Currencies and International Finance: Questions

Under the broad set of issues in Currencies and International Finance, we address many questions:

International Financial Crises

• What are their causes and propagating mechanisms? How and why are these crises contagious? How far do these contagion effects extend? How can the crises be modelled?
• Is it possible to predict international financial crises? What are the important early warning indicators?
• What, if any, are the market or government features that may be related to the onset of a crisis?
• Are there any market mechanisms – for instance, collective action clauses in bond contracts – that could be introduced to mitigate such crises?
• Which types of capital flow have been most volatile? Are there effective ways to control these flows?
• What are the determinants of volatility in capital flows? What role do speculators and highly leveraged institutions (for example, hedge funds) play?

International Financial Architecture

• What is the best exchange rate policy for a country to adopt? When should a country opt for a hard peg exchange rate? What are the advantages and disadvantages of particular hard peg regimes – currency board or official currency substitution (generally known as dollarization)? When should a country join a monetary union (such as the euro area)?
• What is the role of the international financial institutions, particularly the IMF? Should there be an international Lender of Last Resort? How can national regulatory systems be monitored and strengthened by international surveillance? What is the role for international standards and codes, and how can they be monitored and enforced?
• Is there a role for government intervention in international markets, particularly foreign exchange markets? What should governments do with official foreign exchange reserves?
• How can the volatility of capital flows be best managed? Can financial crises be prevented or can their effects be mitigated?
• What are the political economy issues that arise in the reform of the international financial architecture? Should smaller, emerging economies be given more influence? What are the implications for voting and control of the international financial institutions? More generally, how can the interests of the smaller countries be balanced against concerns about U.S. domination of decision-making?