Thursday, June 24, 2010
[IWS] ADB: THE FUTURE GLOBAL RESERVE SYSTEM--AN ASIAN PERSPECTIVE [24 June 2010]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Asian Development Bank (ADB)
The Future Global Reserve System— An Asian Perspective [24 June 2010]
[full-text, 46 pages]
Message from ADB’s President i
Executive Summary and Recommendations ix
Jeffrey D. Sachs, Masahiro Kawai, Jong-Wha Lee, and Wing Thye Woo
International Monetary Advisory Group
1. Global Financial Crisis, its Impact on India and the Policy Response
Nirupam Bajpai 1
2. To What Extent Should Capital Flows be Regulated?
Maria Socorro Gochoco-Bautista 3
3. The Case for a Further Global Coordinated Fiscal Stimulus
Willem Buiter 5
4. Managing a Multiple Reserve Currency World
Barry Eichengreen 7
5. From the Chiang Mai Initiative to an Asian Monetary Fund
Masahiro Kawai 9
6. An Asian Currency Unit for Asian Monetary Integration
Masahiro Kawai 11
7. The International Monetary System at a Crossroad
Felipe Larrain B. 13
8. Towards a New Global Reserve System
Joseph Stiglitz 14
9. A Realistic Vision of Asian Economic Integration
Wing Thye Woo 15
10. An Asian Monetary Unit?
Charles Wyplosz 16
11. Will US fiscal Deficits Undermine the Role of the Dollar as Global Reserve Currency? If So, Should US Fiscal Policy be geared to Preserving the International Role of the Dollar?
Yongding Yu 18
12. International Reserves and Swap Lines: the Recent Experience
Joshua Aizenman, Donghyun Park and Yothin Jinjarak 20
13. The Future of the Global Reserve System
Daniel Gros, Cinzia Alcidi, Anton Brender, and Florence Pisani 21
14. Renminbi Policy and the Global Currency System
Yiping Huang 22
15. Will the Renminbi Emerge as an International Reserve Currency?
Jong-Wha Lee 23
16. Asia's Sovereign Wealth Funds and Reform of the Global Reserve System
Donghyun Park and Andrew Rozanov 24
17. Reforming International Monetary System
Kanhaiya Singh 25
18. Designing a Regional Surveillance Mechanism for East Asia: Lessons from IMF Surveillance
Shinji Takagi 27
PRESS RELEASE 24 June 2010
Cooperation Needed in Shift to Multi-Currency Global Reserve System - Report
MANILA, PHILIPPINES - A reform in the global reserve system is critical to avoid a repeat of the recent global economic crisis and Asia's fast recovering countries need to cooperate to ensure a smooth transition to a multi-currency alternative, says a new report from the Asian Development Bank (ADB) and Columbia University's Earth Institute.
The report, The Future Global Reserve System - An Asian Perspective, says that while the US dollar will remain the leading currency of international exchange for now, a rebalancing in the global economy means that in the future, a wider range of currencies will need to be used to settle trade and investment.
"Our current global reserve system, unfortunately, is not functioning too well," ADB President Haruhiko Kuroda said in a message in the report. "That means, more than ever, we need to work together both globally and regionally to find solutions—however gradually implemented—that will bring about a workable reform of the global reserve system."
There is no single alternative to the US dollar as the world's reserve currency. The Greek debt crisis has exposed the euro's lack of a solid sovereign backbone. The yen is Asia's most internationally accepted currency but its reserve status has declined recently. The yuan, the currency of the fast expanding economy of the People's Republic of China, may well become a reserve currency sooner than most anticipate but for now, cannot fill the role.
The report is the result of an ADB-financed study by 17 internationally renowned monetary experts led by Jeffrey Sachs, Director of the Earth Institute and ADB Chief Economist Jong-Wha Lee. It describes the strengths and weaknesses of the current system, the case for cooperation in bringing about reform, and the increasing role Asia must play in making this happen.
Reforming the global reserve system has huge implications for Asia. The region holds close to half of the world's total foreign exchange reserves and is highly dependent on international trade and capital flows for its growing prosperity.
"The dollar-based reserve system has been fraying for years," said Joseph Stiglitz, a Nobel laureate and a contributor to the report. "A new global reserve system is absolutely essential if we are to restore the global economy to sustained prosperity and stability. But achieving this is not easy."
The report recommends that with Asia’s growing economic clout, the region should increase economic integration and policy coordination to smooth the transition to a multi-currency reserve system.
Exchange rate and monetary policy coordination needs to be stepped up and there need to be formal mechanisms for economic consultation and surveillance between regional and global institutions. Regional foreign exchange reserves must be more actively deployed through swap lines, special drawing rights and other types of borrowing so there is no repeat of the recent credit crunch.
The report also suggested that given the failure to develop globally binding agreements on climate change, a portion of the revenue that a country receives through seignorage could be used to help their region tackle climate change. Seignorage refers to the profits resulting from the difference in cost of printing money and the face value of the money.
On a global level, the report recommends a stronger set of capital market rules be devised given the failure of the financial system to police itself, and regularly gathering international monetary experts to discuss current account imbalances and thus avoid unnecessary friction between countries on issues such as trade or varying exchange rate regimes.
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