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The Review of International Organizations
Erschienen in: The Review of International Organizations 1/2010

01.03.2010

Assessing the implementation of the IMF’s 2007 surveillance decision

verfasst von: Garima Vasishtha, Robert Lavigne

Erschienen in: The Review of International Organizations | Ausgabe 1/2010

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Abstract

On June 15, 2007, the International Monetary Fund (IMF) adopted the “2007 Decision on Bilateral Surveillance over Members’ Policies,” a landmark reform that modernizes the general principles of the IMF’s bilateral surveillance. This paper assesses the first year of the Decision’s implementation in Article IV reports. We develop a questionnaire based on the key aspects of the Decision, which is used to evaluate Article IV reports published before and after the adoption of the new Decision for twenty-four countries. We find that the Decision has significantly increased the overall quality of Article IV reports, with improvements noted in emerging-market, advanced, and developing countries. Bilateral surveillance is more focused on external stability and core macroeconomic policies. Exchange rate analysis, in particular, has improved significantly. We note, however, that the integration with multilateral surveillance remains relatively weak and that cross-country spillovers still do not receive sufficient attention. Moreover, while most reports examine domestic stability in some detail, the link between domestic stability and external stability is not adequately analyzed. On the issue of the even-handed application of the Decision, we conclude that implementation has been broadly similar across country income groups, although differences remain for specific aspects of the Decision.
Vorheriger Artikel The political economy of exchange rate regimes in transition economies
Nächster Artikel Interactions among intergovernmental organizations in the anti-corruption realm

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Fußnoten
1
For an introduction to surveillance and its instruments, see www.​imf.​org/​external/​np/​exr/​facts/​surv.​htm. See Pauly (1997) for an historical account of the development of the Fund’s responsibility for systemic oversight during the organization’s early years, and of the transformation of this mandate after the 1970s.
 
2
Lombardi and Woods (2008) and Momani (2006) provide a detailed study of these approaches. For a political science perspective on surveillance, see Pauly (1997). He explains the self-interest of states in complying with surveillance by analyzing the process as a way to reconcile the economic ideal of global integration and the political ideal of national sovereignty.
 
3
The SSP lays out economic and operational priorities for IMF surveillance over the next 3 years. It is designed to help the Fund deliver on its mandate to promote international monetary and financial stability, and to provide a basis for monitoring and accountability. The surveillance priorities may be revised if circumstances so warrant and were, in fact, revised in October 2009. See IMF (2008a) for details, and Lavigne and Schembri (2009) for an analysis of the SSP.
 
4
For a sample of the concerns expressed by countries, see the International Monetary and Financial Committee statements of India (Chidambaram 2006), Belgium (Quaden 2006), Argentina (Miceli 2006), Brazil (Mantega 2006), and China (Zhou 2006).
 
5
The TSR is a periodic self-assessment process during which the IMF staff evaluates its surveillance performance. Until recently, a surveillance review was typically carried out every 2 years (the last one being in 2004), but the frequency has been decreased to 3 years. The first TSR was carried out in the fall of 2008 (IMF 2008b).
 
6
We refer to the 1977 Decision on Surveillance over Exchange Rate Policies as the 1977 Decision.
 
7
See Boughton (2001: ch 2) for a detailed account of these efforts.
 
8
For example, Crow et al. (1999) note that the scope and coverage of bilateral surveillance had expanded significantly into structural issues of a non-financial nature, and raise doubts about the Fund’s capacity to adequately deal with such issues.
 
9
See paragraphs 4 and 5 of the Decision (IMF 2007a).
 
10
The Decision specifies that a member will only be regarded as manipulating exchange rates in order to gain an unfair competitive advantage over other countries if the Fund determines both that: (i) the member is engaged in these policies in order to secure fundamental exchange rate misalignment in the form of an undervalued exchange rate, and (ii) the purpose of securing such misalignment is to increase net exports (IMF 2007a).
 
