...How The IMF Can Promote Full Employment: Through advising countries to adopt pro-growth policies, the IMF intentions are to promote an increase in growth and employment. However in many cases these policies have led to many countries growth without jobs. These reforms were placed into a developing country’s agenda of those in a financial crisis. Over the years though these set of policies have been criticized for bringing instability in the overall employment rate of the nation. For Example: Comparing Mexico, which had implemented most policies of the Washington based IMF, and Brazil, which kept a more “Closed Door” approach as we all know. Mexico was more vulnerable to international crisis and didn’t reach a higher level of growth and employment, as of Brazil’s, even though it had full, tax free access to the U.S. Market. “NAFTA’s (North American Free Trade Agreement) effects on employment in the Mexican rural sector have been disadvantageous, somewhat due to the weakened capacity of this sector to absorb labor and to the limited growth of value added in the manufacturing industry. In 2004, open unemployment in Mexico reached an all-time high, and the informal sector has vastly expanded.” (United Nation Publication, 2005) Another example is Nigeria, where GDP grew 7% year after year. The IMF again managed to increase growth without increasing employment. In fact this oil rich country saw its own unemployment rate go from 19.7% to 23.9%. But according to the IMF, Nigeria...
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...and balanced growth on international trade, and to contribute thereby to the promotion and the maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy. 3. To promote exchange stability, to maintain or orderly exchange arrangements among members, and to avoid competitive exchange depreciation. 4. To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which the growth of world trade. 5. To give confidence to members by making the Fund’s resources available to them under safeguards, thus providing them with the opportunity to correct maladjustments to measure destructive of national or international prosperity. 6. In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members. According to the text “The IMF’s mandate is to promote international monetary cooperation, exchange stability, and orderly exchange arrangements. (Peng, Global Business pg. 216). Every country that joins IMF can help promote full employment through economic and financial stability. For example, world banks can boost economic diversification and employment creation through appropriate management of the exchange rate. The fixed exchange rates can...
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...provides resources to other bodies. In addition, laws and regulations underpinning bank supervision may not be formally deficient. However, the extensive state ownership of banks severely undermines regulatory governance (IMF, 2004). Many uncertainties also surround the preconditions for effective banking supervision and sustainable macroeconomic policies. These uncertainties also hinders well-developed public infrastructure, effective market discipline, efficient resolution of banking problems and appropriate level of systemic protection. Evident in the IMF (2004) report is the award of banking licenses to individuals without experience. The net worth of bank owners could not be reliably established (IMF, 2004). The 1990 law on money did not require full capital payment. This culminated to the failure of the largest private bank in 2003 with assets of 3% of GDP. The Algerian banking system currently has 28 active lending institutions of which 21 are banks and 7 are financial institutions. There is also one development bank and an offshore bank. The total number of lending institutions has increased from end 1999 when there were 21 as a result of private sector development. Even though, currently there are 15 private banks, the public sector remains predominant (IMF, 2004). They have long been mere instruments of state policies. Public banks accounts for a high proportion of total banking sector activity, in particular, they represent 86.5% of the aggregate balance sheet, 91% of...
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...to do with famine? Debt relief is the key to poverty reduction. In 1996, the International Monetary Fund (IMF) and World Bank came together and launched the Heavily Indebted Poor Countries (HIPC) Initiative (Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, 2010). Under the HIPC, the Fund and Bank provide interim debt relief in the initial stage and full debt-relief upon completion (Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, 2010). In order to be considered, “countries must meet certain criteria, commit to poverty reduction through policy changes, and demonstrate a good track-record over time” (Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, 2010). The HIPC is a two-step process. The first step of the HIPC is decision point. In order to be considered for HIPC Initiative assistance, a country must meet four qualifications. First, the country must be eligible to borrow from the World Bank’s International Development Agency (Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, 2010). Secondly, the country must face an unsustainable debt burden that cannot be satisfied by traditional debt relief mechanisms (Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, 2010). Next, the country must have established a track record of reform and sound policies through IMF and World...
