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Trade and Development Report 2001

Global Trends and Prospects, Financial Architecture

image of Trade and Development Report 2001

The world economy is staring into a dangerous precipice; many see uncomfortable parallels with the period between the two world wars. Excessive financial liberalization has created a world where global private financial flows have broken free from multilateral supervision and regulation. Systemic instability and recurrent crises have followed and so far international policy makers have failed to find effective answers. This disturbing scenario provides the backdrop to the Trade and Development Report 2001. Part one of the report sets out to answer some key questions about the health of the world economy while part two takes a hard look at efforts to reform the international financial architecture.

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Standards and regulation

Many recent initiatives for international financial reform are directed at reaching agreement on, and implementation of, standards for major areas of economic policy. Most of these standards are ultimately intended to contribute to economic stability both at the national and international level. Their main proximate targets are the strengthening of domestic financial systems and the promotion of international financial stability “… by facilitating better-informed lending and investment decisions, improving market integrity, and reducing the risks of financial distress and contagion” (FSF, 2000a, para. 23). In pursuit of these objectives, the standards cover not only the financial sector, but also aspects of macroeconomic policy and policy on disclosure.

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