11
See part I A.6 of the Decision (IMF 2007a).
 
12
According to Sections 1(i) and (ii), each member shall: (i) endeavor to direct its economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability, with due regard to its circumstances; (ii) seek to promote stability by fostering orderly underlying economic and financial conditions and a monetary system that does not tend to produce erratic disruptions (IMF 2007a).
 
13
See paragraphs 5 and 11 of the Decision (IMF 2007a).
 
14
Two aspects are key: first, the Decision broadens the focus of surveillance beyond exchange rates to include the consistency with and between exchange rate, monetary, fiscal, and financial sector policies. Second, the Decision limits the scope of surveillance to these four core policies, and even then examines them only insofar as they have a significant bearing on external stability. The narrowed scope is intended to rein in Fund surveillance from areas beyond the IMF’s mandate, such as structural and institutional reforms, and concentrate IMF resources on what it does best: namely, short- to medium-term macroeconomic analysis.
 
15
This is key for the assessment of spillover effects stemming from local policies, where the original intent of authorities is largely irrelevant in terms of the effects on other members. An important corollary of this principle is that the Decision recognizes the importance of exchange rates for facilitating adjustment and maintaining external stability, but removes the requirement that IMF surveillance attempt to infer “intent” to manipulate exchange rates for balance-of-payments purposes. Indeed, the focus of surveillance should be on the real consequences, intended or not, of a member’s policies on external stability.
 
16
See paragraph 10 of the Decision (IMF 2007a).
 
17
It should be noted that certain general aspects of surveillance assessment, such as timeliness, precision, and appropriateness of advice, are not examined here, since these issues are not specifically addressed in the Decision.
 
18
Appendix A provides details on the sections of the Decision to which the questions relate.
 
19
The selection of countries was made so as to capture the following dimensions: (i) Global imbalances: We include the U.S., Japan, and Saudi Arabia—three countries with large external imbalances; (ii) Financial centers: Hong Kong; (iii) Non-renewable resources: We include countries with significant exports of non-renewable resources, like Algeria, Bahrain, Mexico, Nigeria, Russia and Saudi Arabia; (iv) Developing, IMF program and PRGF-eligible countries: the Caribbean, Colombia, Myanmar, Namibia, Nigeria, and Zambia; and (v) Fixed and floating exchange rate regimes. Another consideration was to ensure that the sample included countries from all country income groups, i.e., advanced, emerging and developing countries.
 
20
The null hypothesis is that the median difference between pairs of observations is zero. Note that this is different from the null hypothesis of the paired t-test, which is that the mean difference between pairs is zero, or that of the sign test, which is that the number of differences in each direction is equal.
 
21
Charts 1, 2, 3, and 4 depict the average results before and after the Decision’s implementation. The first and second bars of every set represent the pre- and post-Decision scores, respectively.
 
22
While the scores for developing countries were somewhat lower, this may be due to our relatively small sample size for this country group.
 
23
One reason for this could be that staff expertise and interaction with country authorities are generally higher in program countries, leading to more intense surveillance. Indeed, the IEO’s recent evaluation of exchange rate policy advice found that officials of smaller EMEs and low-income countries regarded IMF surveillance as affecting their major policy decisions, typically in the context of an IMF program (IMF 2007c).
 
24
One notable exception to this is the Canadian Article IV.
 
25
In line with our finding, the 2008 TSR also concludes that the coverage and quality of analysis of exchange rate issues has improved in the post-Decision reports (IMF 2008b).
 
26
See Appendix B for the list of indicators.
 
27
See also Lavigne and Schembri (2009) for a similar reasoning.
 
28
The low scores of the euro area countries are enough to cause the implementation score for advanced countries to decline for this aspect of the Decision (Table 1, third column group).
 
