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ABSTRACT
IMF surveillance is typically thought to have effect because it provides useful information to member countries, because it engages countries in cooperative behaviour or because it piggy-backs the bargaining power the IMF enjoys in some countries. This article explores IMF surveillance by bringing to bear theoretical explanations as to why and how these effects might work. The simplest explanation is a rationalist-realist one that the IMF has impact in countries over whom it has bargaining power: this is borne out by the evidence regarding IMF surveillance in aid-dependent countries. However, this is not the only condition under which surveillance might work. Rationalist-institutionalists point to the role information plays in shaping competition and cooperation among states, and this effect is borne out to a limited degree by the impact of IMF-supported international standards and surveillance activities on the other economies. Finally, constructivists would describe the possible impact of surveillance in terms of learning or socialization, focusing on the social organization and impact of the IMF's activities. The evidence, however, suggests that neither bilateral nor multilateral surveillance is structured or organized in a way that promotes learning or socialization. The implications are that for IMF surveillance to be more effective across all its members would require restructuring the way the organization engages with its members, as well as a greater delegation of authority by countries to the organization.
ACKNOWLEDGEMENTS
We would like to thank, but do not wish to implicate, Carlo Cottarelli, Graham Hacche, Gerry Helleiner, Joseph Joyce, Louis Pauly, Maria Fabiana Viola, four anonymous referees, and the participants of the workshop, ‘The Reform of Global Financial Governance: Whither the IMF?’ organized by The Centre for International Governance Innovation (CIGI), Waterloo, Canada, 10 June 2006, for their comments on an earlier draft.
Notes
1 An excellent overview of IMF surveillance is CitationPauly (1997). See also CitationPauly (2007).
2 CitationGoldstein (2006) refers to the provisions in Article IV, Sec. 3, empowering the IMF to ‘oversee the compliance of each member with its obligations’ and to ‘exercise firm surveillance over the exchange rate policies of members’, as well as to ‘adopt specific principles for the guidance of members with respect to these policies’. The Articles of Agreement are available online: <http://www.imf.org/external/pubs/ft/aa/index.htm>.
3 The term ‘logic of appropriateness’ is used by CitationMarch and Olsen (1984); see also the incipient literature on economic constructivism: CitationBlyth (2002); CitationSharman (2006); and CitationSeabrooke (2006).
4 We benefited from a similar taxonomy developed by CitationSimmons et al. (2006) to study the international diffusion of liberal economic policies.
5 See CitationWoods and Lombardi (2006) on the role of the Executive Board in the governance of the IMF.
6 CitationIMF (2006b). These figures are stable over time.
7 The 2007 Surveillance Decision reaffirms that surveillance should focus on promoting countries' external stability. Improving upon the previous 1977 Decision, it provides clearer guidance on issues such as exchange rate manipulation and foreign exchange intervention, while specifying a number of appraising indicators. See CitationIMF (2007a).
8 See CitationJames (1995) for a historical appraisal.
9 IMF (Citation2006b: 55). Similar results were found for the GFSR.
10 The standards cover 12 areas related to policy transparency (data transparency through the Special Data Dissemination Standard, or SDDS, and the General Data Dissemination Standard, or GDDS, fiscal transparency and monetary and financial policy transparency); financial sector regulation and supervision (banking supervision, securities, insurance, payments systems and anti-money laundering and combating the financing of terrorism); and market integrity (corporate governance, accounting, auditing and insolvency and creditor rights). Anti-money laundering and combating the financing of terrorism was added in November 2002.
11 ROSC stands for Report on the Observation of Standards and Codes and is used by the IMF (and the World Bank) to assess a member's compliance vis-à-vis a given international standard.
12 IMF Surveillance—A Fact Sheet, August 2006. Available online: <http://www.imf.org/external/np/exr/facts/surv.htm>.
13 Article 1.
14 Her study focuses on Section 2 of Article VIII prohibiting restrictions on the making of payments and transfers for current international transactions.
15 Their participation rates stand at 93, 87 and 50 per cent, respectively.
16 Further evidence of peer pressure in accepting such obligations is found in the most recent document discussed by the Executive Board on the status of compliance with Article VIII (CitationIMF, 2006d). It starts by recalling that in the earlier review, in 1992, the Board ‘agreed that many members have availed themselves of Article XIV [transitional arrangements] for too long and should take appropriate steps to remove remaining restrictions. Therefore, the staff will intensify its efforts to encourage countries to accept the obligations of Article VIII' (CitationIMF, 2006d: 2; emphasis added). The staff then proudly confirms that ‘the goals set out in the 1992 report have been met’. By May 2006, in fact, 165 out of 184 members had notified the Fund of their acceptance of Article VIII obligations – a rapid shift considering that some members have availed themselves of the transitional arrangements for over 40 years. When the 1992 review was discussed by the Board, 74 members had accepted Article VIII obligations. Of those which had not, 68 had been Fund members for more than 20 years. The proportion of countries that have notified their acceptance rose from less than 50 per cent in 1993 to almost 90 per cent in 2005.
17 See CitationCady (2004); CitationGlennerster and Yongseok (2003); CitationPodpiera (2004); CitationPrice (2002); and CitationSundararajan et al. (2001).
18 Treaty of Nice, Article 99(3).
19 The stability programme covers the following background: the medium-term budgetary objective and the adjustment path towards this objective; main assumptions about economic developments and important variables relevant to the realization of the envisaged programme; a detailed and quantitative assessment of budgetary and other economic policy measures being taken and/or proposed to achieve the objectives of the programme, including a detailed cost-benefit analysis of major structural reforms; an analysis of how changes in the main economic assumptions would affect the budgetary and debt position. Set forth in Article 3 of Council Regulation (EC) No. 1466/97 of 7 July 1997 amended by Council Regulation (EC) No. 1055/2005 of 27 June 2005.
20 Article 5 of Council Regulation (EC) No. 1466/97 of 7 July 1997 amended by Council Regulation (EC) No. 1055/2005 of 27 June 2005 provides that ‘based on assessments by the Commission …, [ECOFIN] shall examine the medium-term budgetary objective presented by the Member State concerned, assess whether the economic assumptions on which the programme is based are plausible, whether the adjustment path towards the medium-term budgetary objective is appropriate and whether the measures being taken and/or proposed to respect that adjustment path are sufficient to achieve the medium-term objective of the cycle’.
21 Treaty of Nice, Article 9.
22 Treaty of Nice, Article 11.
23 CitationIMF (1999a). The facility, never used, was discontinued in 2003.
24 In an influential contribution, CitationBurnside and Dollar (2000) have argued that aid is more effective when managed multilaterally than bilaterally.