A leading economist argues that proposed reforms to the global financial system, drafted in the wake of financial crises that shook the world economy during the 1990s, would fail the test of markets and politics. Current proposals focus on reducing the probability of a crisis and helping bring about the swift resolution of any that should occur. Such strategies, although worthwhile, are insufficient, says Joshua Aizenman, who calls for pragmatic solutions that build on politically and financially proven institutions, including:
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. coordination of regulations across countries by the Bank for International Settlements and the International Monetary Fund;
. coordination among creditors, and the formation of international bankruptcy procedures.
Aizenman's analysis, "Reforming the Global Financial System," is online at repositories.cdlib.org/cgirs/gpb. The policy brief is the second in a series published by the Center for Global, International, and Regional Studies at the University of California, Santa Cruz.
Aizenman, a professor of economics at UCSC, specializes in international finance and development. He is at the forefront of discussions of ways to modify the global financial system to alleviate financial crises around the world. An advocate of mitigating the exposure of banks by imposing regulations on their reserves and capital, he is skeptical of proposals that would establish indicators of a nation's vulnerability. But he acknowledges the challenge of designing "proper interventions." He can be reached at (831) 459-4791 or via e-mail sent to jaizen@ucsc.edu.
The Global Policy Brief web site showcases research and opinions on international matters of widespread interest and was designed to narrow the gap between academics, policy makers, and the public.
