Article

Beyond the IMF

Economic and political weekly 01/2007; DOI: 10.2307/4419258
Source: RePEc

ABSTRACT A consensus has developed that the International Monetary Fund (IMF) is not fulfilling its role, prompting multiple proposals for reform. However, this paper argues that the focus on reform should be complemented with an exploration of alternatives outside the IMF which hold the potential to not only give developing countries greater bargaining leverage with the Fund but also, by increasing competition, spurring the institution to better performance. The paper argues that most of the IMF’s functions are being carried out in part through alternative institutional arrangements. It focuses in particular on the insurance role of the Fund and argues that developing countries are developing alternative insurance mechanisms, from a higher level of reserves, to regional co-insurance facilities to remittances as a counter-cyclical source of foreign exchange. The de facto exit of its clientele has been driven by the high political costs associated with Fund borrowing and now poses unprecedented challenges for the Fund, in particular pressures on its income. The paper argues for a rapid restructuring and significant cuts of the Fund’s administrative budget with the budget savings instead directed to lower the interest rates charged to borrowers.

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    ABSTRACT: In this paper we examine the impact of membership in Preferential Trade Agreements (PTAs) on trade between PTA members. Rather than considering the impact of PTA membership on the volume of trade we consider the impact of membership on the structure of trade. For a large sample of countries over the period 1962-2000 we find that membership in a PTA is associated with an increase in the extent of intra-industry trade. In addition, we find that the effect of PTA membership on IIT is larger when a PTA is formed between two developed countries.
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