theinternationalmonetaryfunditspresentroleinhistorical.docVIP

The International Monetary Fund: Its Present Role in Historical Perspective* Michael D. Bordo Rutgers University Harold James Princeton University November 1999 Prepared for the U.S. Congressional International Financial Institution Advisory Commission * For valuable and timely research assistance we thank Debajyoti Chakrabarty. For helpful comments on an earlier draft we thank Jim Boughton. Table of Contents Introduction What does the IMF do? Origins and Original Aims The IMF’s Role in the Post Bretton Woods Era: Externalities and Public Goods? The IMF in Search of a Mission International Politics and the IMF Conclusion: Some Issues in the Case for Reform References Tables Average Time Spent in IMF Programs by Class of Borrowers Arrears in the IMF Figures IMF Quotas as a Share of World Imports IMF Charges and Commercial Interest Rates Total Fund Credit Outstanding to Members Low Interest IMF Lending Transactions of the International Monetary Fund, 1955 – 1997 1. Introduction After 55 years of existence there are strongly conflicting views on the importance and role of the IMF for today’s international economy, and on its effectiveness. On the one hand there are those who see the Fund as having adapted well to the changing world environment with perhaps the need for some reforms to the International Architecture. On the other hand are those who believe that its useful time has passed in the environment of exchange rate flexibility and open capital markets. These radically conflicting views require the need for a balanced perspective on the role and performance of the IMF within the context of its historical evolution. In this paper we describe what the IMF is and what it does. We consider its origins as the guardian of the Bretton Woods adjustable peg exchange rate system and financier of temporary current account deficits for advanced countries, to its present primary roles as development financier and crisis manag