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Centre for Financial and Management Studies (CeFiMS)

The International Monetary Fund and Economic Policy

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Few countries have complete autonomy in macroeconomic policy. For many policy is conducted in collaboration with the International Monetary Fund (IMF) or supervised by the IMF. The course examines the changing roles of the IMF, the nature of economic policies it encourages countries to pursue, and some of the effects these policies have on the economic environment of business, on the financial sector, and on social conditions. The course gives a simple introduction to the basic IMF economic policy framework, ‘financial programming’. Using different types of countries, including transition economies and developing countries as case studies, it enables students to study issues such as the role of capital controls and the problems of highly indebted countries.


Study Guide

You will receive a looseleaf binder containing eight ‘course units’. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Online Study Centre.


S. Ishii and K. Habermeier, (2002) Capital Account Liberalisation and Financial Sector Stability, Occasional Paper No. 211, International Monetary Fund, Washington D.C.

Independent Evaluation Office, (2003) The IMF and Recent Capital Account Crises, Indonesia, Korea and Brazil, International Monetary Fund, Washington D.C.

Kanitta Meesook, Il Houng Lee, Olin Liu, Yougesh Khatri, Natalia Tamirisa, Michael Moore and Mark H. Krysl, (2001) Malaysia: From Crisis to Recovery, Occasional Paper 207, International Monetary Fund, Washington D.C.

IMF Country Report No. 07/116 (2007) The Gambia:Request for a Three Year Arrangement Under the Poverty Reduction and Growth Facility, International Monetary Fund, Washington DC. (This is only available to download on the OSC)


You will receive two volumes of Readings, which are a compilation of recently published articles or seminal writings which augment and illustrate the main text.

Online Study Centre

You will have access to the OSC, which is a web-accessed learning environment. Via the OSC, you can communicate with your assigned academic tutor, administrators and other students on the course using discussion forums. The OSC also provides access to the course Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Objectives and learning outcomes of the course

When you have completed this course, you will be able to do the following:

  • identify who pursues stabilisation policies, and why
  • distinguish between countries that seek to stabilise on their own, and those that seek help in doing so
  • outline and discuss the role, function and operations of the IMF and its approach to stabilisation
  • discuss the influence of the financial sector in precipitating instability
  • explain the prevalent stabilisation theories and assess their appropriateness in differing circumstances
  • identify and discuss the major criticisms and controversies that the IMF’s approach has elicited
  • explain the particular problems and prescribed remedies for low-income countries seeking to stabilise their economies.

Scope and syllabus

Course Content
Unit 1: Macroeconomic Stabilisation and the Role of the IMF
  • 1.1 Introduction
  • 1.2 The Character of the International Monetary Fund
  • 1.3 The Articles of Agreement
  • 1.4 Three Key Functions Performed by the IMF
  • 1.5 Organisational Structure of the IMF
  • 1.6 The Executive Board, Constituency System and Advisory Organs
  • 1.7 The Departmental Structure of the IMF
  • 1.8 The Process Followed in Negotiating a Financing Arrangement with the IMF
  • 1.9 Types of IMF Lending
  • 1.10 Types of IMF Conditionality
  • 1.11 Conclusion
Unit 2: The IMF’s Approach to Stabilisation
  • 2.1 Introduction
  • 2.2 Trends in the Use of IMF-Supported Stabilisation Programmes
  • 2.3 Special Drawing Rights (SDRs)
  • 2.4 A Model to the Rescue? Mundell-Fleming
  • 2.5 Scenarios Using the IS-LM-BP Schedules
  • 2.6 The Theoretical Framework For IMF Stabilisation Policies
  • 2.7 The Financial Programming Approach – Four Key Identities
  • 2.8 Moving from Identities to Behavioural Assumptions
  • 2.9 Key Questions and Issues – Peru 2007
  • 2.10 Conclusion
Unit 3: Alternative Approaches to Stabilisation
  • 3.1 Introduction
  • 3.2 Key Shortcomings and Criticisms of the IMF Financial Programming Approach
  • 3.3 Further Issues in Evaluating the Financial Programming Approach
  • 3.4 How Can the IMF Programming Approach Be Improved?
Unit 4: Stabilisation and the Financial Sector
  • 4.1 Introduction
  • 4.2 The Background to the East Asian Crisis
  • 4.3 The Implications of Increased Financial Flows for Stabilisation Policy
  • 4.4 The Choice of Exchange Rate Regime
  • 4.5 Financial System Soundness
  • 4.6 The East Asian and Subsequent Emerging Market Crises
  • 4.7 The Costs of Financial Sector Crises
  • 4.8 Conclusion
Unit 5: Stabilisation Policy and the Financial Sector: Institutional Responses to Recent Crises
  • 5.1 Introduction
  • 5.2 Financial Sector Crises – the Role and Responses of the IMF
  • 5.3 Developing International Standards and Codes
  • 5.4 The IMF's Role in Crisis Prevention and Resolution
  • 5.5 Financial Crises – Other International Responses
  • 5.6 Conclusion
Unit 6: Stabilisation and the Financial Sector: Some Challenges and Controversies
  • 6.1 Introduction
  • 6.2 Capital Account Liberalisation
  • 6.3 Capital Controls
  • 6.4 Criticisms of IMF Stabilisation Policies
  • 6.5 Large-Scale IMF Financing and Moral Hazard
  • 6.6 Conclusion
Unit 7: Stabilisation and Low-income Countries
  • 7.1 Introduction
  • 7.2 The Poverty Reduction and Growth Facility (PRGF)
  • 7.3 The Poverty Reduction Strategy Paper (PRSP)
  • 7.4 Debt Relief
  • 7.5 Countries in or Emerging from Protracted Conflict
  • 7.6 IMF Technical Assistance (TA)
Unit 8: Challenges for Low-income Countries
  • 8.1 Introduction
  • 8.2 Quotas and Voting Shares of Low-Income Countries
  • 8.3 Access Limits
  • 8.4 Additional Challenges for Developing Countries
  • 8.5 Social Safety Nets
  • 8.6 Conclusion

Method of assessment

You will complete two Assignments which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 5, and the second assignment at the end of the course, on the Tuesday after Week 8. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Online Study Centre. You will also sit a three-hour examination on a specified date in October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.