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June 18th 2007

IMF Adjusts Currency Mandate

The International Monetary Fund (“IMF”) today announced it will change the way it monitors the foreign exchange policies of its member nations. Previously, the IMF primarily focused on the internal effects of exchange rate policies, by looking at how the currency’s host country was either harmed or benefited from the policy.  The IMF’s new mandate, in contrast, extends to the evaluation these policies from an external standpoint: that is, how these policies affect other countries.  In the past, the IMF would only advise a country to alter its exchange rate regime if it was fostering economic instability in that particular country.  Now, however, the IMF would theoretically be justified in advising against currency policies that engender global economic standpoint.  Predictably, Iran, Egypt and Chin all voiced disapproval of the policy. Reuters reports:

The changes were meant to address exchange currency-related problems that developed since 1977, mainly caused by overvalued or undervalued exchange rate pegs and, more recently, capital account vulnerabilities.

Read More: IMF sharpens focus of forex monitoring

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Posted by Adam Kritzer | in Politics & Policy | No Comments »

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