International Payments Imbalances and Global Governance

The world economy is presently characterized by very large payments imbalances whose management and resolution is a central issue in the agenda of international financial reform. To tackle this issue effectively, innovations in global governance would be helpful because of three unique features of the current situation: the distinct geography of contemporary imbalances, the dollar's changing position as world currency, and the growing influence of sovereign wealth funds. Some suggested innovations include: widening the G8; creating an IMF or ECB substitution account to ease the shift away from a dollar-centred international monetary order; fostering a greater recognition of the role of regions in global financial governance; and negotiating new multilateral rules for investment flows.