INT 220 4-1 Discussion: The International Monetary Fund

Our Owlisdom Step-By-Step guide of INT 220 4-1 Discussion: The International Monetary Fund, In which we will discuss our understanding of The International Monetary Fund. We will Begin by understanding the IMF’s foundational goals to ensure the stability of the international monetary system, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. This discussion will explore the IMF’s mechanisms, such as surveillance and financial and technical assistance.

Note: We are asked to answer two of four questions in the  INT 220 4-1 Discussion: The International Monetary Fund Instructions. Later on, I will give directions and simulated solutions to all the four questions. Still, what is provided in the sample solution will consider only the first two questions. You can take help from those dummy solutions to give solutions for the questions you decide to solve.

Example

The International Monetary Fund is an international organisation that was established with the mandate of fostering global monetary cooperation, exchange rate management and selling international economic growth (Mussa & Savastano, 1999). It offers credit facilities to member countries with balance of payments deficit. There is a policy advice which contributes to stabilizing economies making IMS important to stability of the world economy.

When should a government, economy, or country be bailed out? Justify your answer with specific examples and how the bailout or lack of bailout would impact the global economy and the future of globalization.

Criteria For Bailouts 

In this segment of the INT 220 4-1 Discussion: For example, we will examine the criteria and the impacts of the IMF bailout.

• When should a government or country get bailed out? 
• Think about how severe the financial crisis is; how risky it is to be contagious to the global economy; and what the associated social impacts with a bailout and absence of it. 
• Use historical examples like the Greek debt crisis, or famous worldwide examples of financial events that happened before.

Example

When a government or country’s economic instability threatens its economy and the global economy, it should be in a position to sell a bailout. But only when contagion and crux economic disruptions for a larger segment are imminent. During the 2009 Greek debt crisis, for example, the international community, along with institutions such as the IMF, provided bailouts to stabilise Greece’s economy, so that it doesn’t spread to the rest of the Eurozone (Alogoskoufis 2021). The potential default of Greece was of great importance because Greece’s default could have a severe repercussion in the interconnected global market and could lead to a cascading failures similar to the failures observed in the 2008 financial crisis (Taskinsoy, 2022). Despite the obvious contentiousness of it, the bailout itself was an important stabilizer within the global economic system because it sought to alleviate these risks — between the bailouts’ stringent fiscal reforms to restore fiscal stability and confidence — like the bailout itself. Such process emphasizes sign-posting of when bailouts are a necessity (severe financial distress with global reach) and when they are necessary for keeping global economy booming and globalization going.

Ideally, which countries or organizations would provide the economic support for a government that needs a bailout? Is the IMF the ideal organization to bail out a country?

IDEAL PROVIDERS OF ECONOMIC SUPPORT

Next, we will discuss the ideal Economic Support providers for a government seeking bailout in INT 220 4-1 Discussion: The IMF.

• Let’s evaluate who should provide economic support in times of crisis.
• Now compare the organization to world powers, other international financial institutions like the World Bank, or consortia of countries.
• Talk about the good sides, and the dangers, but put emphasis on whether it will be effective, be geopolitically resonant, and financially stable.

Example

When the economy is in crisis, the International Monetary Fund (IMF) often steps in, exercising the clout available to it as an international membership organization and with a mandate on economic stability (Breen & Doak, 2023). But strict IMF reform rules can spark large-scale social unrests in the borrow nations. Individual world powers and consortia of countries could offer alternative forms of financial aid, either in the form of financial support alone, or with diplomatic or strategic benefits not usually found in IMF programs. But such support could have geopolitical accents, bringing in political expectations that would impact on the sovereignty of the recipient.

The fact that regional groups such as the European Union can mobilize large amounts of individual resources (potentially with more politic strings attached) owing to their collective nature, could create more sustainable recovery programs that are more responsive to regional dynamics (Ferrera et al., 2023). But coordination among member states is not without strife, making such multilateral aid efforts not guaranteed — or potent — enough, sometimes.

