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Global Financial Safety Net: Further Optimization Is Required (No.222, 2020)
2020-10-28
By Tian Hui, Research Institute of Finance, DRC
Research Report, No.222, 2020 (Total 5966) 2020-9-14
Abstract: Since the 1990s, the outbreak of several systemic crises has become a catalyst propelling the rapid development of the global financial safety net, which has evolved from a single mechanism led by IMF into a multi-actor and multi-level network mechanism, and the scale of which has been continuously expanding. It has enhanced the confidence of various parties in maintaining global financial stability. Facing the COVID-19 epidemic, the global financial safety net has played a positive role, but it has also exposed some weak points. For example, the unbalanced coverage could not provide adequate protection for emerging economies and developing countries. The US dominance is too strong. The role of regional financial arrangements needs to be strengthened. The lack of effective coordination among rescue mechanisms is prone to moral hazard and improper arbitrage. In the post-COVID-19 pandemic period, we need to further strengthen the role of the global financial safety net, rely more on the G20 mechanism to promote relevant international cooperation, carry out reforms aimed at improving the balanced coverage and adequacy of security, and establish effective incentive and restraint mechanisms.
Keywords: global financial safety net, COVID-19 epidemic, IMF, the United States
