Macroeconomic Foundation of Functioning of the IMF: An Evolutionary Journey

Dilip Nachane () and Partha Ray ()
Additional contact information
Dilip Nachane: Indira Gandhi Institute of Development Research
Partha Ray: National Institute of Bank Management, NIBM Post Office

A chapter in Perspectives on Inclusive Policies for Development in India, 2022, pp 81-104 from Springer

Abstract: Abstract This paper narrates the chronicle of the evolutionary journey of theoretical foundation of functioning of the International Monetary Fund (IMF) and tries to locate various twists and turns. The initial basis of the IMF-supported adjustment programme came from an application of Polak, IMF Staff Papers 6:1–50, (1957) model that attempted an integration of monetary, income and balance of payments analyses. Subsequently, this got transformed into “financial programming models”, which got refined through IMF’s experience of lending to countries. Later during the mid-1980s, the IMF developed a modern dynamic multi-country macromodel of the world economy, called the MULTIMOD. This model was designed to study the transmission of shocks across countries as well as the short-run and medium-run consequences of alternative monetary and fiscal policies. During the late 1990s, the IMF developed a multi-country dynamic stochastic general equilibrium (DSGE) model called Global Economy Model (GEM). In recent past, IMF’s theoretical foundation came under heavy attack during the global financial crisis of 2008–2009. In particular, disconnect between macro and financial sector in IMF’s operational models has been held responsible as one of key causes behind IMF’s inability to give any early warning about built-up of risks in the US financial sector. More recently, while various refinements have been made to incorporate financial sector in IMF’s macromodel in DSGE tradition, the quest for such models is still on. In the ultimate analysis, the IMF is a quota-based organization. Its functioning and research output could reflect this skewed governance structure. Till the time, this gets addressed in a satisfactory way; the macroeconomic foundation of IMF functioning will be a hostage of the interests of principal shareholders of the IMF.

Date: 2022
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-19-0185-0_6

Ordering information: This item can be ordered from
http://www.springer.com/9789811901850

DOI: 10.1007/978-981-19-0185-0_6

Access Statistics for this chapter

More chapters in India Studies in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().