The current international financial architecture is a legacy of the Bretton Woods system combined with ad hoc arrangements. The system was designed when the pattern of surpluses and deficits looked very different from today. The world has become more globalized (a success of Bretton Woods) and a set of emerging market economies are now an important part of the world economy. The current international financial architecture, however, does not reflect this. The International Financial Institutions (IMF, World Bank) were designed for a world where surpluses were primarily created in the industrialized world and financial institutions intermediated these surpluses to the developing world. The emergence of the BRIC’s and the surpluses of oil producers have created a new reality. Yet the international financial architecture has not evolved.

This project focuses on reforms of the international financial architecture that are needed to accommodate the new reality? These reforms must be robust to future shifts in the distribution of surpluses. Moreover, an efficient system must facilitate efficient risk sharing so that investments in future energy supplies and alternative technologies can be made effectively.