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...“The IMF is a secretive institution with no accountability. The IMF is funded with taxpayer money, yet it operates behind a veil of secrecy. Members of affected communities do not participate in designing loan packages. The IMF works with a select group of central bankers and finance ministers to make polices without input from other government agencies such as health, education and environment departments. The institution has resisted calls for public scrutiny and independent evaluation”. (Global exchange resources (2015). The IMF and the World Bank have contributed to environmental destruction and provide wide range of inequality to the global economy as a whole. There new enforce policies called structural adjustment policies (SAPs) has...
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...in the lead up to the crisis 4 Table 2.1: Economic data since unification of Germany 5 3. Impact of the crisis in Germany 6 Graph 3.1: Exports in German compared to largest global exporters since 2000 7 Graph 3.2: Germany vs US employment data 8 4. Recovery of the German economy 8 5. Conclusion 9 6. References 10 Introduction: Germany at a glance Germany is a major economic and political force within Europe, and a founding member of the European Union (EU) since 1993. With a population of 82.1m and a Gross Domestic Product (GDP) of €2.5b, Germany is the most populous member state of the EU and has the largest national economy in Europe (EU website, 2014). As indicated in Graph 1.1 below, Germany also has the fourth largest economy by real GDP globally (behind the US, China and Japan) and is the third largest exporter in the world. Graph 1.1: World’s largest economies by GDP Source: International Monetary Fund, World Economic Outlook Database, April 2014 Exports make up approximately one third of Germany’s GDP and are driven by a strong industrial base. Germany is a major producer and exporter of automobiles, transport equipment, mining products, electronic and communications equipment, chemicals and pharmaceuticals (IMF, 2014). As a result of this concentration on exports, competitiveness in the global economy is an important factor impacting living standards in Germany. In addition, while an open economy, social protection and the state have an important...
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...An Open Letter from Kenneth Rogoff, International Monetary Fund, to Joseph Stiglitz, Author of Globalization and Its Discontents 2 July 2002 At the outset, I would like to stress that it has been a pleasure working closely with my World Bank colleagues—particularly my counterpart, Chief Economist Nick Stern—during my first year at the IMF. We regularly cross 19th Street to exchange ideas on research, policy, and life. The relations between our two institutions are excellent—this is not at issue. Of course, to that effect, I think it is also important, before I begin, for me to quash rumors about the demolition of the former PEPCO building that stood right next to the IMF until a few days ago. No, it's absolutely not true that this was caused by a loose cannon planted within the World Bank. Dear Joe: Like you, I came to my position in Washington from the cloisters of a tenured position at a topranking American University. Like you, I came because I care. Unlike you, I am humbled by the World Bank and IMF staff I meet each day. I meet people who are deeply committed to bringing growth to the developing world and to alleviating poverty. I meet superb professionals who regularly work 80-hour weeks, who endure long separations from their families. Fund staff have been shot at in Bosnia, slaved for weeks without heat in the brutal Tajikistan winter, and have contracted deadly tropical diseases in Africa. These people are bright, energetic, and imaginative. Their dedication humbles...
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...The International Monetary Fund (IMF) was originally established in order to encourage international co-operation to cope with recession and protectionism on a world scale and to discourage individual countries from pursuing policies that would beggar their neighbors and eventually themselves. The desire to improve on the international chaos of the 1930s led to the Bretton Woods Conference in 1944, and an attempt to devise a financial system which would provide a more permanent and acceptable framework for international transactions. It was intended that the emerging Bretton Woods system would generate benefits for international trade in the form of stable (though not necessarily fixed) exchange rates, while at the same time, avoiding the deflationary rigidities of the gold standard mechanism. The system was designed to ensure a world of full employment and economic growth. This paper will examine a few of the negative and positive aspects the IMF has had since its inception, and how it has evolved over time to answer the question, is the IMF a sinner or saint? If the general purpose of the IMF at its inception was to oversee the operation of the infant Bretton Woods system, its more specific purposes were spelled out in Article 1 of its Articles of Agreement as follows: | (i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems. | | (ii) To facilitate...
