>
>More importantly, I thought the whole point of the criticisms of the IMF was
>precisely this: that it has treated the financial crises of Mexico and Asia
>like they were crises of excess demand and exogenous shock for the developed
>world in the 70's. Why would the remedy for one be similar to the other?
It wouldn't.
The IMF's demands that East Asian countries balance their budgets
during the crisis were counterproductive and harmful. But the IMF
also loaned a lot of money to the East Asian economies during the
crisis, which gave them the power to keep their interest rates lower
and the values of their exchange rates higher (and thus the burden of
debt owed to foreigners lower) than would otherwise have been the
case.
It would be nice to have a kinder, gentler IMF that loaned more money
for longer periods of time with less conditionality at lower interest
rates, and recognized that there were crises caused primarily by
investor panic in the core (East Asia, 1997; Mexico, 1995), as well
as crises caused by the fear that the government will never muster
the will to bring its commitments in line with its resources (Brazil)
or crises caused by governments that have run unsustainable policies
(Latin America 1982). But the one we have is better than none at
all--unless, that is, you buy the line of the _Wall Street Journal_
editorial page that without the IMF and the "moral hazard" it creates
international capital markets would run perfectly.
Brad DeLong
