Transcript Panel 4, Daikichi Momma | International Monetary System Reform

INTERNATIONAL MONETARY
SYSTEM REFORM
Daikichi Momma
Executive Director for Japan, IMF
INSTABILITY OF CURRENT IMS
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Frequent Crises
Persistent current account imbalances and
exchange rate misalignments
Volatile capital flows and currencies
FOUR ROOT CAUSES
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Inadequate global adjustment mechanisms
Lack of comprehensive oversight framework for
cross-border capital flows
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Inadequate systemic liquidity provision
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Supply of safe assets/currencies
REFORM
AVENUES TO REFORM
IMS
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Policy collaborations
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Monitoring and management of capital flows
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Financial safety nets
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Financial deepening and internationalization of
currencies
POLICY COLLABORATIONS
IMFC/IMF
Article-IV Consultations
Spillover reports
 G20
Framework for strong, sustainable, and
balanced growth
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ASEAN + 3 (China, Korea and Japan)
AMRO (Macroeconomic Research Office)
 Bilateral Economic policy Talks
Japan-Korea, Japan-China……
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MONITORIING AND MANAGEMENT OF
CAPITAL FLOWS
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Capital inflows to emerging markets can easily
be reversed
Monitoring and analysis of the cause of capital
inflows is useful to prepare and prevent potential
massive and sudden reversals
low global interest rates, high tolerance for
risk
debt is creating net flows or equity-creating
debt
Identify sources of systemic risk (FSB)
 Capital flow management / Macro prudential
measures
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FINANCIAL SAFETY NETS
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Global IMF
Double size of quota resources (US$734 billion)
NAB (US$570B) Bilateral loans to IMF (US$461B)
Precautionary Facilities (FCL, PLL and HAPA
SBA)
Regional (Europe, Chiang Mai Initiative Multilateral)
Double size (US$240 billion)
Precautionary Facilities
De-link from IMF 20%30%40%
Bilateral currency swap
Japan-Korea (US$70billion), etc.
FED, ECB and BOJ currency swaps
Indonesia stand-by loans (WB, ADB, Japan and
Australia)
FINANCIAL DEEPENING
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Countries with deeper domestic financial
markets
liquid, long-term domestic currency bond
markets
Asian Bond Markets Initiative
ABMF (Asian Bond Market Forum)
CGIF (Credit Guarantee and Investment
Facility)
Sound financial supervision and regulatory
frameworks
CURRENCY INTERNATIONALIZATION
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Merits:
Reduce exchange risks to trade, borrow and invest
Demerits:
Key currency countries should supply enough
liquidity of money Monetary policy difficult
Japanese Experience 1980~
Exports 40% Imports 25%
Demand elasticity relative to prices (North America)
Natural resources ( Oil, LNG etc)
Japan-China Financial Collaboration
Yen-Yuan direct exchange market