The IMF's Unmet Challenges

The IMF’s Unmet Challenges”
By Barry Eichengreen and Ngaire Woods, Journal of Economic Perspectives—Volume 30, Number 1—winter 2015—Pages 29–
52”,
Assignment 1
Name of the Student: ABHAYA SHARMA
Name of the University: University Of Salford
Student ID: 00447833

Contents
Introduction......................................................................................................................................3
Part A...............................................................................................................................................3
Ethnicity to balance exchange rates.............................................................................................3
Ethnicity to govern capital flows in an systemized way..............................................................3
Observation regarding IMF and its views are dominated by influenced countries.....................4
Ethnicity to evolve an progressive market...................................................................................4
Ethnicity to the betterment of loan defaults.................................................................................4
Area of operations only extended to variances in trade market...................................................4
Distinct behaviors to furnish as more benefits to some countries...............................................5
There is an issue related to liquidity............................................................................................5
Issues related to dollar system.....................................................................................................5
Conclusion...................................................................................................................................6
Part B...............................................................................................................................................7
Purchasing power parity theory and international fisher effects theory......................................7
International fisher effects...........................................................................................................7
Different ways that helps in protecting the PPP and IEF failures...............................................9
Conclusion.....................................................................................................................................12

Introduction
There is a document that represents the IMF as international monetary fund and its significance
also confers in it, it is seen that IMF is having good returns that are very effective for
globalization and cooperation among countries at international level. Here IMF involves many
factors that affect the economic evolution and growth of countries and these factors are like
inflation rates, exchange rates and interest rate in distinct countries. In presenting the document
depth in the argument on confronts that are faced by countries and purchasing power equality,
the significance of international fisher is presented there.
Part A
Failures of the international monetary fund to face some confront
The international monetary fund is having a great significance over control of the exchange rates
and rates of inflation that significantly affect the development and growth at the international
level. There is presented an in-depth study that provides us about confronts faced by
organizations to attain their objectives and differences between setting goals and gained goals.
Ethnicity to balance exchange rates
The international monetary fund has to be developed for mainly stabilizing the exchange rates
and many acts have to be performed in this regard, it is the chief motive of evolving and
establishment of IMF. There IMF has assisted to maintain unbalance and chooses of exchange
rates up to a limit but there are organizations are unable to meet up with desired results in
balancing the exchange rates. Until the spending over approx. 85 years of establishing and
founding of IMF there has been no such steps to be taken out for balancing the exchange rates
for sustainable growth of the organization.
Ethnicity to govern capital flows in a systemized way
There is a chief intention behind establishing and implementing of IMF is governing the capital
flows and balance it in the international market. There are distinct economies in the world and
this unbalanced and disorganization of capital flow makes slower the growth and evolvement of
economies. So, the main aim of implementing the IMF is to control unbalanced capital flow in

economies. In its outcomes, there is a lack of evolvement of organizations and economies at an
international level.
The observation regarding the IMF and its views are dominated by influenced countries
For evolvement of underdeveloped nations to explain their issues regarding it at the global level
and achieve the development of many countries is the main and entire reason behind
establishing, implementation of IMF. Although, IMF having a system of voting rights and the
operational mechanism that can be adopted by only well developed and influenced countries to
utilize it as monetary plans and economic strategies of IMF. But, there is an unavailability of
concerning about economic situation by IMF without considering the other influenced and
dominating countries.
Ethnicity to evolve a progressive market
There has been a very slight change observed in advanced markets that are in the year 2011 was
32 and in the year 2013 is only 37. There is a proof of spending a vast amount of fund on
evolvement and implementation of advanced market and the initiatives that are to be taken for
this, this shows as a fact that there was not so much increment in advanced markets in the year
2013. There is a most dreadful fact is that this is still only 24% of the total market in 2013 as it
was in 2011.
Ethnicity to the betterment of loan defaults
The international monetary fund assists government an international level to meet up with their
fiscal crisis. Although, there are many countries that faced the issue of evolving and establishing
IMF with its funding due to their heavy unpaid loan repayments to financial organizations. For
IMF there is a most challenging is to decrease the defaults in loan repayments that are given by
organizations to government.
Area of operations only extended to variances in the trade market
Since the foundation of IMF is failed to extend its area and boundaries of its working until 72
years from its establishment. There is a great deficiency in expanding it’s working area has made