Centre for Financial
& Management Studies (CeFiMS) - University of London
Individual Professional
Courses – IPC
The International Monetary Fund and Economic Policy [FE201]
Introduction
Few countries have complete autonomy in macroeconomic policy. For many policy
is conducted in collaboration with the International Monetary Fund (IMF) or
supervised by the IMF. The course examines the changing roles of the IMF, the
nature of economic policies it encourages countries to pursue, and some of the
effects these policies have on the economic environment of business, on the
financial sector, and on social conditions. The course gives a simple
introduction to the basic IMF economic policy framework, ‘financial
programming’. Using different types of countries, including transition economies
and developing countries as case studies, it enables students to study issues
such as the role of capital controls and the problems of highly indebted
countries.
Aims & Objectives
By the time you have completed your study of this course, you will be in a
position to understand the role, function and operations of the IMF, its
approach to stabilisation, and the major criticisms and controversies that its
approach has elicited. You will also be able to identify the influence of the
financial sector in precipitating instability, and you will have a strong
appreciation of the particular circumstances of low-income countries seeking to
stabilise their economies.
Resources
Students receive a looseleaf binder containing eight ‘course units’; these
texts are carefully structured to provide the main teaching and are equivalent
to traditional course lectures, defining and exploring the main concepts and
issues, locating these within current economics debate and introducing and
linking the further assigned readings. Three assignments (of which two are
counted towards the final course grade) marked by your CeFiMS tutors, and a
specimen examination paper are also included within the student pack, along with
the following:
Textbooks:
S. Ishii and K. Habermeier, Capital Account Liberalisation and Financial
Sector Stability, Occasional Paper No. 211, 2002, International Monetary
Fund, Washington D.C..
Ariel Buira (ed.), Challenges to the World Bank and IMF – Developing Country
Perspectives, 2003, Anthem Press, London.
Independent Evaluation Office, The IMF and Recent Capital Account Crises,
Indonesia, Korea and Brazil, 2003, International Monetary Fund, Washington
D.C.
Kanitta Meesook, Il Houng Lee, Olin Liu, Yougesh Khatri, Natalia Tamirisa,
Michael Moore and Mark H. Krysl, Malaysia: From Crisis to Recovery, 2001,
Occasional Paper 207, International Monetary Fund, Washington D.C.
Readings:
A compilation of further readings: recently published articles or seminal
writings which augment and illustrate the main text.
Course Timetable:
This shows the linkage between the various components of the course and
indicates the schedule for reading the texts, submitting assignments, etc.
Course Content
Unit 1 Macroeconomic Stabilisation and the Role of the International
Monetary Fund
In this unit you will examine several of the key institutional
characteristics of the IMF, including its mandate, its ownership and
decision-making structure and its organisational structure. You will also
examine the various functions performed by the IMF, as well as the range of
financing facilities offered by the organisation to its various members.
Unit 2 The IMF’s Approach to Stabilisation
In this unit you will examine a range of issues pertaining to the way the IMF
conducts its work, in particular its lending operations. Firstly, you will study
some of the major trends in IMF lending since the establishment of the
institution over sixty years ago. You will also examine the specific approach to
stabilisation pursued by the IMF. This approach is known as the financial
programming approach.
Unit 3 Alternative Approaches to Stabilisation
Here you will further your inquiry as to what are the best mechanisms for
achieving macroeconomic stabilisation in a number of logical steps. First, you
will examine some alternate approaches to the financial programming model – in
particular, structuralist models of stabilisation policy. Second, you will study
some of the key differences in the assumptions used, between the IMF’s financial
programming approach and the alternate approaches to stabilisation. And finally,
you will examine some empirical evidence about the success of IMF stabilisation
programmes.
Unit 4 Stabilisation and the Financial Sector
In this unit you will therefore focus your attention on stabilisation and the
financial sector. You will briefly examine a range of financial crises, in
Mexico, in East Asian countries and in Russia – all of which took place between
1994 and 2000. You will then consider the significant costs associated with
banking and financial sector crises, and examine the variety of responses to
these crises by the IMF and by other international financial agencies. These
efforts have focused on two sets of objectives: firstly, finding ways to help
avoid or prevent crises from occurring and, secondly, where crises nevertheless
occur, in trying to find ways to manage these crises effectively.
Unit 5 Stabilisation Policy and the Financial Sector: Institutional
Responses to Recent Crises
In Unit 5, you will focus on a particular set of issues that arose following
the East Asian crisis – the issue of how the IMF itself reacted to the evidence
that the role of the financial sector had previously been significantly
underestimated as a source of macroeconomic instability. You will trace some of
the major shifts in its approach to stabilisation, arising from the experience
in East Asia and in other emerging markets which experienced widespread
instability from the late 1990s. You will also examine how other institutions
with some responsibility for the stability of the international financial system
have reacted in response to the emerging market crises of that period.
Unit 6 Stabilisation and the Financial Sector: Some Challenges and
Controversies
In this unit, you will continue focusing on the role of the financial sector
in stabilisation policy, by studying country case studies to examine a few
particular controversies that have arisen in the past decade. You will examine
four particular sets of issues:
-
Appropriate timing and sequencing of capital account liberalisation
-
Approaches to the introduction and retention of capital controls
-
Approaches to stabilisation in the context of financial crisis
-
The IMF’s approach to large-scale lending
Unit 7 Stabilisation and Low-income Countries
In Units 7 and 8, you will turn to the case of a different set of economies –
those that are poor, of which many are seeking to stabilise in the context of
enormous and unsustainable indebtedness. Unit 7 will examine five particular
issues regarding the IMF’s approach to stabilisation in these countries. You
will also consider some of the specific challenges for countries trying to
stabilise in the context of an immediate past conflict and, finally, you will
examine the role of IMF technical assistance in low income countries, with
reference to a number of country case studies.
Unit 8 Challenges for Low-income Countries
In this final unit of the course, you will study two important issues. The
first issue focuses on the voice, level of influence and representation
arrangements for developing countries in the IMF. The second and final part of
Unit 8 focuses on a second set of challenges – how to develop social safety nets
to help mitigate the effects of such programmes, particularly on the poor. You
will examine a particularly useful model by Kanbur, which helps understand the
variety of implications which stabilisation programmes can have on the poor, and
you will study a particular example of the construction of a social safety net,
by the authorities in the Ukraine.
Tuition & Assessment
The course is assessed by:
Each assignment consists of compulsory questions or an essay topic, which should
be answered, in total, in no more than 2500 words. Assignments and examinations
are weighted on a 30/70 basis.
