Link para VOLVER > > > https://wp.me/p2jyCr-Xn
“CLICK” al titulo amarillo del documento que quieras ver completo con graficos, colores y referencias activas en PDF
TESTIMONY to U.S.A. Congress 28 of September 1999
Link to COME BACK here > > https://wp.me/p2jyCr-Xn
September 28, 1999
International Financial Institution Advisory Commission
United States Congress
The International Monetary Fund has grown in resources and responsibilities since it was established in 1944. It has become abundantly clear that the IMF’s “original rationale no longer fits,”1 that the world economy has changed dramatically since the fund was established, and that the increasing frequency and severity of economic crises in recent years require a rethinking of the IMF’s role in the global financial system.
The IMF has recognized this need and is introducing some reforms to the way it operates. The fund has in fact developed new missions for itself many times in response to crises or changes in the world economy. Those episodes have included the end of the system of fixed exchange rates in the early 1970s, the subsequent oil crises of that decade, the Third World debt crisis of the 1980s, the collapse of socialism, and, beginning with Mexico in 1994, emerging market financial crises.
In short, the IMF has expanded its role from providing short-term loans based on macroeconomic policy change to providing longer-term aid conditioned on structural economic reforms to providing bailout funds and becoming an international crisis manager. As the graph shows, new missions and greater lending have led to periodic increases in the fund’s resources, which donor nations have granted every time such increases have been requested.
Sources: IMF, International Financial Statistics (various issues); and IMF, Financial Organization and Operations of the IMF(Washington: IMF, 1990).
The IMF today finds itself in an awkward position. It continues to provide massive aid to countries suffering from financial crises while wishing to avoid creating moral hazard. The agency has thus proposed initiatives to “bail in” the private sector, so as to make investors bear more of the cost of bad investment decisions. Conversely, the fund has created a line of credit to provide aid to countries before crises occur, so as to prevent them. Yet preventive lines of credit are likely to increase moral hazard, while efforts to force losses on the private sector may precipitate the very crises they intend to prevent. Finally, the IMF wishes to become more transparent and improve its surveillance function. Its dual goals of preventing the outbreak of financial turmoil and maintaining relations with client countries, however, may undermine the fund’s credibility.
Many of the problems the IMF seeks to resolve would be reduced or eliminated with increased reliance on direct negotiations between lenders and borrowers in international finance and decreased reliance on IMF lending and mediation. That has become more and more evident since the early 1980s. To see why, it is useful to look at the evolution of the IMF.
The International Monetary Fund was established at Bretton Woods in the aftermath of the Great Depression and at the end of World War II, when confidence in a liberal world economy was low. The fund’s purpose was to maintain exchange rate stability by lending to countries experiencing temporary balance of payments problems. In a world of fixed exchange rates, countries would only be allowed to alter their exchange rates if there were fundamental imbalances in their economies. In this way, the IMF would promote international stability and avert competitive devaluations.
Although world trade did increase under the Bretton Woods system, trade did not return to its 1913 level (as a share of the global economy) until the mid-1970s, after the Bretton Woods system was abandoned. Moreover, the system was not as orderly as envisioned by its founders. Sharp and sudden currency devaluations would occur. Economic historian Leland Yeager observed that “The authorities of a country desiring to change its exchange rate typically make up their own minds on the matter and then simply notify the Fund. Though this notification is phrased as a request for permission, the Fund actually faces the choice only between acquiescing or risking loss of face by seeing its authority flouted and the change made anyway.”2
The Bretton Woods system was, in fact, “unworkable from the start” and “promptly began to break down” once major European countries began lifting capital controls on their currencies in 1958.3 The breakdown occurred because countries pursued a combination of unsustainable policies-free capital flows, fixed exhange rates, and independent monetary policies. By the time President Nixon finally abandoned this system in 1971, thus ending the international system of fixed exchange rates, he was merely acknowledging economic reality. That similar scenario has been played out in the 1990s as financial crises have forced developing countries to learn that they cannot pursue both independent monetary policies and tie their currencies to the dollar in a world of free capital flows. It is somewhat ironic then, that the recent financial crises in Asia and elsewhere have elicited calls for the establishment of a “new Bretton Woods.”