Refocusing the IMF

Feldstein, Martin
March 1998
Foreign Affairs;Mar/Apr98, Vol. 77 Issue 2, p20
This article discusses the role of the International Monetary Fund (IMF) in handling of the economic and institutional problems of the Southeast Asian countries affected by the Asian currency crisis. It is observed that the Southeast Asian currency collapse that began in Thailand was an inevitable consequence of persistent large current account deficits and of the misguided attempt of Thailand, Indonesia, Malaysia, and the Philippines to maintain fixed exchange rates relative to the dollar. The IMF, meanwhile, insisted on fundamental changes in economic and institutional structures as a condition for receiving IMF funds. The author cautions that the IMF's recent emphasis on imposing major structural and institutional reforms as opposed to focusing on balance-of-payments adjustments will have adverse consequences in both the short term and the more distant future. Further, he advises the IMF to stick to its traditional task of helping countries cope with temporary shortages of foreign exchange and with more sustained trade deficits.


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