29
We thank two anonymous referees for bringing this to our attention.
 
Literatur
Adams, T. D. (2005). The US view on IMF reform. Washington, DC: Speech presented at the conference on IMF Reform, Institute for International Economics.
Barnett, M., & Finnemore, M. (2004). Rules for the World: International Organizations in Global Politics. Ithaca, NY: Cornell University Press.
Boughton, J. (2001). The silent revolution. Washington, DC: International Monetary Fund.
Chidambaram, P. (2006). Statement on behalf of Bangladesh, Bhutan, India, Sri Lanka. Singapore: International Monetary and Financial Committee. 17 September.
Crow, J. W., Arriazu, R. H. & Thygesen, N. (1999). External evaluation of IMF surveillance. Report by a Group of Independent Experts, International Monetary Fund.
Dodge, D. (2006). Lecture to the Woodrow Wilson School of Public and International Affairs. Princeton.
IMFC. (2006). Communiqué of the International Monetary and Finance Committee of the board of governors of the international monetary fund. April 22.
Independent Evaluation Office (IEO). (2007). Annual Report 2007. Washington, DC: Independent Evaluation Office of the International Monetary Fund.
International Monetary Fund (IMF). (2005). The managing director’s report on the fund’s medium-term strategy. Washington, DC: International Monetary Fund.
International Monetary Fund (IMF). (2006b). The managing director’s report on implementing the Fund’s medium-term strategy. 5 April.
International Monetary Fund (IMF). (2007c). IEO report on the evaluation of the IMF exchange rate policy advice. Evaluation by the Independent Evaluation Office (IEO) of the IMF. Washington, DC: International Monetary Fund.
King, M. (2006). Reform of the international monetary fund. New Delhi: Speech given at the Indian Council for Research on International Economic Relations. February 20.
Lavigne, R., & Schembri, L. (2009). Strengthening IMF surveillance: An assessment of recent reforms. Bank of Canada Discussion Paper #2009–10.
Lavigne, R., Maier, P., & Santor, E. (2009). Renewing IMF surveillance: transparency, accountability and independence. Review of International Organizations, 4, 29–46.CrossRef
Lombardi, D., & Woods, N. (2008). The politics of influence: an analysis of IMF surveillance. Review of International Political Economy, 15(5), 711–739.CrossRef
Mantega, G. (2006). Statement on behalf of Brazil, Colombia, Dominican Republic, Ecuador, Guyana, Haiti, Panama, Suriname, Trinidad and Tobago. Singapore: International Monetary and Financial Committee. 17 September.
Miceli, F. (2006). Statement on behalf of Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay. Singapore: International Monetary and Financial Committee. 17 September.
Momani, B. (2006). Assessing the utility of and measuring learning from Canada’s IMF article IV consultation reports. Canadian Journal of Political Science, 39(2), 249–269.
Pauly, L. W. (1997). Who elected the bankers? Ithaca: Cornell University Press.
Quaden, G. (2006). Statement by the Hon. Guy Quaden, Governor of the Fund for Belgium, at the Joint Annual Discussion. Press Release No. 45. Singapore: Boards of Governors 2006 Annual Meetings of the IMF and the World Bank Group. September.
Stone, R. (2004). The political economy of IMF lending in Africa. The American Political Science Review, 98(4), 577–591.
Thacker, S. (1999). The high politics of IMF lending. World Politics, 52, 38–75.
Woods, N. (2006). The globalizers: The IMF, the World Bank, and their borrower. Ithaca: Cornell University Press.
Zhou, X. (2006). Statement on behalf of China. Singapore: International Monetary and Financial Committee. 17 September.
Metadaten
Titel
Assessing the implementation of the IMF’s 2007 surveillance decision
verfasst von
Garima Vasishtha
Robert Lavigne
Publikationsdatum
01.03.2010
Verlag
Springer US
Erschienen in
The Review of International Organizations / Ausgabe 1/2010
Print ISSN: 1559-7431
Elektronische ISSN: 1559-744X
DOI
https://doi.org/10.1007/s11558-009-9077-2

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