GEI Newsletter Issue No. 6

Financial Crises and Financial Stability

A GEI Conference on 'Origins and Management of Financial Crises' was held in Cambridge on 11/12 July 1997, and this was followed by a day of policy discussions at the Bank of England on 14 July 1997. This conference examined whether there are common elements in financial crises, whether they can be predicted, and whether rescue by or support from international financial institutions should be forthcoming. These meetings followed on from a successful international workshop on the 'Future of the IMF' which was held in Cambridge during July 1995. At the Bank of England meeting, one of the speakers was Andrew Crockett who is General Manager of the Bank for International Settlements, and also Chairman of the Steering Committee of the GEI Programme. His talk is available in full. A full report on the Conference and policy discussions will appear in Issue 7 of this Newsletter (November 1997).

The Future of the World Bank

A conference on 'The Future of the World Bank' was held in London on 24 June 1997. An extensive report on the conference is available. This meeting was jointly organised by the GEI Programme, the Oxford Policy Institute and CEPR. The conference was chaired by John Flemming (Warden of Wadham College, Oxford), and included papers by Professor Christopher Gilbert (Queen Mary and Westfield College), Professor Paul Collier (University of Oxford), Stephen Jones (Oxford Policy Management and Oxford Policy Institute) and Professor Mark Casson (University of Reading). Such a meeting came at an opportune time, in the wake of the unveiling of the 'Strategic Compact' by World Bank President James Wolfensohn in March of this year. Topics discussed included the Bank's overall strategy, its practice of 'conditionality', the issues involved in the delivery of development assistance on the ground, and the Bank's role as an opinion former.

The exchange market crises in East Asia in the (northern) summer of 1997 took the international policy community by surprise. They suggested that, even after the lessons learned from the Mexico Crisis of 1994/5, there remain many uncertainties about how best to deal with large capital inflows and current account deficits in emerging markets. This Report, commissioned by the Commonwealth Secretariat, traces the cause of very large capital flows to the profitable opportunities created by trade liberalisation and credible macroeconomic reform. It discusses the appropriate macroeconomic policy responses (including the great riskiness attached to fixed rates), the need for stronger financial supervision, and the desirability of removing capital controls gradually as part of a phased liberalisation. It also analyses the need for systemic reform of the international monetary, going beyond the kind of regional central bank co-operation seen during this episode. The Report argues that stronger contingency planning is still necessary if the international community is to be prepared to deal with crises in sovereign bond markets crises, and that, if necessary, the IMF should be prepared to lend into arrears under stated conditions to deal with financial crises involving securitized debt.

Copies of the Report are available for £6 from: Commonwealth Secretariat, Marlborough House, Pall Mall, London SW1Y 5HX, UK, tel: (44 20) 7747 6261, fax: (44 20) 7747 6235.

The Newsletter of the GEI programme is published three times annually to inform policy-makers and the academic community of research, meetings, conferences, and Working Papers of the GEI programme.

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