Deep Financial Crises, Reforming the IMF and Building Regional Autonomy:Towards a New Hybrid Global Financial Architecture

This paper analyzes the problems of creating and expanding national macroeconomic policy space and economic governance. It develops a critical constructivist evolutionary theory of international financial institutions and arrangements within a framework of dynamic complex adaptive economic systems(DCAES). More specifically, the paper analyzes the following aspects: • The IMF’s response to recent and emerging global economic and challenges, and the evolving nature of its role. • The most appropriate role of regional arrangements in financial stabilization, based on experiences with such arrangements in this and prior episodes of crisis. The role of IMF under the present globalization arrangements and repeated financial crises is studied by following such a critical constructivist evolutionary theory of international financial institutions within a rigorous DCAES framework. It is shown that IMF must and can change in a direction which allows for greater national policy autonomy. It is also shown that the IMF needs complementary regional institutions of cooperation in order to create a stabilizing hybrid global financial architecture that will be more democratic and pro-development in terms of its governance structure and behavior. Thus regional financial architectures will need to be integral parts of any new global financial architecture (GFA).The tentative steps taken towards regional cooperation in Asia since Asian financial crisis are discussed to illustrate the opportunities and challenges posed by the need to evolve towards a hybrid GFA. The opportunities and challenges arising from the current global crisis are also analyzed in this context.