The debate on a new global financial architecture took on a new twist at the 54th annual meeting of the World Bank and International Monetary Fund here this week, as senior finance officials and some bankers proposed introducing a system for managing foreign exchange fluctuations to help curb global economic volatility.

"The lesson emerging markets have learned from the most recent crisis is that when an emerging economy depends on another currency, and the exchange rate of that currency fluctuates, the result is chaos," said Toyoo Gyohten, senior adviser to the Bank of Tokyo-Mitsubishi Ltd. and president of the Institute of International Monetary Affairs, a Tokyo-based think tank.

Citing wild swings in the value of the dollar against the Japanese yen and the instability this has triggered for Southeast Asian countries that depend on export earnings and on dollar- or yen-denominated loans, Mr. Gyohten called on finance officials to set up a multistage plan that would set "permissible" levels of fluctuation for the dollar, yen, and euro against each other.

Addressing fund managers and bankers at a symposium Saturday that was sponsored by Deutsche Bank, Mr. Gyohten argued that setting up a managed system with an international fund for intervening in foreign exchange markets would help suppress "the kind of overshooting and misalignments" that have triggered financial crises over the last two years in countries including Thailand and Brazil.

In a similar vein, Fred Bergsten, director of the Washington-based Institute for International Economics, said that the majority of G7 industrialized countries are backing a managed currency system.

"I hope they get it,'' Mr. Bergsten said. "It's eminently feasible, and what we've got now is totally ad hoc."

Mr. Bergsten and others warned that managed exchange rates are becoming more crucial as the U.S. dollar is coming under increased pressure and that there is a growing the risk the Federal Reserve will again raise interest rates, triggering a U.S. economic slowdown.

This, officials warned, could have a disastrous impact on already hard-pressed emerging-market economies.

"Any change in Fed policies has a direct impact on financial flows to Latin America," said Enrique Iglesias, president of the Inter-American Development Bank.

Hikes in U.S. interest rates, he said, translate directly into higher borrowing costs and decreased capital flows to Latin America, as money chasing higher yields flows back into the United States and other industrialized countries, he added.

Calls for a managed exchange rate system follow a warning by U.S. Treasury Secretary Lawrence Summers last week that international lending agencies such as the IMF will no longer intervene and provide financial assistance to countries that peg their currencies to the dollar and suffer a run on their currency.

The revival of interest in managed exchange rates comes after more than three decades of free-floating foreign exchange trading that has often triggered wild currency swings. It is one of a series of proposals that finance officials are considering to control global capital flows and reduce economic volatility.

Though finance officials maintain that a managed exchange rate system would help reduce volatility and ensure orderly growth, most bankers and some central bankers contended that market-driven solutions remain the most effective for reducing distortions in global capital flows.

Both Guillermo Ortiz, governor of the Mexican central bank, and Arminio Fraga, governor of the central bank of Brazil, rejected the idea that foreign exchange controls are needed to help overcome crises.

They also warned, however, that any sudden surge in interest rates could unsettle Latin American economies.

"The worst thing would be an unexpected high burst of increases in U.S. interest rates," Mr. Ortiz said.

European officials also expressed skepticism at the proposal and said it had little chance of including the euro.

"There might be some ideas around but I don't see them emerging in the foreseeable future," said Otmar Issing, a member of the executive board of the European Central Bank.

He added that the European Central Bank's top priority is ensuring that its own experiment with a single currency works.

"Anything that might endanger the success of the euro cannot be considered," Mr. Issing said.

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