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Global Financial Architecture, Global Imbalances and the Future of the Dollar

Published on: January 2010​
Genre: Economics/Finance​ Category: Policy Brief/ Policy Note​

The current global financial and economic crisis has come after two decades of unprecedented integration of global financial markets and financial innovation, a process that accelerated significantly in the new millennium. At the same time, the past decade has seen a widening of global financial imbalances to new and unsustainable levels. The convergence of these two trends is no coincidence, and financial globalization and global imbalances are two facets of the same phenomenon, which has resulted in the worst global economic and financial crisis since the Great Depression. By the same token, a long-term resolution of the global imbalances issue will require a strengthening of the infrastructure of the global financial system through a rethinking of national financial regulatory regimes and improved global cooperation on financial governance. In the medium term, the governments of the United States, Europe and the major emerging markets must focus on bringing the recession to an end and put the global economy back on a sustainable growth path. In the longer term, unless we bring financial globalization and global imbalances under control, we will be paving the way for the next financial and currency crisis, with incalculable consequences.

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