, it may be sensible for policy to begin to work towards this objective. However, IMF independence would also force the world to decide what purposes the Fund should fulfil and what instruments it would need in order to fit these purposes.

Since the annual meetings of the IMF in September 2005, its Managing Director, Rodrigo de Rato, has been publicizing a medium-term strategy for the institution based on the organizing principle of globalization. Mr de Rato presents the challenges facing the Fund as global economic imbalances, capital account crises and the problems of low-income countries. But do his envisaged reforms meet these challenges, and are there other issues that need to be addressed? This paper provides a critical evaluation of the main elements of the Fund’s strategy and briefly examines a number of alternative reforms.

The US balance of payments current account deficit is in excess of 5 per cent of GDP. Is this sustainable? A loss of confidence in the dollar could lead to foreign investors selling dollars and to a sharp dollar devaluation. In principle, there could be a dollar crisis. But how likely is it? This paper investigates the extent to which the situation in the mid 2000s mirrors that at the time of the last dollar crisis in 1971. It also examines the causes of the contemporary US current account deficit and the factors determining its sustainability. It goes on to discuss the need for policy action both within the US and in the rest of the world to minimize the risks of a dollar crisis that could have serious implications for the global economy.

In the aftermath of the 1997/1998 crisis, Asian economies have built up large holdings of international reserves. Although initially encouraged to do so by the IMF, more recently they have been criticised for maintaining undervalued currencies, running large current account balance of payments surpluses and accumulating excessive reserves, policies that have been blamed in part for causing global economic imbalances. This paper examines two related issues. The first is the role of closer international macroeconomic policy co-ordination in rectifying the imbalances and the institutional mechanisms through which this may be achieved. The second is the alternative ways in which the liquidity needs of Asian economies may be met without them having to acquire large reserve holdings. There may be an inconsistency in opposing reserve accumulation in Asia and at the same time blocking reform that would provide additional security against subsequent economic and financial crises.

The IMF advertises itself as playing a catalytic role, whereby its lending programmes induce other providers of finance to invest or lend as well. The theoretical foundations of this claim are reviewed and found to be questionable. The empirical evidence also appears to contradict the notion of a consistent and significant catalytic effect. The policy implications of weak catalysis are reviewed and alternative approaches to delivering a suitable adjustment process investigated. While some of these alternatives seem worthy of further evaluation, including greater official coordination and the use of alternative private and official pools of capital, many are politically or operationally untenable.

In the midst of a lively debate about international monetary reform at the beginning of the twenty-first century, there seemed to be a broad consensus about exchange rate policy in developing and emerging economies; that they should opt for one of the extremes in the form of either firm fixity or free flexibility. Intermediate solutions were ruled out. However, dissenting voices remained and have become more audible. This paper reviews the underlying theoretical issues and draws on case study experience to see whether clear conclusions emerge. The investigation shows that the choice of exchange rate regime continues to involve a careful weighing up of opposing arguments. It may therefore be unwise for the IMF to adopt the ‘consensus’ view. A more subtle made-to-measure approach is needed.

At the beginning of the 1990s it appeared that there was considerable agreement about the kind of economic policies that countries turning to the IMF and the World Bank should pursue. These included macroeconomic stabilisation, microeconomic liberalisation and openness, and were summarised by the concept of a ‘Washington Consensus’. How has the Consensus stood up to the passage of time? This article briefly assesses the track record of Consensus-type policies and shows how the Consensus has evolved. With regards to some of its components, a greater sense of agnosticism may now prevail. Moreover, issues that were little or no part of the Consensus have come to the fore. The implications of these changes for institutional design are also investigated.

The concept of globalisation has received a great deal of popular attention in recent years. However, the term is often used quite loosely. When defined to mean closer international economic integration, the evidence shows that the extent of globalisation may easily be exaggerated. This article examines the evidence and assesses the benefits from, and costs of, globalisation. It goes on to discuss how the costs might be mitigated, and briefly examines the role of the principal international trade and financial institutions.

The long-standing debate over IMF conditionality has received a new lease of life in the context of the debate over a new international financial architecture. Conditionality has increased in recent years and some proposals for reform envisage a continuation of this trend. However, by emphasising the importance of implementation as well as design it may be argued that increased conditionality will have a negative effect on final out-turns; there may be a conditionality Laffer curve. The policy issue is whether conditionality has reached or gone beyond its optimal level. There is some evidence that is consistent with the claim that conditionality has become excessive.

In the aftermath of the East Asian financial crisis there has been much discussion of exchange rate policy in developing countries. Some observers have suggested that they should opt either for flexible exchange rates or for firmly fixed rates. Adopting the US dollar as legal tender and abandoning the domestic currency is one possibility. In conditions of economic crisis Ecuador dollarised in early 2000. Will other Latin American economies follow or will Ecuador live to regret the decision? This article assesses the arguments.

In the aftermath of the East Asian financial crisis there has been much discussion of a new international financial architecture. A significant contribution to this debate is the Report of the International Financial Institution Advisory Commission, sponsored by the US Congress, which was chaired by Allan Meltzer and published in March 2000. The Commission makes a number of radical proposals for reform. Professor Bird argues that unfortunately the analysis underlying many of them is flawed, or at least highly dubious. Reform based on the Commission’s recommendations would therefore be largely ill-directed; it would be bad news for developing countries and countries in transition, and could lead to greater global instability. An alternative approach to reform exists which attempts to modify the IFI’s operations in ways that build on the lessons of experience rather than simply discontinues them, as the Meltzer Commission recommends.

The East Asian financial crisis has spawned a number of proposals for institutional reform. Some envisage reforming existing institutions, particularly the International Monetary Fund (IMF), while others suggest that new institutions are needed. Amongst them is the idea of establishing an Asian Monetary Fund (AMF). Evaluating this proposal raises a number of complex issues. Its appeal hinges on whether it would be able to undertake some functions better than the IMF. To the extent that crises are regionally contained, there may be a case for mobilising finance to help deal with them at the regional level. This could also take pressure off the constrained resources of the IMF. In as much as access to finance from an AMF would be conditional upon compliance with specified standards and policy guidelines, an AMF might also help to prevent a future financial crisis in the region.