The key provider, the IMF remains key due to experience and its systematic approach but determining this ought to be done strategically by determining what requirements the crisis affected country requires from aid and potential geographical politics and the flexibility of aid terms (Avakian & Fotaki, 2024). It’s important that this balance holds so that the support meets immediate financial needs at the same time as increasing long term economic stability and growth.

Is it ethical for the IMF to bail out countries that repeatedly make bad economic and fiscal decisions? Is it ethical for the IMF to attach significant requirements to its loans?

Ethical Considerations of IMF Bailouts

In this section of INT 220 4-1 Discussion: We will explore the ethical considerations for bailouts with the International Monetary fund.

• Think about whether under this situation is it ethical for the sum of countries with a bad history in Union economy saved by IMF, and whether the stringent terms connected to the grant of IMF loans are ethical. 
• Examine the dichotomy between fiscal discipline that is necessary, however, and that of national sovereignty.

Ethical Considerations of IMF Bailouts

If it is bailed out, the International Monetary Fund (IMF) should bail out countries that have failed consistently to make wise economic and fiscal decisions (Breen & Doak, 2023). First, and perhaps most obviously, these bailouts are essential to avoid global economic meltdown and to spare citizens of the affected countries from devastating damage to their economic welfare. At the same time, repeated bailouts give rise to moral hazards, since public fiscs may adopt lax policies if the international community will easily rescue them from financial mismanagement.

In addition, IMF loans often come with too strict a parameters and this probably causes ethical issues on the impact on national sovereignty. However, the conditions are assumed to ensure that the loan flows would support sustainable economic recovery and not just a bandtaid, and can produce huge changes to national policies. Such could include austerity measures which, in turn, would make the country more poorer and unequal. Consequently, the enforcement of difficult conditions may be considered requisite to instill fiscal restraint and responsibility, while restraint must be sympathetic of a country’s discretion to adopt economic policies. These action have an ethical justification of forging a fair balance between maintaining discipline and retaining the sovereignty of a country whereby any emergent hardship impeded by the imposition of these conditions is received momentarily with long term gains outweighing that.

What lessons should be learned from the Greek debt crisis for countries with debt obligation issues and organizations like the IMF?

Lessons From The Greek Debt Crisis

In this section of the INT 220 4-1 Discussion: We will review the main points covered in the The Greek Debt Crisis, all made by the International Monetary Fund.

• Find critical lessons from the Greek debt crisis for other countries in similar debt situations, and organizations like the IMF. 
• Look to reforms to policy, to debt management and to preventive measures to prevent severe economic downturns.

The Greek Debt Crisis

On the eve of writing this, the Greek debt crisis provides critical lessons for countries that have a large debt obligation and for which the International Monetary Fund developed its current structure (Avakian & Fotaki, 2024). The crisis sharpens the need for countries to adopt sustainable debt management strategies and to further develop proactive fiscal policies. Preventing a build up of unsustainable debt depends upon maintaining fiscal discipline-come down realistic targets for the budget and effective tax collection systems. But the crisis has also underscored for the IMF and other organizations the value of early intervention and the need for bailout programs that don’t just impose austerity, which can drive deeper recessions and social revolt. These programs, however should also support economic growth and structural reforms that address the reasons for the debt crisis. This approach could help make sure that financial help provided by the like of the IMF stabilizes economies in the short run and lays the foundation for meaningful long run economic growth. Moreover, these experiences underscore to who governments are indebted need to display openness and transparent communication among those governments and international lenders in order to foster mutual trust and cooperation.

Future of Global Currency: Digital Currency Debate

Next, we will explore the future of global currencies in INT 220 4-1 Discussion: The IMF. 

• Think about the IMF creating a digital currency. 
• Discuss the advisability of the IMF, in contrast, over other parties such as global banks or nations, for establishing a global cryptocurrency. 
• The ethical problems in adopting a global digital currency should be addressed.

Example

Efficiency and financial inclusion are purported but can bring with it privacy concerns, security and monetary sovereignty. There is an ethical cost to cryptocurrencies made up of market manipulation, illicit purpose, and the environmental toll from energy intensive mining operations.

