Essays on The International Monetary Fund - the Bretton Woods Agreement Case Study

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The paper 'The International Monetary Fund - the Bretton Woods Agreement" is a good example of a finance and accounting case study.   The International Monetary Fund is an international institution that is involved in the monitoring and regulating of economic-related matters in the international sphere. The IMF is usually associated with international borrowing transactions involving governments. However, this is just the tip of the iceberg because the IMF is involved in the more serious matters of preventing economic crisis that could cause the collapse of governments. One of the tools used by the IMF to achieve its goals is the so-called surveillance system.

The surveillance system is conducted on a state-to-state basis by the staff of the Executive on a periodic basis delving into domestic information related to the country’ s economy. Although this seems clearly an impingement of a state’ s sovereignty, the member-states have consented to by signing the Articles of Agreement for the purpose of achieving global economic stability. Nonetheless, the surveillance power of the IMF is not always effective and seems to have persuasive powers only on those states that need its favour.

Those who have no need of it, tend to ignore IMF recommendations resulting from consultations during surveillance. In theory, the surveillance system of the IMF is important because of the public good it engenders although despite its tendency to infringe on the sovereignty of the state, but in practice, the system is flawed and is being weakened by the overall impression that the IMF is incapable of being independent and is ineffective in achieving the ends of its functions. HISTORY AND STRUCTURE The Bretton Woods Agreement In July 1944, some 45 countries met in Mount Washington Hotel in Bretton Woods, New Hampshire.

This was the time when the Great Depression – the most severe depression in the 20th century- had just eased up and countries were in the process of recovering. Before that meeting, countries scampered to adopt various measures to recover from the depression, such as more stringent foreign trade rules, competing harder and prohibiting against holding foreign exchange. This had a disastrous effect of slowing down international trade. To remedy the situation, Harry White of the US and John Keynes of the UK met and discussed economic-related measures to prevent another depression (Woods 2000; IMF 2013; Vreeland 2006).

The idea of creating a body that could function as the heart of the economic framework was hatched and the International Monetary Fund or IMF was created. IMF’ s original function as a regulator of exchange rates an authorised lender of money on a strictly short-term basis to countries experiencing a crisis on the balance of payment (Woods 2003). The Bretton Woods Agreement was initially signed by 29 countries and became effective on March 1, 1947.

That very same year, it lent money to France – its first borrower. The US helped shore up the IMF’ s funds through the Marshall Plan infusing $13 billion between 1947 and 1953. In the late 1980s and into the 1960s, the IMF’ s membership expanded, particularly countries coming from the African continent. As the Cold War became heated, however, most Soviet allies avoided membership in the IMF. The Bretton Wood system of exchange was originally based on the gold standard and the US dollar, but this collapsed in the 1970s and the floating rate exchange was adopted in its stead.

Headquartered at Washington, D.C. , the IMF has currently 188 members and maintains a staff of 2,670 from 64 countries. As of 2013, it has a total quota of $360 billion with additional committed resources of $1 trillion and $233 billions of committed loans, $162 billions of which have not yet been drawn.

References

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Bossone, B (2008) ‘The Effectiveness of IMF Surveillance A study on global financial governance’, World Economics, 9(4).

Buira, A (2005) The IMF and the World Bank at Sixty (Anthem Press).

Dreher, A (2007) Independent actor or agent? An empirical analysis of the impact of U.S. interests on International Monetary Fund conditions.

Fritz-Krackow, B and Ramlogan, P (2007) ‘International Monetary Fund Handbook’, International Monetary Fund.

Gola, C and Spadafora, F (2009) Financial Sector Surveillance and the IMF (International Monetary Fund, Working Paper 09/02)

(2013) Factsheet: IMF Surveillance. International Monetary Fund.

Lavigne, R and Schembri, L (2009) Strengthening IMF Surveillance: An Assessment of Recent Reforms (Bank of Canada Discussion Paper 2009-10).

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OECD (2013) Glossary of statistical terms: G10,

Vreeland, J (2006) The International Monetary Fund (IMF): Politics of Conditional Lending, Routledge.

Woods, N (2003) ‘The International Monetary Fund and World Bank’, Encyclopaedia of Government and Politics 1, (Routledge, London).

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