the major benefits of globalisation is that emerging and also developing countries are increasingly involved in the exchange of goods and capital and can benefit from the transfer of know - how and technologies. especially emerging markets have, over time, become major global trading partners as well as recipients of financial flows. some of them, especially in asia, have turned into nearly industrialised countries with decades of growth rates above those of high - income countries, and they have themselves become sources of international capital flows. over the last four years, these roughly 20 emerging countries in latin america, eastern europe and asia have accounted for about 30 % of world exports and received about 20 % of gross global foreign direct investment ( fdi ), a figure which is close to the fdi inflows into the united states. greater integration also means greater economic and financial spillover effects from one country or one region to the rest of the world. some of these effects are positive, while others are less so. the main positive spillover, as i see it, is that the global economy has benefited from the strong growth in many emerging market economies, especially in asia. china has become one of the main growth engines, not only for the region, but worldwide, contributing to about one - third of world gdp growth on average over 2000 - 2003 ( in ppp - terms ). moreover, capital mobility and financial integration allow savings to be invested on both the national and global scale, thereby increasing economic efficiency and promoting growth. what about the challenges? globalisation and capital mobility also makes the international system more vulnerable to changes in investor sentiment. on several occasions we have witnessed contagion effects spreading from one country or one market to others. some of these crises originated in the public sector, such as the debt crisis during the 1980s, which started with poland and mexico and spread to latin america, africa, the middle east and the soviet union, the mexican crisis in 1994, the asian crisis in 1997 / 1998, the russian crisis in 1998, and the more recent crises in brazil, argentina and turkey. others, by contrast, stemmed mainly from events in the private sector, such as the stock market collapse of 1987, the bond market crash of 1994, the near - failure of the large hedge fund long - term capital management ( ltcm ) in 1998, the stock exchange fall and the bursting of the technology bubble in 2000. despite their differences in origin, nature and magnitude, all these events had one thing in common : they represented major

threats to the stability of the international financial system. the international community has always managed to resolve such crises, but the costs incurred by the respective economies have been significant. in many instances, the level of output fell dramatically, sometimes even in double figures. for example, in argentina and turkey real gdp fell by as much as 10 - 11 % in the worst year of their crises. these events highlighted the potential vulnerabilities of the globalised system and, in that way, underscored the need for systemic changes to the policy framework of the international economic and financial system. policy - makers had to rethink how best to promote stability and achieve growth in an ever - changing environment characterised by globalisation. an impressive reform agenda was gradually launched to cope with the new challenges. many of these reforms have focused on how to prevent financial crises from happening and - should they still occur - on how to manage and resolve them. this ongoing work is influenced considerably by the widespread recognition of two fundamental principles. first, there is general consensus on giving the private sector and markets a central role, while focusing on sound public policies and institutions to provide market participants with an appropriate environment. given increasingly liberalised financial systems, the private sector is bound to play a key role not only in providing capital but also, and probably more importantly, in disciplining the overall economic policy. second, increased international cooperation has been considered as key given the mismatch between globalised markets and national policy responsibilities. indeed, the scope of international cooperation has widened, but also the forms of cooperation have evolved over time. let me now expand on some key areas in which important lessons have been learnt and significant adjustments to the international financial architecture have been initiated and implemented. i will first talk about the main changes in the international monetary system and then comment on the institutional set - up of the international system, before touching upon reform efforts in the area of crisis prevention and resolution. 1. international monetary system looking at the international monetary system, some say that since the collapse of the bretton woods system of fixed exchange rates in the early 1970s, there has basically been no system in place. the current situation of manifold monetary arrangements is sometimes characterised as a “ non - system ”. in my view, this is not true. it is correct that we are living in an increasingly complex world with a multitude of exchange rate regimes - about one - third of imf countries have their currencies pegged to one major currency or currency basket