International Financial Management Answer 2022

Running head: INTERNATIONAL FINANCIAL MANAGEMENT
International financial management
Name of the Student
Name of the University
Author Note

INTERNATIONAL FINANCIAL MANAGEMENT
Table of Contents
Answer to question a).................................................................................................................1
Answer to question b)................................................................................................................5
Requirement i)............................................................................................................................5
Explaining the role of PPE and IFE theory in making derivatives unnecessary:.......................5
Requirement ii)...........................................................................................................................8
Explaining the different ways of protection by derivatives against the failings of IFE and
PPE:............................................................................................................................................8
References list:.........................................................................................................................12

INTERNATIONAL FINANCIAL MANAGEMENT
Answer to question a)
“A summary of: “The IMF’s Unmet Challenges” by Barry Eichengreen and Ngaire
Woods, Journal of Economic Perspectives—Volume 30, Number 1—Winter 2015—
Pages 29–52”.
The article presents a discussion on the critics of International monetary funds and its
incapability in discharging the core functions and how it also presents the views of its
advocates in addressing various issues at the global level. The impartiality and the
competence of the monetary funds in performing its functions is attributable to the issues
associated with its governance structure (Ridley 2020). The importance of the institution and
its contribution to the financial management is presented in terms of various factors with the
critics arguing about its commitment, information and coordination issues and the significant
impact it would have on the economies of the world.
The article tends to elaborate the shortcomings of the fund in terms of its effectiveness
which is limited by the failure to meet some challenges and respond to them effectively. Such
challenges which forms the center of attraction of the article includes conditionality that
should be attached to the loans, surveillance, role of the fund in the management of debt crisis
and sovereign and issues of governance. In this regard, IMF is placed to be on doubt due to
conditionality relevance, surveillance quality and the approach of funds in solving debt
issues. The legitimacy of the fund is questioned because of its failure in adopting an
appropriate governance system (Robinson 2020).
The surveillance challenge threatening the competence of IMF is presented in the
article by mentioning their role in the surveillance as corrective with the spillovers and risks
becoming central to such function. Function of IMF in conducting surveillance is challenged
by identifying various failures of sounding louder warnings in the banking crisis of Ireland,

INTERNATIONAL FINANCIAL MANAGEMENT
Iceland and some other countries and subprime crisis of United States. This was due to the
inappropriate and incorrect assessment made by the institutions which was further justified by
the presentation of some practical limitations to the analysis (Grima and Thalassinos 2020).
While on one end, article presents surveillance challenge faced by IMF, on other hand, it
outlines some its advocates that justifies the functioning of the institution.
Another challenge concerning the capital flows and exchange rate in the article is
explained for the damage to the perception of the institution for lacking the clarity in terms of
exchange rate and rationale. The article discusses about the adoption of Euro and the advice
from the institution in explaining this particular challenge. The critics presented that despite
the economist presenting seminal analysis on the euro experience, louder warnings was not
presented by the institutions on the issues of the fiscal union and the monetary union without
banking. There was a significant change on the advice and assessment of the institutions on
the capital control and this resulted due to the changes in staff guidance (Eichengreen and
Woods 2016).
The challenge associated with the conditionality presents the fact that the conditions
when expanded offers the powerful shareholders with the scope of advancing their national
interest by enlisting the institutions. There is a lack of evidence on the fact that the
conditionality of the IMF is attuned to the crisis country welfare. That is, the article sets out
several facts that presents the view that the institution is primarily concerned about the
interest of its principal stakeholders. It is further mentioned that there will always be criticism
on the conditionality of IMF as there would be inevitable opposition of the special interest
and compliance issues. Article also illustrates the measures taken for reforming the functions
of IMF and making the conditionality exclusively focusing on the macroeconomic policies.
The conditions of policy of the IMF should be specified for enhancing the prospects of
compliance and ownership of country (Eichengreen and Woods 2016).