Conclusion 

In conclusion of our INT 220 4-1 discussion, we shall give a brief of what we have received as the most crucial information.

• Finally, reestablish the IMF’s function in global economics, the issues regarding state rescues and moral issues that arise.
• Consider how these dynamics will be facilitating future policies and the over all international economy.

Example

The IMF’s role in shaping the global economy involves stabilizing economies, providing financial assistance, and promoting policy reforms. Future international monetary policies aim for resilience, inclusivity, and sustainable growth amidst evolving economic landscapes.

The IMF is considering creating a digital currency, and assuming that we are in a world with a single digital currency, who would ideally create a global cryptocurrency? Would you trust the IMF to create one? Or would you prefer one created by a global bank such as JPMorgan Chase or one backed by a country? What are the ethical implications of cryptocurrency?

Peer Responses

INT 220 weekly discussion posts consists of responding to peers as one of the crucial sections. We will have to submit at least two peer responses. I will post one example post. It is possible to write your peer responses following the points listed below.

Response 01

Hey Taylor, great post! As for the question of who should ideally create a global cryptocurrency, the IMF may well fit the bill as this organization cores business is international monetary cooperation and financial stability. Isolating the IMF as the world’s supervisor in international money, trusting it with a manipulation of a global digital currency may coincide with its aims of maintaining balance and fostering stability in the process of the economic growth (Breen & Doak, 2023). However, there is a huge ethical question whether such a currency should be created at all. Concerns such as privacy and security, as well as the risk of reinforcing inequa;tity in economic terms must be taken into account (Baddam et al., 2023). It also shows some of the main risks which are crucial to address before investing in the new global financial initiative, including, for instance, market manipulation and environmentally unfriendly mining.

Reference

Breen, M., & Doak, E. (2023). The IMF as a global monitor: Surveillance, information, and financial markets. Review of International Political Economy, 30(1), 307–331. https://doi.org/10.1080/09692290.2021.2004441

Baddam, P. R., Yerram, S., Varghese, A., Ande, J. R. P. K., Goda, D. R., & Mallipeddi, S. R. (2023). From Cashless Transactions to Cryptocurrencies: Assessing the Impact of Digitalization on Financial Security. Asian Accounting and Auditing Advancement, 14, 31–42.

Closing

By following the above guidelines, I am sure you will smash 4-1 Discussion as a maestro would. Good luck 🙂

You can also read our INT 220 next module 4-2 Assignment on Foreign Exchange.

References

Alogoskoufis, G. (2021). Greece Before and After the Euro: Macroeconomics, Politics and the Quest for Reforms. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3801659 

Avakian, S., & Fotaki, M. (2024). Accounting for Failure Through Morality: The IMF’s Involvement in (Mis)managing the Greek Crisis. Journal of Business Ethics, 189(4), 817–841. https://doi.org/10.1007/s10551-022-05312-w 

Baddam, P. R., Yerram, S., Varghese, A., Ande, J. R. P. K., Goda, D. R., & Mallipeddi, S. R. (2023). From Cashless Transactions to Cryptocurrencies: Assessing the Impact of Digitalization on Financial Security. Asian Accounting and Auditing Advancement, 14, 31–42.

Breen, M., & Doak, E. (2023). The IMF as a global monitor: Surveillance, information, and financial markets. Review of International Political Economy, 30(1), 307–331. https://doi.org/10.1080/09692290.2021.2004441 

Ferrera, M., Corti, F., & Keune, M. (2023). Social citizenship as a marble cake: The changing pattern of right production and the role of the EU. Journal of European Social Policy, 33(5), 493–509. https://doi.org/10.1177/09589287231207333 

Mussa, M., & Savastano, M. (1999). The IMF Approach to Economic Stabilization. NBER Macroeconomics Annual, 14, 79–122. https://doi.org/10.1086/654380 

Taskinsoy, J. (2022). Financial Crises Continue to Strike Amid Accelerated Evolution of Risk Management (SSRN Scholarly Paper 4038732). https://doi.org/10.2139/ssrn.4038732