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International Monetary Fund

Abstract

One of the most puzzling features of Article IV, Section 8, is the contrast between subsections (b) and (c). Under subsection (b), express provision is made for an adjustment in the Fund’s holdings of a currency in the event of both devaluation and depreciation. Under subsection (c), express provision is made for revaluation but not appreciation. It is difficult to find a satisfactory explanation for this distinction. It would not be sound to assume that Article IV, Section 8, has the quality of a sanction; that if a member permits its currency to depreciate, the penalty for this violation of the member’s obligations is that it must pay more of its currency to the Fund; and that the corresponding penalty for a member which permits its currency to appreciate in violation of its obligations is that it cannot get the return of any of its currency from the Fund. The flaw in this set of assumptions is that a member may have an exchange system which enables the Fund to find that there is an appreciation but which is formally consistent with the Articles for the time being. This situation would exist if multiple rates of exchange had been temporarily approved by the Fund under its jurisdiction to authorize multiple currency practices.17

International Monetary Fund

Abstract

The Fund has concluded that it has implied powers to sell a portion of its gold in order to invest the proceeds, on certain conditions, in order to earn income for certain limited purposes.27 The proceeds have been invested in U. S. Government securities ranging from Treasury bills having not more than 93 days to run to 15-month Treasury securities. One of the problems that had to be resolved before the investment program was undertaken was whether the gold value of the securities would be maintained under Article IV, Section 8. Subsections (b), (c), and (d) all refer to the Fund’s currency holdings. However, subsection (a) refers to the Fund’s “assets.” It had already been decided in connection with the application of Article IV, Section 8, to fluctuating currencies that subsection (a) had independent substantive effect and was not merely a preamble adding nothing to the rest of Section 8. It had also been decided in connection with the same issue that “assets” included currency holdings. Therefore, the further problem was whether the word went beyond currency holdings and would embrace the securities in which the Fund would invest. It was of no assistance in solving this problem that the gold value of the non-negotiable, non-interest bearing securities that members may substitute for currency under Article III, Section 5,28 must be maintained in gold value, because Article XIX(f)29 provides expressly that these securities are to be regarded as currency holdings.

International Monetary Fund

Abstract

Under Article VII, Section 2,32 the Fund can borrow the currencies of members in order to replenish its holdings of them. The Fund has entered into General Arrangements to Borrow with eight of its members and the central banks of two other members. Each of these ten “participants” has assumed a stand-by commitment to lend up to a stated maximum amount in its own currency in certain circumstances and on certain terms and conditions.33

International Monetary Fund

Abstract

The Articles of Agreement provide in some detail in Article IV for changes in the par values of the currencies of members. In the event of any change in par value, Article IV, Section 8, comes into play. The basic rule is that a member making a change in the par value of its currency must then adjust the Fund’s holdings of that currency so that, on the basis of the new par value, the holdings will correspond in gold value after the change to their gold value before the change. This obligation is confined to the Fund’s holdings of the currency at the date of the change.3 The obligation applies to all of the Fund’s existing holdings no matter what their origin may have been, and therefore there is no point in trying to trace the sources of these holdings even if it were possible to trace balances that are fungible and that result from a diversity of operations. The obligation of adjustment does not apply to any amount of currency that has been sold or disposed of in some other way by the Fund before the change in par value, even if that currency can still be identified in the hands of the recipient.

International Monetary Fund

Abstract

Article IV, Section 8(b), provides that a member shall pay additional currency to the Fund equal to the reduction in the gold value of the member’s currency held by the Fund not only when the par value of the member’s currency is reduced but also when there is no formal change in par value, but the Fund determines that the foreign exchange value of the member’s currency has depreciated to a significant extent within the member’s territories. In this way, provision is made for the maintenance of the gold value of the Fund’s holdings of a member’s currency when there is a de facto depreciation of the currency in exchange transactions in the member’s territories. The par values of the currencies of members are fixed, directly or indirectly, in terms of gold, and therefore there is a fixed relationship between the par values of any two currencies. Exchange transactions involving the two currencies in the territories of the two members must be based on this fixed relationship and must not deviate from it by more than narrow margins that are consistent with the Articles.12 If, notwithstanding the provisions of the Articles, exchange transactions do deviate from the fixed relationship by a significant amount in excess of these margins, the deviation may occur because there has been a depreciation in the market value of one currency in relation to other currencies.

International Monetary Fund

Abstract

Many factors appear to underlie the increasing willingness of governments to adopt restrictive trade measures, even while reiterating their basic commitment to an open and liberal trading system. The survey in the preceding section leads to the conclusion that the issue is complex, that a multiplicity of factors—economic and social—are at work, and that explanation must be sought in terms of the interaction of these factors.

International Monetary Fund

Abstract

At one time during the decade of the fifties, it was feared that a number of countries with currencies that were important in international trade and payments might feel themselves forced to depart from the observance of their obligation under the Articles to ensure that exchange transactions within their territories were kept within the permitted margins of the par value. If a member departed from this obligation, it might allow the rates of exchange for its currency to fluctuate more or less freely, or it might allow fluctuation within margins wider than those permitted under the Articles. In either event, the rates of exchange might move up or down at more or less frequent intervals in response to the forces brought to bear on the currency.

International Monetary Fund

Abstract

Research activity in the IMF emphasizes the links between the organization's policy and operational concerns. The main objectives of research is IMF staff understanding of policy and operational issues relevant to the institution, and to improve the analytical quality of the work prepared for management and the Executive Board and the advice provided to member countries. The scope of research in the IMF is defined by the purposes and functions of the institution. In order to foster innovation and ensure quality control, the IMF makes much of its research available outside the institution and encourages staff to interact with academia and other research organizations through conferences, seminars, and occasional joint research projects. The visiting scholar’s program has also enhanced the quality of research done in the IMF. This program brings in leading members of the economics profession from around the world to assist in the preparation of papers for the Executive Board and to conduct research on IMF-related issues.

International Monetary Fund

Abstract

Research activity in the IMF emphasizes the links between the organization's policy and operational concerns. The main objectives of research is IMF staff understanding of policy and operational issues relevant to the institution, and to improve the analytical quality of the work prepared for management and the Executive Board and the advice provided to member countries. The scope of research in the IMF is defined by the purposes and functions of the institution. In order to foster innovation and ensure quality control, the IMF makes much of its research available outside the institution and encourages staff to interact with academia and other research organizations through conferences, seminars, and occasional joint research projects. The visiting scholar’s program has also enhanced the quality of research done in the IMF. This program brings in leading members of the economics profession from around the world to assist in the preparation of papers for the Executive Board and to conduct research on IMF-related issues.

International Monetary Fund

Abstract

Research activity in the IMF emphasizes the links between the organization's policy and operational concerns. The main objectives of research is IMF staff understanding of policy and operational issues relevant to the institution, and to improve the analytical quality of the work prepared for management and the Executive Board and the advice provided to member countries. The scope of research in the IMF is defined by the purposes and functions of the institution. In order to foster innovation and ensure quality control, the IMF makes much of its research available outside the institution and encourages staff to interact with academia and other research organizations through conferences, seminars, and occasional joint research projects. The visiting scholar’s program has also enhanced the quality of research done in the IMF. This program brings in leading members of the economics profession from around the world to assist in the preparation of papers for the Executive Board and to conduct research on IMF-related issues.