Can the fund by IMF save the world economy Essay

Can the fund by IMF save the world economy - Essay Example The functions of the IMF are quite broad and it ranges from enhancing monetary cooperation between nations to maintaining an acceptable level of balance of payment. Other functions include promoting stability of exchange rate, ensuring smooth flow of capital and providing funds to nations. Providing financial assistance is one of the major functions of the IMF so that problems relating to balance of payment can be reduced (Weiss, â€Å"International Monetary Fund: Background and Issues for Congress†). Monitoring the fiscal and monetary functions of nations under its membership and technical advice are also functions of the IMF. The purpose of this paper is to highlight the role of IMF in helping to protect the world economy. The paper is divided into five main sections. The chapter of literature review focuses on the key economic theories in explaining the role of the IMF. The methodology chapter briefly discusses the methods of conducting this essay and the section on results provides empirical verification of the ways in which the countries has performed with the help of the funds provided by the IMF. Historically, the mechanism of working of IMF is rooted in the Keynesian macroeconomics. The IMF is essentially a monetary organization that focused on the monetary help to adjust balance of payment of a country. The works of Friedman (1950 cited in Davidson 64) regarding floating exchange rates and monetarism had influenced the functioning of the IMF. Keynes was one of the founding fathers of the IMF and he had applied his countercyclical monetary and fiscal policies to combat unemployment and recessions. However, over the years the functioning of the IMF had changed dramatically with the evolution of the new classical macroeconomic ideas. The proponents of the Keynesian and the post Keynesian theories had suggested that uncontrolled flow of capital makes countries highly vulnerable to events like banking crisis and