Letter from the editor

• Author: Ian S. McDonald
• Position: Editor-in-Chief

Recent economic crises have stimulated interest in reforming the international financial architecture. This effort includes such measures as building transparency and developing financial standards and codes of good practice, involving the private sector in crisis resolution, liberalizing the capital account, and adapting the international financial institutions-including the IMF-to the realities of the new global environment. A conference held by the IMF at the end of May addressed the key issues of reform and attracted a wide range of participants from government, the academic world, and the private financial sector. In view of the importance of this event, we are publishing in this issue of Finance & Development articles derived from four of the papers presented at the conference.

In the first article, Benoît Coeuré and Jean Pisani-Ferry discuss the damaging effects of large swings in exchange rates and recommend a dual approach based on coordination of responses to major systemic shocks and close monitoring of foreign exchange markets. The challenges and constraints of dealing with swings in international capital flows are discussed by Michael Mussa, Alexander Swoboda, Jeromin Zettelmeyer, and Olivier Jeanne. Although capital controls are often considered a way to protect emerging markets from volatile capital movements, Guillermo A. Calvo and Carmen M. Reinhart see dollarization as being in some ways a more viable alternative to controls. In the fourth article, Barry Eichengreen discusses ways to "bail in" the private sector-that is, to force investors to share some of the financial burden when crisis strikes.

How should the international financial system be adapted to the challenges of increasingly integrated markets? Hans Tietmeyer, who as president of the Deutsche Bundesbank for the past six years has been a leading participant in the recent evolution of the monetary system, discusses the rationale for and purposes of the new Financial Stability Forum, which first met in April 1999.

Recent foreign exchange crises have brought the...