New Thinking and the New G20

About the series

These papers are an output of a project that aims to promote policy and institutional innovation in global economic governance in two key areas: governance of international monetary and financial relations and international collaboration in financial regulation. With authors from eight countries, the 11 papers in this series add to existing knowledge and offer original recommendations for international policy cooperation and institutional innovation.

In the Series

The 2008 financial crisis led to the renewed realization that close linkages between financial firms can also cause large-scale disruption when financial firms fail. This paper provides a brief description of the principles of cross-border resolution that have emerged since 2008 and an overview of developments on resolution of financial firms in India. The policy choices of India may be reflective of the thinking in a large number of emerging markets, which lag considerably behind more developed markets.
Gross capital inflows and outflows to and from emerging market economies have witnessed a significant increase since the early 2000s. This rapid increase in the volume of flows, accompanied by sharp swings in volatility, has amplified the complexity of macroeconomic management in emerging economies. This paper focuses on capital flows in selected emerging Asian economies, analyzing surge and stop episodes, then evaluating the policy measures undertaken by these economies in response.
This paper shows that debt flows have contractionary effects on emerging markets’ output, while equity flows have expansionary effects. Such correlations can be driven by counter-cyclical debt flows and pro-cyclical equity flows, or by debt flows that lead to an appreciation and hurt exports, and by equity flows that improve the productivity of the real economy, broadly defined.
Expanding the access of financial services to low-income households and other disadvantaged groups has become an important public policy goal in the past decade. Many developing economies have encouraged the introduction of a variety of programs, services and branchless banking instruments ranging from automatic teller machines to mobile phones to reach people for whom traditional, branch-based structures, had not. This paper contributes to the discussion about the enablers and barriers to responsible financial inclusion by assessing to what extent differences in the adoption of post-crisis global regulatory standards can explain cross-country variation in financial inclusion.
The “shadow banking” system, as a credit intermediary outside of regulation and the regular banking system, has been regarded as one of the critical sources of the global financial crisis. International coordination of regulation on shadow banking has improved since 2009, but cooperation among advanced economies and emerging markets has made little progress. Zheng Liansheng looks at the reasons for this slow progress and offers suggestions for reform, with a particular focus on China.
In response to the recent global financial crisis, membership of key institutions for international standard setting, notably the Basel Committee on Banking Supervision (BCBS), expanded to include emerging countries. However, with some exceptions, official and private sector actors from these countries still exhibit low levels of engagement with international financial standard setting. This is due to a combination of related factors: an elite network of developed country regulators that continue to set the BCBS agenda; a relative paucity of regulatory knowledge and resources in emerging countries; and low mobilization by emerging country private actors on BCBS proposals. This paper recommends a series of measures to improve emerging country engagement.

In 2012, the Basel Committee on Banking Supervision opened its membership to key emerging markets to encourage international participation in the Basel rule-making process and commitment to implementation of its standards. This paper examines recent Brazilian experience and brings to light some of the gaps that must be filled in order to serve the interests of a broader range of actors in the international regulatory landscape.
Due to the 2008-2009 global financial crisis, the Chinese government began to promote renminbi (RMB) internationalization in order to raise its international status, decrease reliance on the US dollar and advance domestic structural reform. This internationalization has achieved progress not only in cross-border trade settlement, but also in the offshore RMB markets. However, the rampant cross-border arbitrage and the relatively slow development of RMB invoicing compared to RMB settlement are becoming increasingly problematic.