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Reforming the IMF: Lessons from Modern Central Banking

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  • Philipp Maier
  • Eirc Santor

Abstract

The authors examine the institutional and governance framework of modern central banks to determine whether there are lessons that can be applied to the International Monetary Fund's (IMF's) institutional framework. Such a comparison is appealing for two reasons. First, both central banks and the IMF carry out tasks that can be described as "delegated responsibilities." Second, while monetary policy has yielded mixed results in many countries for decades, it has recently enjoyed considerable success in reducing inflation. Substantial changes to the institutional frameworks of central banks have, at least partly, contributed to this success. This raises a simple question: can the lessons learned from modern central banking help to strengthen the governance of the IMF? The authors argue they can. Governance reform would enhance the IMF's decision-making process and make the Fund more transparent and accountable, thus improving the effectiveness of its main instruments -- surveillance and lending. The reforms proposed by the authors in this paper should not be viewed as immediately achievable goals; rather, they constitute a set of guiding principles for long-term governance reform.

Suggested Citation

  • Philipp Maier & Eirc Santor, 2008. "Reforming the IMF: Lessons from Modern Central Banking," Discussion Papers 08-6, Bank of Canada.
  • Handle: RePEc:bca:bocadp:08-6
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    File URL: http://www.bankofcanada.ca/en/res/dp/2008/dp08-6.pdf
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    3. Philipp Maier, 2007. "Monetary Policy Committees in Action: Is There Room for Improvement?," Staff Working Papers 07-6, Bank of Canada.
    4. Charles Nolan & Eric Schaling, 1996. "Monetary Policy Uncertainty and Central Bank Accountability," Bank of England working papers 54, Bank of England.
    5. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001. " Central Bank Independence: An Update of Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 3-40, February.
    6. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2002. "Does it pay to be transparent? international evidence form central bank forecasts," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 99-118.
    7. Carlo Cottarelli, 2005. "Efficiency and Legitimacy; Trade-Offs in IMF Governance," IMF Working Papers 05/107, International Monetary Fund.
    8. Eric Santor, 2006. "Governance and the IMF: Does the Fund Follow Corporate Best Practice?," Staff Working Papers 06-32, Bank of Canada.
    9. Walsh, Carl E, 2003. " Accountability, Transparency, and Inflation Targeting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 829-849, October.
    10. Robert Lavigne & Philipp Maier & Eric Santor, 2007. "A Vision for IMF Surveillance," Staff Working Papers 07-37, Bank of Canada.
    11. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Cited by:

    1. Robert Lavigne & Philipp Maier & Eric Santor, 2009. "Renewing IMF surveillance: Transparency, accountability, and independence," The Review of International Organizations, Springer, vol. 4(1), pages 29-46, March.
    2. Pierre L. Siklos, 2011. "Transparency is Not Enough: Central Bank Governance as the Next Frontier," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 5 Edward Elgar Publishing.
    3. Robert Lavigne & Philipp Maier & Eric Santor, 2007. "A Vision for IMF Surveillance," Staff Working Papers 07-37, Bank of Canada.
    4. Robert Lavigne & Lawrence Schembri, 2009. "Strengthening IMF Surveillance: An Assessment of Recent Reforms," Discussion Papers 09-10, Bank of Canada.

    More about this item

    Keywords

    International topics;

    JEL classification:

    • F3 - International Economics - - International Finance

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