Strengthening the International Financial System : Key Issues

There has been notable progress in reforming the international financial system in order to improve the resilience of the world economy to volatility in international capital flows. This paper focuses on three critical issues central to the effort to reduce the frequency and virulence of crises: (a) exchange rate regimes, both amongst major industrial countries and for emerging market economics; (b) capital account liberalization, whether and how it should be done; and (c) the role of IMF lending in crisis prevention and management, and in particular the critical question of how to involve the private sector in the resolution of financial crises