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Solving Global Financial Imbalances: A Plan for a World Financial Authority

Columbia Law and Economics Working Paper No. 361

Northwestern Journal of International Law & Business, v. 31, p. 535, 2011

58 Pages Posted: 17 Nov 2009 Last revised: 29 Apr 2013

Carlos Mauricio Mirandola

Columbia Law School

Date Written: November 16, 2009

Abstract

This paper will propose a plan to reform international finance – the World Financial Authority (WFA) Plan. Under such a plan, the IMF and other existing international financial institutions would be reformed and coordinated around a newly created WFA. The WFA would have two core functions. First, managing the international liquidity, which implies reducing externalities arising from domestic monetary policies adopted by its members, and dealing with global liquidity problems involving financial activities of transnational private banks. Second, helping countries to make their domestic monetary policies more effective, regaining traction and preventing contagion. A central instrument to this end is the creation of the World Financial Unit (WFU), an international currency unit conceived as a synthetic security backed by reserves composed of currencies surrendered to the WFA by member countries. The WFA is being thought as a device to support the financial globalization, as well as helping governments to maintain their power to manage the domestic macroeconomic conditions, contain externalities, align incentives, and allow for more responsible policies.

Keywords: International Financial Institutions, Financial Globalization, IMF, IMF reform, SDR, reserve currency, imbalances

JEL Classification: E02, E42, E44, E52, E58, F02, F31, F32, F33, F34, F36, F42, F53, F55, F59, G15, G28, G34, G38, K22

Suggested Citation

Mirandola, Carlos Mauricio, Solving Global Financial Imbalances: A Plan for a World Financial Authority (November 16, 2009). Northwestern Journal of International Law & Business, v. 31, p. 535, 2011. Available at SSRN: https://ssrn.com/abstract=1507286 or http://dx.doi.org/10.2139/ssrn.1507286

Carlos Mauricio S. Mirandola (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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