Unlike the 2001 default which shook the world, last week’s Argentinian default has had more muted impact and bondholders are sanguine. Has global finance finally been tamed?

LAST week, Argentina defaulted for the second time in 13 years after failing to reach a deal with a group of so-called “holdout” creditors. Unlike the December 2001 default which had reverberated around the world and created panic everywhere, the adverse impacts this time around have been more muted and are being felt mainly at home. Has global finance finally been tamed? No, a lot has been done to reform the global financial architecture, but more remains to be done.

Financial crises of the past three decades have underscored the dangers of unfettered finance and led to major reforms. Global financial architecture has emerged firmly as the fourth pillar of the rules-based international economic architecture established at Bretton Woods, complementing the monetary, trade and development architectures. Mirroring the efforts to promote global financial safety nets for crisis prevention and crisis management, reforms of the global financial architecture have been multi-pronged: multilateral, regional and national.

… The writers are dean and associate professor, respectively, at the S. Rajaratnam School of International Studies, Nanyang Technological University.