Fifty years ago, in March 1973, the major industrial economies abandoned fixed exchange rates, conclusively ending the post-World War II Bretton Woods arrangements. Proponents believed their action would strengthen countries' ability to reconcile domestic macroeconomic policies with the balance of payments. But opponents feared it would initiate a new era of instability and financial shocks. Since 1973, much of the world has moved away from fixed exchange rates to a variety of regimes based on considerable exchange rate flexibility. But international trade conflicts and unstable capital flows, along with a rise in financial crises around the world, have nonetheless accompanied the global shift away from exchange rate pegs.

How has the international monetary system performed over the past half century? What have we learned from the experience of more flexible exchange rates? What has been the impact on macroeconomic and financial stability in the years since? This book derives from papers delivered at a conference that brought together leading economists and policymakers to debate and discuss these questions, as well as to assess the evolution of the international monetary system, the dominance of the US dollar, and the role of exchange rate regimes in shaping the world economy.

In September 1985, emissaries of the world's five leading industrial nations--the United States, Britain, France, Germany, and Japan--secretly gathered at the Plaza Hotel in New York City and unveiled an unprecedented effort to correct the largest set of current account and exchange rate imbalances that had ever threatened the world economy. The Plaza Accord is credited with sharply realigning exchange rates, significantly reducing current account imbalances, and countering protectionist pressures in the United States. But did the Accord provide a foundation for ongoing international financial stability and policy coordination? Or was it simply a unique one-time coincidence of national interests?

The Plaza experience continues to inform today's debates about the limits and possibilities of international monetary cooperation. In late 2015, leading policymakers and economists--including those who were involved in the Accord's design, negotiation, and implementation--held a Plaza Retrospective conference at the Baker Institute for Public Policy to evaluate the Accord's legacy and how its collaborative spirit can be applied today. This volume presents their views and analyses to provide guidance for a time when the world again faces the prospect of currency disequilibria, growing imbalances, trade policy reactions, and thus uncertainty for both the global economy and world politics.

Data disclosure: The data underlying the analysis in this volume are available. The data used in chapter 14 are taken directly from William Cline's Policy Briefs 15-8 and 15-20, with the exception that they have been manipulated with a key assumption stated in the chapter.

China's extraordinarily rapid economic growth since 1978, driven by market-oriented reforms, has set world records and continued unabated, despite predictions of an inevitable slowdown. In The State Strikes Back: The End of Economic Reform in China?, the renowned China scholar Nicholas R. Lardy argues that China's future growth prospects could be equally bright but are shadowed by the specter of resurgent state dominance, which has begun to diminish the vital role of the market and private firms in China's economy.

Lardy's book is a timely sequel to his path-breaking Markets Over Mao: The Rise of Private Business in China (Peterson Institute for International Economics, 2014). This book mobilizes new data to trace how President Xi Jinping has consistently championed state-owned or controlled enterprises, encouraging local political leaders and financial institutions to prop up ailing, underperforming companies that are a drag on China's potential. As with his previous book, Lardy's perspective departs from conventional wisdom, especially in its contention that China could achieve a high growth rate for the next two decades--if it reverses course and returns to the path of market-oriented reforms.

Protesters now routinely fill the streets when any large, formal meeting dealing with international economic issues takes place. They express concern about the potential social and environmental costs of globalization and want negotiators to address these issues in trade agreements and international organizations. In addition, the debate over whether and how to link labor standards to trade has led to an impasse in American trade policy for much of the past decade and has tied the hands of US trade negotiators. Proposals to let the market do it or let the International Labor Organization (ILO) do it abound, but it is less common to find any serious analysis of just how activists can galvanize consumers to demand that corporations raise labor standards in their global operations or how the ILO can become more effective.

In this study, Elliott and Freeman move beyond the debate on the relative merits and risks of a social clause in trade agreements and focus on practical approaches for improving labor standards in a more integrated global economy. The authors examine both what is being done in these areas and what more needs to be done to ensure that steady and tangible progress toward universal respect for core labor standards is made. While concluding that the ILO should have primary responsibility for labor standards, the book also suggests that the WTO should consider how to address egregious and willful violations of core labor standards if they are trade related.

