Barry Eichengreen calls for reform of the International Monetary Fund while arguing against a dramatically reduced mission for fund. Although the IMF may not confront a new financial crisis in the near future, Eichengreen says the possibility alone is enough of a reason to preserve its capacity for crisis lending. He supports the use of conditionality in such lending, arguing vigorously against pre-conditions as being impossible to implement and potentially dangerous to financial stability. Eichengreen calls for the streamlining of existing crisis lending procedures, allowing the fund to respond more quickly and to front-load its assistance.
To succeed as a crisis lender, Eichengreen believes the fund needs to continue its surveillance activities, increasing its focus on financial vulnerabilities and exchange rate policy. Eichengreen also calls for the fund to play a more activist role in pushing countries away from rigid exchange rate regimes.
In the area of IMF governance, Eichengreen calls for a major reallocation of representation and voting shares. He argues that it is essential to give developing countries more power in the institution in order to enhance IMF legitimacy.
This is half of a two-part debate. To read the accompanying essay by Allan H. Meltzer, click here.