Managing the global economy through turbulent times

Oleh : Gusti Pares

Faculty of Economics and Business

Sriwijaya University

Accounting

2011

ABSTRAK:
“Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again1.”

The unexpected scale of the turbulence in international financial markets and its impact on real economies has become a global crisis, as the risk of contagion to emerging markets increases.
The Leaders of the G20 advanced and emerging nations met in November 2008 in Washington to agree a new and decisive systemic international approach to handle the challenges to the world economy and financial markets. As we look forwards to our next Leader’s meeting in the UK in April 2009, we need to take this agenda forwards quickly, to start the process of reform so as to manage globalisation as a force for good in the medium-term.

The context is that first, we need coherent and concerted policy action across the world to counter falling demand and fragile confidence. Within this, there will be room for further monetary easing in the advanced economies as commodity prices have fallen and the risk of higher inflation has receded, although countries have different room for manoeuvre on monetary policy.

Fiscal policy has an essential role to play alongside monetary policy in sustaining demand. A well-designed fiscal stimulus is timely, temporary, targeted and sizeable, and part of a concerted international response, tailored to individual country circumstances.

Emerging economies with large accumulated surpluses could also take action to rebalance growth as appropriate, including supporting other countries in their regions directly or through the international financial institutions.
Second, the international community must take action to prevent further contagion and support vulnerable emerging and developing markets, including ensuring the IMF has the resources and instruments it needs.

Third, in order to restore confidence, we need to work together to address the failures in the financial and supervisory architecture the crisis has exposed, guided by the principles of transparency, integrity, sound financial regulation and responsibility of management for the risks they take.

Fourth, we need to move quickly to strengthen cross-border co-ordination of financial
regulation including a global early warning system, globally accepted standards of regulation, colleges of supervisors, and cross-border stability groups. We also need to strengthen as a matter of urgency the legitimacy and governance of the Financial Stability Forum and IMF, so that they are able to foster the international cooperation needed to promote global macroeconomic and financial stability.

Fifth, we must boost world trade and reject protectionism, being vigilant to immediate problems over trade finance, and work for more stable and secure global commodities markets. Finally we must reaffirm our commitment to meeting other global challenges despite the financial turmoil, including maintaining aid flows to meet the Millennium Development Goals, combating climate change, and looking to reform of the resources, mandate and governance of the international financial institutions. And we must start the process of setting out a long-term vision for managing globalisation as a force for good in the global age.

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