25.07.2013 Views

What Is the International Monetary Fund? - the JVI eCampus!

What Is the International Monetary Fund? - the JVI eCampus!

What Is the International Monetary Fund? - the JVI eCampus!

SHOW MORE
SHOW LESS

Create successful ePaper yourself

Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.

The IMF's Purposes<br />

- 6 -<br />

Box 2<br />

The purposes of <strong>the</strong> <strong>International</strong> <strong>Monetary</strong> <strong>Fund</strong> are:<br />

i. To promote international monetary cooperation through a permanent institution which<br />

provides <strong>the</strong> machinery for consultation and collaboration on international monetary problems.<br />

ii. To facilitate <strong>the</strong> expansion and balanced growth of international trade, and to contribute<br />

<strong>the</strong>reby to <strong>the</strong> promotion and maintenance of high levels of employment and real income and to<br />

<strong>the</strong> development of <strong>the</strong> productive resources of all members as primary objectives of economic<br />

policy.<br />

iii. To promote exchange stability, to maintain orderly exchange arrangements among<br />

members, and to avoid competitive exchange depreciation.<br />

iv. To assist in <strong>the</strong> establishment of a multilateral system of payments in respect of current<br />

transactions between members and in <strong>the</strong> elimination of foreign exchange restrictions which<br />

hamper <strong>the</strong> growth of world trade.<br />

v. To give confidence to members by making <strong>the</strong> general resources of <strong>the</strong> <strong>Fund</strong> temporarily<br />

available to <strong>the</strong>m under adequate safeguards, thus providing <strong>the</strong>m with opportunity to correct<br />

maladjustments in <strong>the</strong>ir balance of payments without resorting to measures destructive of<br />

national or international prosperity.<br />

vi. In accordance with <strong>the</strong> above, to shorten <strong>the</strong> duration and lessen <strong>the</strong> degree of<br />

disequilibrium in <strong>the</strong> international balances of payments of members.<br />

The <strong>Fund</strong> shall be guided in all its policies and decisions by <strong>the</strong> purposes set forth in this Article.<br />

From Article I of <strong>the</strong> IMF's Articles of Agreement<br />

The expansion of <strong>the</strong> IMF's membership, toge<strong>the</strong>r with <strong>the</strong> changes in <strong>the</strong> world economy,<br />

have required <strong>the</strong> IMF to adapt in a variety of ways to continue serving its purposes<br />

effectively.<br />

Countries that joined <strong>the</strong> IMF between 1945 and 1971 agreed to keep <strong>the</strong>ir exchange rates<br />

(in effect, <strong>the</strong> value of <strong>the</strong>ir currencies in terms of <strong>the</strong> U.S. dollar, and in <strong>the</strong> case of <strong>the</strong><br />

United States, <strong>the</strong> value of <strong>the</strong> U.S. dollar in terms of gold) pegged at rates that could be<br />

adjusted, but only to correct a "fundamental disequilibrium" in <strong>the</strong> balance of payments and<br />

with <strong>the</strong> IMF's concurrence. This so-called Bretton Woods system of exchange rates<br />

prevailed until 1971 when <strong>the</strong> U.S. government suspended <strong>the</strong> convertibility of <strong>the</strong><br />

U.S. dollar (and dollar reserves held by o<strong>the</strong>r governments) into gold.<br />

Since <strong>the</strong>n, IMF members have been free to choose any form of exchange arrangement <strong>the</strong>y<br />

wish (except pegging <strong>the</strong>ir currency to gold): some now allow <strong>the</strong>ir currency to float freely,<br />

some peg <strong>the</strong>ir currency to ano<strong>the</strong>r currency or a group of currencies, some have adopted <strong>the</strong><br />

currency of ano<strong>the</strong>r country as <strong>the</strong>ir own, and some participate in currency blocs.

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!