2011 Triennial Surveillance Review - External Commentary - A Short Note on Surveillance and How Reforms in Surveillance Can Help the IMF to Promote Global Financial Stability

Policy Papers, July 22, 2011

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2011 Triennial Surveillance Review - External Commentary - A Short Note on Surveillance and How Reforms in Surveillance Can Help the IMF to Promote Global Financial Stability

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Bibliographic details

• Published: July 22, 2011
• Series: Policy Papers

Overview

• Commentary prepared by Joseph E. Stiglitz, University Professor, Columbia University.
• Date of publication: July 22, 2011.
• Core focus: the role of IMF surveillance in promoting global economic stability and the shortfalls in achieving its objectives.
• Subject areas listed: Corporate governance; Financial crisis; Financial stability; Fund role; Global Financial Crisis 2008-2009; Surveillance.

Key findings

• Surveillance is widely viewed as a key instrument by which the IMF ensures member states adhere to policies that promote global economic stability and enable global macroeconomic coordination necessary for economic stability.
• There is widespread agreement that major shortfalls exist in achieving the objectives of IMF surveillance.
• Part of the problem is perceived lack of incentives for countries—notably those not borrowing from the Fund—to comply with IMF advice that would achieve global stability.

Mechanisms by which surveillance can affect global stability

• If IMF surveillance impacts global stability (as distinct from the well-being of particular countries), it operates primarily through two channels:
  • (i) A process of consensus building in which actions that countries might previously have thought not to be in their interest are recognized as being in their national interest.
  • (ii) A sufficiently large number of small, individually systemically insignificant countries being affected in a meaningful enough way so as to generate systemically significant effects.

Challenges highlighted

• Lack of binding incentives for non-borrowing countries to follow IMF policy advice.
• Systemically significant countries are often among those that do not borrow from the Fund, limiting direct leverage through conditionality.
• The gap between the IMF's stated objective—to provide "the machinery for consultation and collaboration on international monetary problems"—and practical effectiveness of surveillance.

Implicit policy implications and reform priorities

• Strengthen consensus-building mechanisms so that IMF surveillance more effectively aligns national interests with global stability objectives.
• Enhance the influence of IMF surveillance on non-borrowing, systemically significant countries through improved persuasive strategies, coordination efforts, or institutional reforms that increase uptake of surveillance advice.
• Consider approaches that increase the systemic impact of surveillance on many smaller countries collectively.

Commentary prepared by Joseph E. Stiglitz, University Professor, Columbia University.

Content in this bundle

• _072211 - Broadening coverage of surveillance; Broadening participation in surveillance
  • _072211 - Broadening coverage of surveillance; Broadening participation in surveillance (Markdown version)
  • _072211 - Broadening coverage of surveillance; Broadening participation in surveillance (PDF)