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...Fair Trade: International Trade and World Output AIU Online/MGMT 220 Charlotte Taylor May 6, 2012 Abstract A business process that is affected by consumer demand, international trade, is a vital necessity in order for economies to stay afloat, expand, and to enhance the welfare of society. However, if trade should cease, the goods we have or wish to obtain would become unaffordable or maybe not available at all. In addition, the people begin to make fewer choices about purchasing products. Introduction International trade and world output both have direct and indirect effects on the economy (Griffin, et al., 2010). Therefore, in a world where trade is very vital it is critical to comprehend the relationship between international trade and world output. In addition, this paper will explain the broad pattern of international trade, describe a product that might no longer be obtainable here in the United States if trade would cease; and provide one other nation and the product that the country can do without. Relationship: International Trade and World Output Trade is when one person voluntary exchange goods, services, assets, and money with another person, or organization. Since, the transaction is voluntary; all parties must accept that they will gain something from the exchange before completing the transaction. International trade is a business process between countries, individuals, or other business associations. It is usually referred to as world or foreign...
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...Theme: “Beyond Perfect Competition – Markets in Reality” Title of the paper: Imperfect Competition, Financial Market & Effective Demand By St. Xavier’s College, Kolkata (Autonomous) Hemangi Desai Email: hemangi221@gmail.com 9874630182 Abstract: We construct an effective demand model involving interaction between the real sector and the financial sector. The commodity market is imperfect. We explain price stickiness in terms of Kaleckian Mark-up pricing. The financial assets are money, government bonds and a risky asset, say equity or stock. The model is an extension of Krugman’s model of international financial multiplier and the model can explain not only the fall in asset prices but also its recessionary consequences. The paper also contains policy recommendations to overcome the financial meltdown. JEL Classification: E60, E61. Keywords: Mark-up pricing, financial meltdown, effective demand. Section 1: Introduction The global financial system is currently in meltdown. Stock markets have been falling most days, money markets and credit markets have shut down as their interest-rate spreads skyrocket, and it is still too early to tell whether the raft of measures adopted by the US and Europe will stem the bleeding on a sustained basis. A generalized run on the banking system has been a source of fear for the first time in seven decades, while the shadow banking system - broker-dealers, non-bank mortgage lenders, structured investment vehicles and conduits...
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...UCD CENTRE FOR ECONOMIC RESEARCH WORKING PAPER SERIES 2011 Ireland’s Sovereign Debt Crisis Karl Whelan, University College Dublin WP11/09 May 2011 UCD SCHOOL OF ECONOMICS UNIVERSITY COLLEGE DUBLIN BELFIELD DUBLIN 4 Ireland’s Sovereign Debt Crisis Karl Whelan University College Dublin 1 May 2011 1 This paper was presented at a workshop on "Life in the Eurozone With or Without Sovereign Default?" that took place at the European University Institute in Florence on April 14, 2011. 1 1. Introduction Among the countries currently experiencing sovereign debt crises, Ireland’s case is perhaps the most dramatic. As recently as 2007, Ireland was seen by many as top of the European class in its economic achievements. Ireland had combined a long period of high economic growth and low unemployment with budget surpluses. The country appeared to be well placed to cope with any economic slowdown as it had a gross debtGDP ratio in 2007 of 25% and a sovereign wealth fund worth about €5000 a head. Fast forward four years and Ireland is shut out of sovereign debt markets and in an EUIMF adjustment programme. Its debt-GDP ratio has soared over 100% and the sovereign wealth fund is effectively gone. In this short paper, I provide a brief review of how this rapid change came about and discuss potential future developments in relation to Ireland’s sovereign debt situation. 2. The Rise and Fall of the Celtic Tiger It is now well known that Ireland’s famed “Celtic Tiger” ended...
