Policy Brief 35, January 2017

On the Existence of Systemic Issues and their Policy Implications

Systemic issues are issues that arise from the built-in features of the global system and the impact of the interaction of its parts; as implied in the chapter title in the Monterrey Consensus, it pertains to the coherence and consistency of the monetary, finance and trade systems.  Systemic issues point at the weak points in the whole global financial “architecture,” the international structures and mechanisms that are beyond the control of individual countries.  Systemic issues are a particular concern to developing countries, which have experienced their greatest development reversals during international payments crises.

Macroeconomic volatility and periodic crises have long-lasting impact on growth and employment in developing countries, in contrast to the case of developed countries. The international policy community has walked away from these crises with a variety of theories and insights about various weaknesses specific to the economies swept into the crises.  However, the pattern of synchronous crises among developing countries has been difficult to ignore and other thoughtful observers have harped on this pattern in their much earlier analyses.

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