centralized international monetary architecture set up at the Bretton Woods
conference is evolving towards a more decentralized multi-layered global financial
safety net (GFSN) comprising (i) the G20 at the apex as an overarching institution (ii)
multilateral financial safety nets (MFSNs) established under the auspices of the IMF
(iii) bilateral financial safety nets (BFSNs) among central banks, (iv) regional
financial safety nets (RFSNs) established in various regions of the world, and (v)
national financial safety nets (NFSNs) or reserve accumulation by individual
countries. The most significant factor explaining this evolution is the increased
incidence of capital account crisis subsequent to the deepening of financial
globalization. The paper argues that the evolving GFSN has increased the flexibility
of the international monetary architecture and enhanced the voice (weight and
influence) of emerging markets on global economic governance to some extent.
However, more needs to be done. Also there is the need for institutional and other
reforms to prevent and manage a systemic crisis in the future and to protect innocent
bystanders. What is the role of Asia and what can Asia do?