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...divided and the manner in which it will be presented to me. Working together will ensure that all parts will be done well and on time. Question 1: Overview of the Macroeconomy: Interpretation (25 marks) Please discuss the current state of the macroeconomy in Canada. In particular please discuss the growth rates and gross domestic product, the unemployment rate and lastly inflation. Please discuss how these variables compare to both the short and long run averages. In providing answers, please provide where data was obtained. You can use the internet or more authorative sources such as the Bank of Canada, Statistical Canada (Cansim) dataset or the IMF/World Bank websites. After you have ascertained this information, please make a determination as to whether the economy is at its long run equilibrium level (full employment), or whether it is in a recessionary or expansionary gap. (Hint: the economy is rarely at its long run level). Question 2: Legislative Overview (15 Marks) Please discuss 2 important institutions in Canada responsible for conducting fiscal and monetary policy, name the Department of Finance and the Bank of Canada. What are the roles of each and what are each responsible for obtaining? What are the responsibilities of each institution and what tools do they have at their disposable to impact the economy? Can you say that their objections are in tandem with one another or due they sometimes conflict? Please explain. Question 3: Mechanical Aspects...
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...divided and the manner in which it will be presented to me. Working together will ensure that all parts will be done well and on time. Question 1: Overview of the Macroeconomy: Interpretation (25 marks) Please discuss the current state of the macroeconomy in Canada. In particular please discuss the growth rates and gross domestic product, the unemployment rate and lastly inflation. Please discuss how these variables compare to both the short and long run averages. In providing answers, please provide where data was obtained. You can use the internet or more authorative sources such as the Bank of Canada, Statistical Canada (Cansim) dataset or the IMF/World Bank websites. After you have ascertained this information, please make a determination as to whether the economy is at its long run equilibrium level (full employment), or whether it is in a recessionary or expansionary gap. (Hint: the economy is rarely at its long run level). Question 2: Legislative Overview (15 Marks) Please discuss 2 important institutions in Canada responsible for conducting fiscal and monetary policy, name the Department of Finance and the Bank of Canada. What are the roles of each and what are each responsible for obtaining? What are the responsibilities of each institution and what tools do they have at their disposable to impact the economy? Can you say that their objections are in tandem with one another or due they sometimes conflict? Please explain. Question 3: Mechanical Aspects...
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...Annexure-V- Cover Page for Academic Tasks Course Code: Course Title: | Course Instructor: | Academic Task No.: Academic Task Title: | Date of Allotment: Date of submission: | Student’s Roll no: Student’s Reg. no: | Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by students as specified at the time of assigning the task by the instructor) | Learning Outcomes: (Student to write briefly about learnings obtained from the academic tasks) Declaration: I declare that this Assignment is my individual work. I have not copied it from any other student‟s work or from any other source except where due acknowledgement is made explicitly in the text, nor has any part been written for me by any other person. Student Signature: Evaluator’s comments (For Instructor’s use only) General Observations Suggestions for Improvement Best part of assignment S. No | Name of Student | Registration No | Peer Rating (10) | Signature | | | | | | | | | | | | | | | | Evaluator‟s Signature and Date: Marks Obtained: Max. Marks: ………………………… Subject: Rubrics for written report of ECO310 Category | 5 marks Exemplary | 2-4 marks satisfactory | 1 marks unsatisfactory...
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...Term Paper On Alternative Economic Policies for India based on analysis of the Alternative Budget INTRODUCTION Attempt has been made not to draw a detailed picture of an alternate budget but to understand the macro outline of the budget based on alternative policies. With rising debt and interest burden there was a need for a change in fiscal policy change In the Indian economy. This paper shows the possibility of an alternative change to the IMF dictated budget adopted at that time. A comparison has been made between four scenarios. Scenario I has been drawn up to show the 1994-95 budget if the country would have been persisted with the observed trends of 80s. Scenario II are the projected estimates for 1994-95 if IMF dictated policies are followed. It is not the budget that Finance minister may present. In scenario IV, alternative budget proposal has been detailed out with a real fiscal correction. It has been assumed that the policies are in place for five years. The scenario III is the first year of transition. Changes in taxation both direct and indirect have been done to raise revenue. Expenditures for various sectors have been estimated and the overall impact on the economy has been explained. A comparison between the revised estimates of 1993-94 and alternative budget 1994-95 (Scenario IV) has been done. Finally, the critique has been given with the responses to the critique by Arun Kumar. THEORETICAL BACKGROUND Financing of economic development through taxation-...
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