In 1930, when economic activity in the major industrial countries to narrow, many countries began to apply critical thought, trying to protect their economies by restricting imports. To avoid falling gold reserves, foreign exchange, a few countries cut imports, some countries banknotes, and some water pressure reaches the limit for foreign currency account of the citizens.World trade was in serious decline, when employment and living standards in many countries.The IMF has put into operation on December 27, 1945, when it has 29 first nation signing it is the terms of the Treaty.From the end of World War 2 until the end of 1972, world capitalism has achieved the rapid real income growth is unprecedented. In the capitalist system, the benefits obtained from growth have not been evenly for all, but most countries capitalism are becoming more prosperous, In contrast with the previous period of capitalist countries in the period between the two world wars.
The IMF is a self-described "organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.
Upon initial IMF formation, its two primary functions were: to oversee the fixed exchange rate arrangements between countries, thus helping national governments manage their exchange rates and allowing these governments to prioritise economic growth, and to provide short-term capital to aid balance-of-payments. This assistance was meant to prevent the spread of international economic crises.
The IMF's role was fundamentally altered after the floating exchange rates post 1971. It shifted to examining the economic policies of countries with IMF loan agreements to determine if a shortage of capital was due to economic fluctuations or economic policy. The IMF also researched what types of government policy would ensure economic recovery. The new challenge is to promote and implement policy that reduces the frequency of crises among the emerging market countries, especially the middle-income countries that are open to massive capital outflows. Rather than maintaining a position of oversight of only exchange rates, their function became one of “surveillance” of the overall macroeconomic performance of its member countries. Their role became a lot more active because the IMF now manages economic policy instead of just exchange rates.
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