International Monetary Fund Case Study

International Monetary Fund (IMF)

The International Monetary Fund was created for promoting and stabilizing global financial relations and plays very important role in influencing economic policies of its member countries. Whenever financial crisis anywhere in the world, IMF is in the limelight. Stiglitz’s Globalization and its Discontents provides great insight into the International Monetary Fund’s role in an era of globalization and how .

Did IMF’s intervention worsened the East Asian financial

Stiglitz has been particularly critical of the International Monetary Fund’s handling of the East Asian crisis. Stiglitz highlighted five major mistakes that contributed to worsening the situation in East Asian countries. According to Stiglitz, The

advocating contractionary policies in one country led to spreading the crisis to neighboring countries. The combined impact of tight fiscal policies as well as high interest rates further dampen the demand worsening the crisis. On the other hand, high levels of indebtedness coupled with high interest rates sealed the death warrants for many organizations facing debt problems further contributing to crisis. As the crisis continued to run deep, International Monetary Fund started to focus on restructuring which led to more mistakes.

The third mistake was the closing of banks in the middle of crisis, which was a great mistake because prompt closure of these banks could not prevent hemorrhage of public money instead it promoted bank runs which contributed to worsening the situation. With large number of banks being out of the system, pressure on remaining banks increased and they stopped taking new customers which led to business being unable to find credit which was necessary for economic

In my opinion, Stiglitz overlay critical of IMF and putting too much confidence on the government’s ability to get it right, which highlights important question of why market failures occur if the governments were itself capable of handling them. I believe that IMF should be clear in its objectives and policies and promote the agenda to improve institutions as well as promote competition and efficiency while implementing policies. This is because the main aim of every IMF program is to raise economic wellbeing of nations suffering form