The global financial crisis and ensuing economic downturn has raised many questions concerning the future of global economic growth. Prior to the financial crisis, global growth was characterized by growing imbalances, reflected primarily in large trade surpluses in China, Japan, Germany, and the oil exporting countries and rapidly growing deficits, primarily in the United States. The global crisis raises the question of whether the previous growth model of low consumption, high saving countries such as China is obsolete. Although a strong and rapid policy response beginning in the early fall of 2008 made China the first globally significant economy to come off the bottom and begin to grow more rapidly, critics charged that China's recovery was based on the old growth model, relying primarily on burgeoning investment in the short run and the expectation of a revival of expanding net exports once global recovery gained traction. Critics, however, argued that as government-financed investment inevitably tapered off, the likelihood was that global recovery would not be sufficiently strong for China's exports to resume their former role as a major contributor to China's economic expansion. The prospect, in the eyes of these critics, is that China's growth will inevitably falter.

This study examines China's response to the global crisis, the prospects for altering the model of economic growth that dominated the first decade of this century, and the implications for the United States and the global economy of successful Chinese rebalancing. On the first it analyzes the strengths and weaknesses of China's stimulus program. On the second it analyzes the nature of origins of the imbalances in China's economy and the array of policy options that the government has to transition to more consumption-driven growth. On the third successful rebalancing would mean that more rapid growth of consumption would offset the drag on growth from a shrinkage of China's external surplus. Successful rebalancing would mean China would no longer be a source of financing for any ongoing US external deficit. From a global perspective China would no longer be a source of the global economic imbalances that contributed to the recent global financial crisis and great recession.

The Russian revolution, collapse of the Soviet Union, and Russia's ensuing transformation belong to the greatest dramas of our time. Revolutions are usually messy and emotional affairs, challenging much of the conventional wisdom, and Russia's experience is no exception. This book focuses on the transformation from Soviet Russia to Russia as a market economy, and explores why the country has failed to transform into a democracy.

It examines the period from 1985, when Mikhail Gorbachev became the Soviet Union's Secretary General of the Communist Party, to the present Russia of Vladimir Putin. Åslund provides a broad overview of Russia's economic change, highlighting the most important issues and their subsequent resolutions, including Russia's inability to sort out the ruble zone during its revolution, several failed coups, and the financial crash of August 1998.

More than two and a half years have passed since China announced a number of changes to its foreign exchange regime in July 2005. During this period, the debate on the pros and cons of China's exchange rate policy, which had begun in earnest several years earlier, intensified. This important new book, based on an Institute conference in October 2007, takes stock of exchange rate policy in China and identifies the major policy options going forward.

Specific proposals presented in the volume address how best to eliminate any misalignment of the renminbi; how best to reduce pressures emanating from the sterilization of large reserve accumulation; how best to make capital flows the ally--not the enemy--of exchange rate policy; and what institutional arrangements and policy guidelines to put in place to reap the greatest benefits from management of China's large foreign exchange reserves. Leading experts--including three from China--have contributed to the volume. The keynote address by Wu Xiaoling, deputy governor to the People's Bank of China at the time of the conference, is also presented in the book.

The turmoil in financial markets that resulted from the 2007 subprime mortgage crisis in the United States indicates the need to dramatically transform regulation and supervision of financial institutions. Would these institutions have been sounder if the 2004 Revised Framework on International Convergence of Capital Measurement and Capital Standards (Basel II accord)--negotiated between 1999 and 2004--had already been fully implemented? Basel II represents a dramatic change in capital regulation of large banks in the countries represented on the Basel Committee on Banking Supervision: Its internal ratings-based approaches to capital regulation will allow large banks to use their own credit risk models to set minimum capital requirements. The Basel Committee itself implicitly acknowledged in spring 2008 that the revised framework would not have been adequate to contain the risks exposed by the subprime crisis and needed strengthening.

This crisis has highlighted two more basic questions about Basel II: One, is the method of capital regulation incorporated in the revised framework fundamentally misguided? Two, even if the basic Basel II approach has promise as a paradigm for domestic regulation, is the effort at extensive international harmonization of capital rules and supervisory practice useful and appropriate? This book provides the answers. It evaluates Basel II as a bank regulatory paradigm and as an international arrangement, considers some possible alternatives, and recommends significant changes in the arrangement.