to deal with the problems of instability and volatility in exchange rates and capital flows which have characterized international financial markets in the 90s. let each country take measures to build its own safety walls by providing for higher reserves, more realistic policies to regulate capital flows, and careful monitoring of exchange rates. finally, let the international institutions play a supportive role through higher and more automatic access, subject to annual performance review. these institutions must also be made less ideological and less political with greater voice for all member countries rather than for a handful of industrial countries. [ i believe that what i have said is also in line with the “ middle way ” prescription of mervyn king and is capable of being built into the present architecture. ]

bimal jalan : seminar on international financial architecture remarks by dr bimal jalan, governor of the reserve bank of india, at the symposium of central bank governors, hosted by the bank of england, london, 5 july 2002. * * * today ’ s topic is a very large one and the time available to us is relatively short. to make the maximum use of the time available to me, i will make four broad points rather than deal with any specific issues relating to the international financial architecture. these, we can deal with later in the seminar during the question / answer period. the first point that i want to make is that we need to recognize that the period of the 90s, despite many gains, has seen many more financial crises than the earlier decades. the most distinguishing characteristic of this period is a marked increase in volatility in exchange rates and capital flows. the swings in these areas have not only been large, but also unpredictable and unanticipated. thus, we have seen a large number of currency crises, for example, in mexico, russia, east - asia, brazil and currently argentina, turkey, and emergence of currency pressures in brazil and paraguay again. exchange rates of industrial countries, notably dollar, euro and yen have also shown both short - term volatility and large medium - term movements. capital flows, particularly to emerging markets, have similarly been volatile, with a boom phase being followed by an abrupt and equally large reversal. another feature of the abrupt movement in exchange rate is that while crisis initially occurs in one or two countries, their adverse effects can be felt across the world. in the light of the recent events following the argentina crisis, it is also not clear whether the contagion effect from one country ’ s problems to others has actually been contained, as was assumed only a month ago. as i said, there have been real gains also in terms of benefits from higher capital flows and more flexible exchange rates. however, it is also a fact that the international financial environment has become substantially more uncertain, unpredictable and unstable in the 90s than in the previous half - century. the second broad point that i want to make is that the present international financial architecture, which was designed at bretton woods after world war ii, was for a different era altogether - one of fixed exchange rates, preponderance of “ official ” and stable capital flows, and temporary current account deficits which could be met with temporary access to imf credit. the bretton