The Need for Institutional Changes in the Global Financial System: An Analytical Framework

Stijn Claessens (stijn.claessens@yale.edu) and Geoffrey Underhill

No 4970, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The international financial system has been the subject of much debate following the financial crises of the 1990s. While many reforms have been proposed for and implemented by mostly developing countries, few changes have been made to the international financial system itself. Fundamentally, the design, institutions, and governance of the international system remain very similar to those of two decades ago. The major changes in global financial markets, financial services industries and economies during this period, however, have rendered the international financial system and its governance of out date. In this paper, we analyse the causes and consequences of the failure to reform. We highlight the forces driving the need for changes in the governance of the international financial system, in particular the combination of the global integration processes and the increased role of the private sector. We then provide insights into the desirable institutional structure for international financial decision-making, also as it relates to the legitimacy of the international system in the eyes of the public worldwide. We also discuss the (political economy) factors inhibiting reform. We conclude with suggestions for future research.

Keywords: Political economy; Legitimacy; International financial institutions; international financial arrangements; international governance (search for similar items in EconPapers)
JEL-codes: F33 F34 K33 N20 O19 P50 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-dev, nep-fmk, nep-his, nep-law and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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