Post-crisis global monetary instability

Abstract

Getting over the financial crisis could originate the intensification of global monetary instability. Unlike the previous cases of global monetary stresses the current period is described by crisis processes within the system of reserve assets and inflation effects of financial imbalances and global liquidity. Skewed recovery of asset markets in terms of countries increases fluctuations of capital flows and exchange rates, thus increasing demands for foreign exchange reserves and preserving pre-crisis monetary relations alongside with search for alternative denominations of foreign assets of the country. As far as the monetary assets do not grow into global demand which revives real issue, the global economy finds itself in a stagflation trap. The bail out should be facilitated with the increase of international coordination of monetary policy in order to intensify control over the behavior of global liquidity.