Argentina's ongoing crisis demonstrates, if demonstrations are still needed, that emerging market crises remain with us. Indeed, so frequent have such crises been over recent years that we seem almost to take them for granted. In the 120 months of the 1990s, 40 emerging markets (i.e., 33% of the world's developing countries), experienced serious financial distress. So it is time to ask: what viable steps have been taken to create a financial architecture able to contain and reduce this number?
Real progress, I believe, has taken place, but it is insufficient and asymmetric. Positive developments include the expansion and adaptation of new IMF lending facilities for crisis prevention and management, as well as an increase in the IMF's total resources. Important institutional innovations have also been introduced, including creation of the Financial Stability Forum.
Based on a British initiative and developed by Hans Tietmeier (former head of the Bundesbank), the Forum will attempt to identify sources of systemic risk and develop consistent financial regulation across different financial sectors and countries. The FSF was set up by the G-7 in early 1999. The Forum was initially made up of just the G-7 countries, but four new members - Australia, Holland, Hong Kong and Singapore - were added this year.
In addition to national representatives, the Forum's members include international organizations concerned with financial stability. In its first year of operation, the Forum commissioned five working groups to examine issues affecting international financial stability, including highly leveraged institutions, capital flows and offshore financial centers. Yet, despite these developments, overall progress remains insufficient. An international financial system to support - not undermine - growth and development is what the times demand.