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Louellen Stedman, Mr. John Hicklin, and Roxana Pedraglio

Abstract

In 2007, the IEO completed an evaluation of IMF Exchange Rate Policy Advice. The evaluation addressed issues at the heart of the IMF’s work, as laid out by the Articles of Agreement. In particular, the Articles call on the institution to oversee the effective operation of the international monetary system and to collaborate with member countries in promoting growth, stability, and a stable system of exchange rates.1 This function is carried out through surveillance, a process that provides for periodic dialogue between the Fund and its members, with the IMF providing advice on exchange rate and other policies.2

Louellen Stedman, Mr. John Hicklin, and Roxana Pedraglio

Abstract

The IEO evaluation of IMF Exchange Rate Policy Advice found that the IMF was “not as effective as it need[ed] to be” in fulfilling its responsibilities for exchange rate surveillance in the period reviewed (1999–2005).7 The evaluation acknowledged the efforts of staff, as well as the complexity of the task, not least given the lack of professional consensus on many of the key issues in this area. Nonetheless, the evaluation observed serious weaknesses in the IMF’s focus on key analytical issues and in its engagement with members—which reduced the traction of IMF advice on countries’ policy choices, contributed to perceptions that member countries were not treated consistently, and limited the IMF’s effectiveness. The evaluation attributed these shortcomings to gaps in three main areas:

Louellen Stedman, Mr. John Hicklin, and Roxana Pedraglio

Abstract

The 2007 IEO evaluation pointed out a lack of clarity in the 1977 Surveillance Decision and in the associated guidance for staff. It also noted the need for greater “trust and engagement with the membership on how to deal with new challenges” in order for the IMF to continue to carry out its surveillance mandate effectively (IEO, 2007).

Louellen Stedman, Mr. John Hicklin, and Roxana Pedraglio

Abstract

As the IMF has moved forward under the successive new Surveillance Decisions and also adapted its work to reflect the lessons of the global financial crisis, the institution has invested substantially in enhancing its analysis of, and advice on, exchange rate policy. This chapter discusses specific developments related to exchange rate analysis and policy advice in key areas addressed by the 2007 evaluation: exchange rate regimes; exchange rate levels and external stability; data; spillovers; and evenhandedness.15