IPE WEEK 9

Question 1

Why is the global financial system crucial in the global political economy?

Answer 1

The GFS is essential because it facilitates financial transactions, promotes economic stability, and enables global trade and investment.

Question 2

What functions must money serve in the global financial system?

Answer 2

Money must serve as a medium of exchange, a unit of account, a store of wealth, and a standard of deferred payment.

Question 3

What is the International Monetary System (IMS)?

Answer 3

The IMS is a set of arrangements that govern the exchange of one nation’s currency for another, providing order and stability to foreign exchange markets, and addressing balance of payments issues.

Question 4

What are the Bretton Woods Institutions?

Answer 4

The Bretton Woods Institutions include the International Bank for Reconstruction and Development (IBRD), now the World Bank, and the International Monetary Fund (IMF), established in 1944.

Question 5

What is the primary role of the World Bank?

Answer 5

The World Bank is primarily a development institution focused on financing economic development in poor and developing countries.

Question 6

What is the primary role of the IMF?

Answer 6

The IMF is a cooperative institution that maintains an orderly system of payments and receipts between nations, overseeing monetary and exchange rate policies.

Question 7

What is the IMF?

Answer 7

The IMF is an intergovernmental organization that oversees the global financial system, aiming to stabilize exchange rates and assist in reconstructing the world’s international payment system.

Question 8

What are the major functions of the IMF?

Answer 8

The major functions include surveillance (economic policy making advice), technical assistance (strengthening human and institutional skills), and financial assistance (lender of last resort).

Question 9

What are the four main bodies governing the IMF?

Answer 9

The four main bodies are the Governing Body (all member countries), Executive Board, Managing Director, and IMF Staff.

Question 10

What are the obligations of IMF membership?

Answer 10

Obligations include agreeing to the code of conduct, paying a quota subscription, refraining from restrictions on foreign currency exchange, and striving for openness in economic policies.

Question 11

How are a country’s quota and voting power in the IMF determined?

Answer 11

A country’s quota and voting power are based on its relative size in the world economy, determining its financial contribution, voting power, and drawing rights.

Question 12

What was the focus of the IMF during the 1940s?

Answer 12

In the 1940s, the IMF focused on establishing a postwar economic order, creating a system of exchange rates linked to the dollar.

Question 13

What major events characterized the IMF’s role in the 1950s and 1960s?

Answer 13

In the 1950s, the IMF made significant loans during the Suez Crisis. In the 1960s, the IMF supported newly decolonized African nations by creating the Africa Department and admitting many new members.

Question 14

What were the key challenges for the IMF in the 1970s?

Answer 14

The 1970s saw the end of gold convertibility, OPEC oil embargo, and the adoption of flexible exchange rates by member countries.

Question 15

How did the IMF address the international debt crisis in the 1980s?

Answer 15

The IMF managed the crisis by providing financial assistance and establishing structural adjustment policies for developing nations.

Question 16

What key events happened in the 90s and 2000s with the IMF?

Answer 16

Lots of debt relief. 90s= Mexican and Asia Crisis

Question 17

What is the main mission of the World Bank?

Answer 17

he World Bank’s mission is to reduce poverty and promote shared prosperity by financing development projects in developing countries.

Question 18

What are SAPS?

Answer 18

Market- based reforms

Question 19

What are some criticisms of SAPs?

Answer 19

Failed to account for political economy dynamics within countries.
Did not emphasize the role of local ownership in domestic economic policy.
Led to increased poverty and inequality.
Reduced access to essential services like healthcare and education due to austerity measures.

Question 20

What are some positive outcomes of SAPs as identified by proponents?

Answer 20

Helped stabilize economies by reducing fiscal deficits and controlling inflation.
Promoted economic efficiency by reducing government intervention and encouraging private sector growth.
Increased trade openness and integration into the global economy.

Question 21

What were some common policy prescriptions under SAPs?

Answer 21

Fiscal discipline (cutting government spending).
Trade liberalization (reducing tariffs and trade barriers).
Privatization of state-owned enterprises.
Deregulation to promote private sector investment.

Question 22

What is the Washington Consensus?

Answer 22

The Washington Consensus is a set of ten market-oriented policies that were popular among Washington-based institutions like the IMF, World Bank, and the US Treasury, used as policy prescriptions for improving economic performance in Latin American countries, and later applied to other regions including Africa.

Question 23

What is the IMF’s response to criticisms of SAPs?

Answer 23

The IMF argues that developing countries seek financial assistance when they are already in deep financial trouble due to bad management and bad luck. They caution against simplistic solutions like low-interest rates and fiscal expansions, stressing the need for comprehensive reforms.

Question 24

What changes has the IMF made since SAPs?

Answer 24

Increased focus on poverty reduction.
Emphasized good governance, accountability, and transparency in public finances.
Enhanced support for financial system regulation and supervision.
Provided more capacity building and technical assistance.
Initiated debt relief programs.