GOV_298_3 - The IMF Part 1: History and Background...

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The IMF Part 1: History and Background Vreeland, James Raymond. 2007. The International Monetary Fund: Politics of Conditional Lending. New York: Routledge. HG3881.5.I58 V743 2007. CHAPTER 1, CHAPTER 6, & Conclusion
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Today is about: A triangle Trade imbalances IMF to the rescue… or not
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The course take-away: Institutions matter… The ways countries interact in the international arena partly depends on their institutional context Both international and domestic institutions matter What is an institution? A set of rules (structures/constraints/mechanisms) that govern the behavior of a given set of actors in a given context An equilibrium?
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What do international institutions do? Informational role? E.g., trade agreements Lock-in E.g. Human rights agreements Obfuscate dirty laundry, scapegoat, dark knight? Collective action (PD) Pool reserves in case of financial crises?
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Why was the IMF created? To answer this, we need… a little historical perspective…
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BUT FIRST… The Inconsistent/Unholy Trinity Or “Trilemma”
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Free Capital Flow Fixed Exchange Rate Sovereign Monetary Policy Inconsistent/Unholy Trinity Or “Trilemma”: a country can only have 2 out of 3 of these
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Why would you want… Free Capital Flow? Draw on the savings of the rest of the world Investment opportunities abroad Fixed Exchange Rate? Reduce uncertainty in trade Sovereign Monetary Policy? Address inflation/unemployment
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Free Capital Flow Fixed Exchange Rate Sovereign Monetary Policy Inconsistent/Unholy Trinity Or “Trilemma”: a country can only have 2 out of 3 of these Switzerland PRC Eurozone countries
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Free Capital Flow Fixed Exchange Rate Sovereign Monetary Policy Inconsistent/Unholy Trinity Or “Trilemma”: a country can only have 2 out of 3 of these USA PRC
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A puzzle
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This note was uploaded on 01/16/2012 for the course GOVT 298 taught by Professor Staff during the Spring '10 term at Georgetown.

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GOV_298_3 - The IMF Part 1: History and Background...

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