Emerging Issues in the International Financial System: Reflections of a By-Stander

Abstract

The post-second world war period has been characterized by tumultuous and varied changes in the international monetary, financial and economic systems (IMFES). The monetary system which was formulated on the basis of fixed par values of exchange rates, under the Bretton Woods agreement, had given way by early 1970s to floating exchange rates, with the snapping of the convertibility of the US dollar with gold. The financial system that was largely supported by official flows in the 1950s and 1960s has been reinforced by private market financing of a wide array of activities ever since the early 1970s in most parts of the world. The economic' system, interpreted here as representing the "real" side, has been increasingly rendered productive, with growth in trade in goods and services world wide being often higher, notwithstanding the non-tariff barriers, than the world GDP growth, and with the competitive conditions having been fostered by the introduction of new technologies and computational capacities in production and trading processes, as well as by clear shifts in policy regimes toward market oriented, incentive-based systems in the last three decades of the twentieth century.The processes of change in IMFES are reflected in the underlying currents that characterize the dynamic market-oriented behavior of economic participants, and given the rapid strides in new technologies, and the rising mobility of international capital, financial markets have grown in size and diversity, and have evinced increasing integration. The growth in the markets has also brought in its wake different degrees of fluctuations in the pricing and valuations of assets, ranging from relatively small creeping shifts to strong volatilities and misalignments, in many industrialized economies (IEs) and emerging market economies (EMEs). Where volatilities are persistent and strong, there can be no certainty in the behavioral patterns of economic agents. In such situations, cycles in economic activity would represent shifts in investor confidence and in the connected 'expectations about some of the major macro-economic variables that have a bearing on financial stability. In addition to the issues that arise from financial sector development, diversification, and integration, specific policy challenges related to the functioning of the multilateral institutions and problems associated with policy pursuits in different economies have dominated IMFES in the post war period. The major ones that could be mentioned in this regard relate to the following: 1) The adequacy of international liquidity and the distribution of it; 2) Economic adjustment and conditionality; 3) Exchange arrangement; 4) External Debt problem; 5) Private market development and internationalization of finance; 6) Problems of poorer countries; 7) Trade liberalization and free trade in services; 8) Currency and financial crises of recent years, especially the 1990s; 9) Proposals relating to governance of Bretton Wood Twins and 'New International Financial architecture' (NIFA);...

A Bibliometric Review of Sales Performance Research in India: Trends and Future Directions

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