This requires not only stronger financial intermediaries and better supervisors, but deeper and more liquid capital markets that provide greater access to capital for firms and greater freedom for households to borrow and to invest their savings. Certain features of today's emerging economies, notably the size of current account surpluses and the high levels of reserves, tend to be seen principally as sources of comfort against future crises. But you can also look at these phenomena as measures of the incompleteness of the institutional changes achieved in the monetary and financial arena, and as a sign of the persistent ambivalence in the emerging world about financial integration. The current account surpluses are, of course, the mirror image of the high rates of savings relative to investment. There are a range of factors that affect the flows of goods and services across international borders, but the sustained outflow of funds from some emerging economies witnessed in recent years may have as much to do with the limited intermediation capacity of the local financial systems as with the scarcity of profitable domestic investment opportunities. And in this sense you can read a large current account surplus as a sign of financial sector under development rather than of financial strength and maturity. The pattern of intervention in exchange markets and the scale of reserve accumulation provides a similar perspective on the challenges ahead. Policymakers in many emerging markets still reveal a substantial degree of reluctance to allow the exchange rate to adjust to market forces.
Despite this progress, the causes and implications of the crises remain the subject of contentious debate. In fact, if you'd fallen asleep in early or late 1998, and awakened in the IMF boardroom yesterday, you would find officials discussing many of the same questions. Were the crises the result of fundamental economic and financial weakness at the national level, or the result of forces largely beyond the control of governments in emerging market economies? Can small open economies grow and prosper with open capital markets and floating exchange rates? Did moral hazard induced by the success of the Mexican package earlier in the decade cause the buildup in lending that led to crises that followed? Did the initial response of the IMF and its creditors make the crises worse? What level of insurance, in the form of reserves or debt structure, is adequate to protect against crises? How should the IMF differentiate between conditions of illiquidity and insolvency, and decide when it should help a member country restructure its debt obligations? Even among people who probably agree on the most important issues in economics and finance, you can still find stark differences in their answers to these questions. The diversity in the circumstances of the countries involved, and in the policy responses adopted, makes it easier for people to find evidence to support fundamentally different views.