INTERNATIONAL ECONOMIC INSTITUTIONS

International Economic Institutions



International Economic Institutions

Introduction

The financial crisis of 2008-2009 showed that dysfunction of financial regulation in a country, namely the U.S., could have consequences - including systemic scale - on the situation of financial intermediaries in the rest of the world. 10 years earlier, the bankruptcy of the LTCM hedge fund in the wake of the Asian and Russian crises had come first and as a solemn warning. Today, it is the consequences of the crisis of sovereign debt in some European countries that fear ripple effect on Western financial systems. Despite the interconnection of capital markets in the world, our financial regulatory systems remain essentially national in nature, yet dependent on the financial environment that prevailed after World War II, in which capital flows between countries were limited and mainly the fact of political and monetary authorities coordinated by the International Monetary Fund (IMF) (Vreeland 2007, 83 - 90).

However, the suspension "temporary" the dollar's convertibility into gold by President Nixon, there are only 40 years old, had committed the privatization movement of international capital flows. Then it will not cease to grow, especially in favor of financial deregulation initiated in the 1980s and liberalization of capital flows, completed at the end of the decade in industrialized countries and implemented in many emerging and developing countries over the next decade.

During the past 40 years, the national monetary and financial authorities have not remained inactive. They have tried to develop cooperation between them, either bilaterally or - especially - in the international forums organized by "business lines": banks, securities markets, insurance. These forums have given mission, increasingly over time, to bring out a set of benchmarks developed by consensus that is referred to by the English term soft law. This approach was preferred to transfer sovereignty to international financial institutions (IFIs), IMF and World Bank or the World Trade Organization (World Bank 2007, 123 - 140).

Role of International Monetary Fund

The International Monetary Fund (IMF) is a treaty-based, voluntary association of countries based on their real or potential impacts on the world's economy. It currently controls assets amounting to US$215 billion and has 182 member countries. Unlike the World Bank, the other “pillar” of the world economy, the IMF has no subsidiaries or affiliates. Its highest authority resides with the Board of Governors (which meets annually), each of whom is appointed by a member country.

IMF membership has varied over time, as has its role and responsibilities in world affairs. The evolution of the IMF can roughly be divided into phases based on the degree of functionality, relevance, and shifting purpose. Initially, the IMF was established at the Bretton Woods Conference (along with the World Bank) in New Hampshire with the signing of the Articles of Agreement in July 1944 and declaration of exchange values by the 44 member countries at the first meeting in 1946. However, most economists and historians disregard the impacts of the early IMF since the most important signatories (Western industrial democracies) refused to establish rules ...