International Monetary Fund

Introduction The economies of most countries were affected badly and left in a struggling state after the World War II. The International Monetary Fund (IMF) was initiated in the year 1944 and then formally established in the year 1945. Initially, the organization consisted of only 29 countries (De, 2011). The major objective of the IMF was to help in reconstructing the economies of the nations that were badly affected by the war.Advertising We will write a custom research paper sample on International Monetary Fund specifically for you for only $16.05 $11/page Learn More Countries that had economic imbalances would borrow money from the fund and repay over an agreed period. It is normal that nations suffer in terms of economic, political, as well as social well-being after war. War is expensive to nations that participate in it. A country that is not strong economically will suffer more compared to nations that are economically stable in the event of wa r. It becomes difficult for economically weak countries to finance their activities post-war due to the effects they suffer during war. To revive their economies, such nations depend on loans and grants from international organizations (De, 2011). The International Monetary Fund not only assists countries that are affected by war, but it also gives loans to nations whose economic difficulties are as a result of any other reason. It is imperative to note that the number of member nations has grown from 29 in the year 1948 to about 188 countries today. All these member nations are also members of the United Nations, apart from the Republic of Kosovo. The IMF has helped in increasing the stability of nations. The IMF has also been instrumental in the development of international trade. International trade has become of more importance since it facilitates globalization over the past couple of decades. In addition, the IMF has helped in the reduction of poverty across the world, as well as reducing the rate of unemployment. This research paper will focus on the ways in which the International Monetary Fund helped in reviving the world economy following the 2nd World War. The promotion of global monetary cooperation One of the reasons why the IMF was created was to promote the global monetary corporation. The IMF is an international body that helps nations that have trade imbalances. Promoting monetary cooperation with the IMF was to be done via an institution where countries would make consultation, as well as collaborations regarding the international monetary problems.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This is a forum where nations would bring their monetary problems to the set institutions. They would then explain the problems and later get advice on how to deal with them. Since the institutions were open to various countries who were members of the IMF, it provided the chance for countries to meet with other countries which they would collaborate with in order to find solutions to their problems (Lazarus, 2002). It is important to note that there was no monetary cooperation between nations prior to the mid-20th century. In addition, there was no economic cooperation. This changed in the 1940s when the IMF was founded. When the organization was formed, it established a mechanism that would encourage cooperation between nations. The mechanism that it established was a permanent one. The IMF believed that if nations worked in cooperation, they would increase their chances of succeeding both financially and economically. This was the philosophy behind the formation of these cooperation mechanisms. There were many restrictions that existed between countries before the organization was formed, thus making it difficult for them to trade among themselves and even cooperate in any economic activities. Exchange of currencies was dif ficult, making it difficult for nations to make payments for goods and services within the required time. This was a barrier to economic development since it made trade difficult (Griesgraber, 2009). Encouraging cooperation between nations was effective in that it brought ‘economic miracles’ to nations. Member nations of the IMF were able to meet the problems that barred cooperation between them. The developing nations and the developed nations were integrated into the global economy in order to help them deal with some of the problems that they were facing. For instance, when the nations were integrated into the global economy, they were able to deal with the debt crisis that existed in the 1980s. In addition, communist economies were encouraged and the economic crises in the 1990s were dealt with effectively. This was one of the initiatives that led to the development of globalization. It is important to note that globalization started in the 20th century, around the same time when the IMF was formed and following the end of the 2nd World War. It is, therefore, an indication that the efforts by the IMF to form cooperation mechanisms that eliminated barriers between nations was one factor that led to the development of globalization. Globalization is a major factor in the growth of the national economy in today’s economic world. Organizations such as multinationals are formed through globalization (Haynes, 2012).Advertising We will write a custom research paper sample on International Monetary Fund specifically for you for only $16.05 $11/page Learn More These are organizations that generate a lot of revenue to the economy and they are effective in the economic development of nations. It is due to globalization that most technologies have developed today. Innovations have also increased, making trade to develop and become of much significance in the growth of national, as well as global economies. Therefore th e IMF helped in reconstructing the economy of the globe after the World War II through the promotion of global monetary cooperation. Stability of the country’s financial standing The IMF was also instrumental in promoting the financial standing of nations. There were countries that were facing difficulties in terms of finance in the early 20th century, while others were financially stable. This created imbalances in the world economy, a factor that IMF was determined to address. One of the ways in which IMF addressed this issue is that it collected money from the nations. This is where nations would contribute through a quota system to a pool of money. Countries that contributed to this pool of money were mainly those nations that had some stability in their economies. Countries that were facing payment imbalances would then borrow from this fund and were expected to repay it over an agreed period of time. When a country borrowed the money, it would meet most of its financial obligations and improve the payment imbalances to increase its financial stability. In addition, lending countries money would help them establish corrective measures that would help them avoid any abnormal changes on external imbalances (Fritz-Krockow, Ramlogan International Monetary Fund, 2007). Countries that are facing difficulties in balance of payments are not likely to develop in terms of the economy, thus they remain highly unstable. Such countries may not be able to finance most of their government activities. This means that most programs in the country end up failing and the citizens face difficulties since it becomes difficult for them to meet their basic needs. The instability that results from such imbalances is what the IMF tried to solve in order to fuel reconstruction of the global economy after the 2nd World War. It helped member nations to mobilize external funds that would help them meet their needs on balance of payment and increase their economic stability (G artner, 2013).Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The increase in international trade International trade is one of the things that contribute to the growth of the global economy. International trade refers to the trade activities between nations. It is important to note that international trade is not the same as globalization; however, globalization has developed through international trade. Despite the fact that international trade has the ability to improve the economy of the globe, it is faced with a number of barriers that prevent its development. Among the barriers are the restrictions that are put in place by various nations. These restrictions were very common in the early years of the 20th century. Most nations had put laws and regulations that prevented free trade with other nations. As a result, it was difficult for international trade to flourish and realize global economic growth. Among the functions that the IMF conducted was to promote international trade through elimination of these trade barriers. IMF informs its member nations about the conditions and the economic statuses in other nations (Pop-Eleches, 2011). This is a factor that helps the member states to take advantage of the economic status in other countries to exploit opportunities in order to promote international trade through investment. For instance, exchange of currencies was made easy by the IMF. It became easy for a nation to make payments for goods and services from other nations. The IMF also helped in the increase of the global supply of international reserves. The IMF facilitated the issue of an international reserve asset that was referred to as the Special Drawing Right (SDR). The reserve was to be issued in instances where there was need for supplementing the existing reserve assets. This SDR was kept as an international reserve and could be exchanged for currencies that were convertible. One thing that has to be noted is that the SDR is not a claim on the IMF. However, it is a unit under which the financial transaction s of the IMF can be accounted for. This reserve has the ability to impact on international trade. It is a reserve supplementing the reserves of the member nations and makes them get money to finance trade and facilitate exchange of currencies. Consequently, the International Monetary Fund was able to fuel reconstruction of the global economy after the Second World War and in the early years of the 20th century (McEuen International Monetary Fund, 2001). Advancing economic growth and high employment rate A large number of people were jobless in the early 20th century, a situation that had led to high poverty levels in most countries. One of the reasons why the rate of unemployment was high is due to the minimal trade that existed between nations. More business organizations and trading activities emerge when trade increases. As a result, people are able to get employments. Therefore, one of the strategies that IMF used to reduce the rate of unemployment was to improve international trade. As earlier mentioned, international trade failed to develop prior to the formation of IMF due to the many trade restrictions that existed among countries. The first initiative by the IMF was, therefore, to eradicate all those trade barriers among the member countries. This eased transactions that were to be conducted among nations (Gupta, Fonds moneÃŒ taire international, Development Assistance Committee’s Forum on Key Elements for Poverty Reduction Strategies, 1998). Another way through which the IMF helped in creating employment was by providing funds to nations that were suffering from trade imbalances. These funds would help the member nations make investments on government projects. This would also create employment for citizens. People have little or no income when they are not employed, and their standards of living are usually low and poor. However, the IMF helped in the reconstruction of the world’s economy after the Second World War by facilitating g rowth and development of international trade and creation of employment. Reduce the need and poverty around the world Many people were living in poverty as a result of high rates of unemployment. The rate of poverty was especially high in countries that were regarded as low income earners. These were nations whose economies were lagging behind and whose development was low. The IMF was committed to elevating the rate of in poverty in these nations. One of the reasons why the many parts of the world were living in poverty is because most citizens were not employed; therefore, people had no income to better their lives. It is difficult for a nation that has poor people to develop economically. In fact, one of the measures that indicate economic growth is increase in the living standards of people. This acts as an indicator that people have income to improve their living standards (Boughton, 2001). The IMF was determined to reduce the level of poverty that existed in various countries after the World War II. One way to do this was to give loans to such nations to help them meet their needs and finance their projects. The loans were given at a low interest rate and the payback period for the loans was given to be longer than normal. Further, promoting the development of productive resources would facilitate the creation of employment and, in turn, avail real income to citizens. This would help citizens improve their living conditions. The surveillance of the economic policies of the member countries was integral in improving the level of poverty that existed among nations. This helped in the reconstruction of the world’s economy after the World War II. Conclusion The IMF was formed in 1945 and has since then been playing a major role in establishing economic stability and growth among nations in the world. The organization was formed with only 29 member countries initially, but it has grown to include 188 countries today. The IMF helps member nations grow e conomically by providing loans to nations that have trade imbalances. As a result, the rates of employment in these nations’ increase and the levels of poverty are reduced. It is, therefore, evident that the policies set by the IMF have been effective in the reconstruction of the world’s economy after the World War II. References Boughton, J. M. (2001). Silent revolution: The International Monetary Fund 1979-1989. Washington, D.C.: International Monetary Fund. De, J. A. (2011).Transnational corporations and international law: Accountability in the global business environment. Cheltenham: Edward Elgar Pub. Fritz-Krockow, B., Ramlogan, P., International Monetary Fund. (2007). International Monetary Fund handbook: Its functions, policies, and operations. Washington, D.C.: International Monetary Fund, Secretary’s Department Gartner, D. (2013). Uncovering Bretton Woods: Conditional transparency, The World Bank, and the International Monetary Fund. George Washington International Law Review, 45(1), 121-148 Griesgraber, J. (2009). Reforms for major new roles of the International Monetary Fund? The IMF post-G-20 Summit. Global Governance, 15(2), 179-185. Gupta, S., Fonds moneÃŒ taire international Development Assistance Committee’s Forum on Key Elements for Poverty Reduction Strategies. (1998). The IMF and the poor. Washington, D.C.: International Monetary Fund Haynes, J. (2012). Overseeing the international financial and monetary system: a critical analysis of the International Monetary Fund’s Article IV surveillance mandate. Law Financial Markets Review, 6(4), 292-295 Lazarus, S. L. (2002). IFC and its role in globalization: Highlights from IFC’s participants meeting, Washington, D.C., June 6-7, 2001. Washington, D.C.: World Bank. McEuen, J., International Monetary Fund. (2001). Financial organization and operations of the IMF. Washington, D.C.: International Monetary Fund. Pop-Eleches, G. (2011). From economic crisis t o reform: IMF Programs in Latin America and Eastern Europe. Princeton, NJ: Princeton University Press. This research paper on International Monetary Fund was written and submitted by user Lilly Cunningham to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.