The International Monetary Fund: 70 Years of Reinvention

47 Pages Posted: 15 Dec 2015

See all articles by Carmen Reinhart

Carmen Reinhart

Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ; Harvard University - Harvard Kennedy School (HKS)

Christoph Trebesch

Kiel Institute for the World Economy; Centre for Economic Policy Research (CEPR)

Date Written: December 14, 2015

Abstract

A sketch of the International Monetary Fund’s 70-year history reveals an institution that has reinvented itself over time along multiple dimensions. This history is primarily consistent with a “demand driven” theory of institutional change, as the needs of its clients and the type of crisis changed substantially over time. Some deceptively “new” IMF activities are not entirely new. Before emerging market economies dominated IMF programs, advanced economies were its earliest (and largest) clients through the 1970s. While currency problems were the dominant trigger of IMF involvement in the earlier decades, banking crises and sovereign defaults became they key focus since the 1980s. Around this time, the IMF shifted from providing relatively brief (and comparatively modest) balance-of-payments support in the era of fixed exchange rates to coping with more chronic debt sustainability problems that emerged with force in the developing nations and now migrated to advanced ones. As a consequence, the IMF has engaged in “serial lending”, with programs often spanning decades. Moreover, the institution faces a growing risk of lending into insolvency, most widespread among low income countries in chronic arrears to the official sector, but most evident in the case of Greece since 2010. We conclude that these practices impair the IMF’s role as an international lender of last resort.

Keywords: Monetary Policy, Finance, International Finance, Economics, International Monetary Fund, International Economics

Suggested Citation

Reinhart, Carmen and Trebesch, Christoph, The International Monetary Fund: 70 Years of Reinvention (December 14, 2015). HKS Working Paper No. 077, Available at SSRN: https://ssrn.com/abstract=2703449 or http://dx.doi.org/10.2139/ssrn.2703449

Carmen Reinhart (Contact Author)

Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ( email )

79 JFK Street
Cambridge, MA 02138
United States
617-496-8643 (Phone)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
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Christoph Trebesch

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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