What Is the International Monetary Fund - Case Study Example

Download file to see previous pages The Great Depression and the two World Wars gave a great setback to the greatest nations of the world. Shook by these disasters, delegates from 44 countries met in July 1944 at Bretton Woods, New Hampshire in the U.S.A. and agreed on a framework for “economic cooperation party” (Clift, 2004). The IMF was conceived in that meeting, whose primary agenda was to avoid those inconsistent economic policies that led to the Great Depression of the 1930s. Its background was the pursuit of flawed economic policies, like increased restriction on imports and freedom to buy in other countries, dwindling gold and foreign exchange reserves and even devaluation of currencies, which together contributed to worsening the downward spiral in output, world trade, and the overall employment rate. All these steps devastated the international economy, leading to a sharp decline in trade, world output, employment and living standards (Dicken, 1986).

Hence in order to restore the international monetary relations, the IMF emerged after the constitution of a charter (Articles of Agreement) by the country representatives. Its purpose was the establishment of an international institution, which could overlook the international monetary system and guide the member countries to pursue appropriate economic policies. It officially came into existence in December 1945, when 29 countries signed the Articles of Agreement (IMF). Since then, the IMF has strictly pursued its original purposes, which became more important with the expansion of more countries.

Any country, regardless of being a member of the UN or not, is eligible for membership of the IMF. The membership largely depends on the terms prescribed by the Board of Directors of IMF. However, a country has to agree to financial policy's economic growth and reasonable price stability. Furthermore, the country has to provide the IMF with economic data, which will regularly analyze.

After reviewing and monitoring the national and international economic and financial developments, it advises the members on pursuing appropriate economic policies.  ...Download file to see next pages Read More