The Need for Institutional Changes in the Global Financial System: An Analytical Framework

50 Pages Posted: 28 Jul 2005

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Geoffrey R. D. Underhill

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR)

Date Written: March 2005

Abstract

The international financial system has been the subject of much debate following the financial crises of the 1990s. While many reforms have been proposed for and implemented by mostly developing countries, few changes have been made to the international financial system itself. Fundamentally, the design, institutions, and governance of the international system remain very similar to those of two decades ago. The major changes in global financial markets, financial services industries and economies during this period, however, have rendered the international financial system and its governance of out date. In this paper, we analyze the causes and consequences of the failure to reform. We highlight the forces driving the need for changes in the governance of the international financial system, in particular the combination of the global integration processes and the increased role of the private sector. We then provide insights into the desirable institutional structure for international financial decision-making, also as it relates to the legitimacy of the international system in the eyes of the public worldwide. We also discuss the (political economy) factors inhibiting reform. We conclude with suggestions for future research.

Keywords: International financial arrangements, international governance, international financial institutions, political economy, legitimacy

JEL Classification: F33, F34, K33, N20, O19, P50

Suggested Citation

Claessens, Stijn and Underhill, Geoffrey R. D., The Need for Institutional Changes in the Global Financial System: An Analytical Framework (March 2005). CEPR Discussion Paper No. 4970. Available at SSRN: https://ssrn.com/abstract=771634

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Geoffrey R. D. Underhill

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR) ( email )

Amsterdam, 1012 CX
Netherlands
+31 20 525 2172 (Phone)
+31 20 525 2086 (Fax)

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