Saturday, August 23, 2003
Stanley Fischer on Globalization
Got this link off Rajesh's blog. In this lecture delivered at the Institute for International Economics, Dr Stanley Fischer, former deputy managing director of the IMF and MIT professor addresses the issues surrounding globalization. Of particular interest to me was to read the former IMF man's take on international capital markets and the global financial system. Even if its a bit long at 34 pages, definitely worth a read.
A key problem is that we have no accepted framework in which a country in extremis can impose a payments suspension or standstill pending agreement with its creditors to support the restoration of viability. Which takes us to Anne Krueger’s proposal for a Sovereign Debt Restructuring Mechanism (SDRM), a legal mechanism to approve payments standstills by sovereigns, and for the restructuring and if necessary writing down of sovereign debts.
The costs of resorting to such measures have to be high if the international financial system is to work well. If creditors believe emerging market debtors will too easily use legal provisio ns to restructure debts, spreads will rise and capital flows to those countries will decline. That is why policymakers from emerging market countries generally oppose proposals to make it easier for them to restructure their payments, be it through collective action clauses or the creation of a sovereign bankruptcy procedure.
You can also read an article in The Economist which discusses Dr. Fischer's lecture.
A key problem is that we have no accepted framework in which a country in extremis can impose a payments suspension or standstill pending agreement with its creditors to support the restoration of viability. Which takes us to Anne Krueger’s proposal for a Sovereign Debt Restructuring Mechanism (SDRM), a legal mechanism to approve payments standstills by sovereigns, and for the restructuring and if necessary writing down of sovereign debts.
The costs of resorting to such measures have to be high if the international financial system is to work well. If creditors believe emerging market debtors will too easily use legal provisio ns to restructure debts, spreads will rise and capital flows to those countries will decline. That is why policymakers from emerging market countries generally oppose proposals to make it easier for them to restructure their payments, be it through collective action clauses or the creation of a sovereign bankruptcy procedure.
You can also read an article in The Economist which discusses Dr. Fischer's lecture.
