Strengthening the Governance of the International Monetary Fund: How a Dual Board Structure Could Raise the Effectiveness and Legitimacy of a Key Global Institution

By Thimann, Christian; Just, Christian et al. | Global Governance, April-June 2009 | Go to article overview

Strengthening the Governance of the International Monetary Fund: How a Dual Board Structure Could Raise the Effectiveness and Legitimacy of a Key Global Institution


Thimann, Christian, Just, Christian, Ritter, Raymond, Global Governance


The ongoing financial crisis and a difficult international adjustment process involve a multitude of actors and forums. They all grapple with the complexities of a globalized economic and financial system and the challenges arising from the financial turmoil and economic downturn. Governments have responded with unilateral, bilateral, or regional actions. Major central banks have cooperated on an ad hoc basis, and the G7 and the G-20 have attempted to provide economic stewardship. But the considerable spillovers and policy interdependence in a globalized economy that were already visible in the run-up to the turmoil have shown that the international monetary and financial system needs an effective steering committee to address such spillovers and facilitate cooperation on global economic matters.

For decades, the International Monetary Fund (IMF) was at the helm of the international monetary system. However, an alleged unequal treatment of its members, an ever expanding mandate diluting its core responsibilities, complacency in its policy advice, and the dominance of its governance by some large countries have more and more sidelined the IMF in the international policy debate. While the actions by the G7 may have been sufficient to address economic shocks in the past, the emergence of new economic players in Latin America, Eastern Europe, and Asia necessitates a fresh look at how to address global economic challenges, which involve a rising number of systemically important players.

The IMF has realized that it risks being sidelined in global economic affairs and is now in its fourth year of a strategic review of its setup and activities, with the declared objective of regaining its position as the "steward of international financial cooperation and stability" and putting itself firmly at the center of the international monetary system. Progress is under way: The IMF is strengthening its surveillance by deepening the analysis of interlinkages, including exchange rates, in its bilateral economic surveillance. It is placing more focus on macrofinancial linkages. Moreover, it is reviewing its lending instruments to adapt to the requirements of Fund members, and it is also revising its leading role. As far as IMF resources are concerned, there is broad agreement among the membership that the Fund's lending capacity needs to be substantially increased. While discussions continue on the precise amounts and modalities, Japan and the EU have announced that they will provide loans to the Fund in the order of US$100 billion each; a response from the US is still outstanding.

Will these reform steps be sufficient to restore the IMF as the central institution for international monetary cooperation? This is to be doubted. The crucial element that is missing to complete the reforms is an overhaul in the governance of the IMF and, in particular, in the structure and functioning of the executive board to transform this body into an effective and legitimate forum for dealing with global economic issues. The only step undertaken in this context was to update the byzantine way of calculating quotas; that is, countries' shares in the Fund, in spring 2008. This topic had occupied IMF bodies for over two years and resulted in a shift of 2.7 percent of the votes from advanced to emerging and developing economies. The reform is a good illustration of the proverbial elephant giving birth to a mouse, because it abstracted from changes to the structure and functioning of the board that are much more relevant than small adjustments in voting rights of a body that rarely takes formal votes. (1) In principle, the IMF executive board is uniquely placed to provide authoritative guidance to IMF member countries, exert peer pressure, and give economic policy advice. Being in continuous session, it receives up-to-date information on developments in member countries as well as in the global economy. It has an overview of different policy frameworks and economic policy tools and is aware of the constraints of domestic policymaking, all of which can facilitate tailoring its advice to specific countries. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Strengthening the Governance of the International Monetary Fund: How a Dual Board Structure Could Raise the Effectiveness and Legitimacy of a Key Global Institution
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.