The IMF and Global Financial Crises

Joyce, Joseph
July 2000
Challenge (05775132);Jul/Aug2000, Vol. 43 Issue 4, p88
Academic Journal
This article focuses on the role of the International Monetary Fund (IMF) in financial crises. The IMF, like the World Bank, was established after World War II as part of a new international monetary system designed to avert the economic disorder of the 1930s. Its intellectual fathers were Great Britain's John Maynard Keynes and American Harry Dexter White. They envisioned a regime that would ensure international stability so that countries could pursue domestic goals, such as full employment and growth, without disruption from external forces. The mission of the IMF is to promote international cooperation and to supervise enforcement of the rules. This mandate includes monitoring the compliance of member countries with the fund's Articles of Agreement and periodic consultations with their governments about their macroeconomic policies. The fund also extends financial assistance to countries with balance-of-payments deficits. However, the fund's resources are meant to be provided on an interim basis while governments address the underlying causes of the external disequilibrium and enact policies to correct it. While the global fixed exchange rate system of the Bretton Woods regime ended in 1971, many developing countries continued to peg their exchange rates against major currencies such as the dollar, thus ensuring a role for the IMF. During the debt crisis of the 1980s, the IMF worked with countries struggling to manage their financial burdens. The dissolution of the Soviet bloc in the 1990s gave the IMF a new group of client countries, the transition economies.


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