The current system predicated on the post-War balance of global economic power and institutions, has to undergo changes to cope with the new realities in international financial markets. These realities include levels of international capital flows unanticipated by the historic system, with large sharp swings in flows having potentially destabilizing consequences for recipient countries. The causes of destabilizing swings and the toolboxes for responding to this volatility, including through the current functioning of the international monetary system, bear reexamination.
In this context, the focus of the Global Agenda Council on Global Economic Imbalances is to increase the resilience of monetary and financial systems, and stability of global institutions, by providing guidelines for an orderly transition from unconventional monetary stimulus measures and a reduction in the volatility of international capital flows.
A priority for global policy-makers should be the reduction of risks of another financial crisis, enforced by agreeing and acting on a package of reforms that will contribute to global adjustment. An adjustment process engineered by policy reforms is more likely to be orderly and effective than one forced by volatile financial markets. Central bankers cannot do it alone and are utilizing second and third best policies to prop up the financial system, but policy-makers the world over need to enact the reforms needed for their economies to return to sustainable growth.