Change at the IMF: interconnectedness, financial fragility and global banks
I attended recently a workshop organized by Cornel Ban and Kevin Gallagher, with support from Governance, at Boston University on how the crisis has changed the IMF.
My presentation explored the way in which the IMF has grappled with financial innovation since the crisis, both theoretically and in its policy advice.
This is important, it argues, because the global economic crisis has brought an
important shift in the IMF’s understanding of crisis, its triggers and its
actors. Its research on macro-financial linkages now identifies large capital
inflows as the main conduit for the transmission of global shocks, in contrast
to previous concerns with current account dynamics; and transnational banks as the
key carriers of capital flows across borders. With this, the IMF has included
private financial institutions in its analytics of crisis, previously focused
on governments (fiscal policy), central banks (monetary policy) and trade
union/state-owned companies (structural reform).