Part A

The IMF was formed in 1944 at the Bretton Woods Conference by founding fathers Harry
Dexter White and John Maynard Keynes. It came into formal existence per the IMF Articles
of Agreement on 27 December 1945 at the UN Monetary and Financial Conference, Bretton
Woods, New Hampshire.1 The IMF currently has 189 member countries.

Part B

The IMF aims to facilitate a balanced expansion and growth of international trade by advising
its member countries on economic and financial policies which promote stability. Via its
three key functions of surveillance, technical assistance and lending, the IMF contributes to
promoting and maintaining high levels of employment and real income in all its member
countries.

The issue domain per which the IMF operates is global economic stability. A fundamental
problem faced by states regarding economic stability is the difficulty of achieving even and
stable economic growth levels. Dynamic and healthy market economies require some degree
of natural volatility and structural change. However, the difficulty of minimising instability in
in a country’s economy without reducing its capacity to increase productivity, employment
and efficiency is significant. This difficulty is especially pronounced for developing or
unstable nations, and is persistently crucial in today’s highly globalised and interconnected
international system.

The promotion of economic stability is fundamental to avoiding destabilising economic and

financial crises, volatile swings in economic activity, high inflation levels and swings in
foreign exchange and financial markets. Economic instability within a country consequently
leads to increased consumer and producer uncertainty, which discourages investment and
impedes economic growth and the rise of living standards. Economic and financial stability is
a concern that is both national and multilateral. As past financial crises have evidenced,
states are largely interconnected via their economies. As such, vulnerabilities in one country
can easily spread across sectors and national borders.2

By participating as a member of the IMF, states gain assistance in the achievement of

financial stability. For example, the IMF provides temporary financial help via loans to
member countries that are in debt (particularly countries with balance of payments issues) so

1 International Monetary Fund, Articles of Agreement of the International Monetary Fund

(April 2016), Introductory Article.
2 Mina E. Tanious, "The Impact of Economic Interdependence on the Probability of Conflict

Between States," Review of Economics and Political Science, Vol. 4 Iss. 1 (2019): 40.
that they can work to resolve domestic economic difficulties. Member countries also benefit
from technical assistance and training (called Capacity Development(CD))3 to central banks,
tax authorities and other economic institutions to facilitate the building of modernised and
robust economic frameworks and policies. These member state benefits are not only
economically advantageous, but crucial in contributing to global economic stability and
material security.

As a corollary, non-member states forgo the IMF’s immediate offer of economic and financial
assistance. They lose the offer of low-interest rate loans and Capacity Development work, as
well as access to resources such as the IMF’s international reserve asset (the Special Drawing
Rights), which supplements member countries’ official reserves.4 Importantly, they also forgo
access to the IMF’s created space wherein states in anarchy can cooperate and facilitate
stability via repeated interactions and shared norms and values.

Part C

Per neoliberal institutionalist theory, states see collective action as being a potential
opportunity to receive absolute gains. However, under anarchy, inadequate information
about whether potential partner states will cooperate or “cheat” leads states to be inclined to
defect against other states instead of cooperating to realise mutual gains.

As an international organisation, the IMF provides two relevant mechanisms which assist
member states to overcome the cooperation problem and cooperate to facilitate multilateral
economic stability. These two mechanisms, per this paper, are extending the shadow of the
future and providing issue linkage.

Extending the shadow of the future refers to the instillation of concern about the future in
states. Making states care about the future can encourage them to cooperate because their
actions in the present will affect their outcomes and interests in the future. The IMF extends
the shadow of the future among its member states by creating mechanisms for monitoring
and enforcement. To maintain stability and prevent international monetary crises, the IMF
monitors member countries’ policies and economic and financial developments via its
surveillance function. IMF surveillance is typically delivered to members via annual staff
visits from IMF headquarters, as well as engagement with government and central bank
officials during these visits to discuss risk management policies and macro-critical structural

3 “IMF Capacity Development,” International Monetary Fund. Accessed 31 March, 2019.

https://www.imf.org/en/About/Factsheets/imf-capacity-development.
4 “Special Drawing Right (SDR),” International Monetary Fund. Accessed 31 March, 2019.

https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-
SDR.
reforms. Upon completion of their evaluation, the IMF presents a report to its Executive
Board for discussion. Discussions about reports are then passed to the member state’s
authorities, concluding a process known as an Article IV consultation. 5 Press releases
summarising IMF reports, analyses and Board views are often published for greater
transparency. This procedure of surveillance and monitoring influences member states to
cooperate in the international system to consistently implement economically sound policies.
Surveillance extends the shadow of the future, contributing to a system wherein all states are
inclined to work towards global economic stability.

Providing issue linkage refers to how the simultaneous negotiation of multiple issues for joint
settlement can assist states in concluding international agreements. Developing countries,
faced with recurrent payments imbalances, pressure for currency devaluation and
macroeconomic instability, increasingly turn to the IMF for stabilisation plans and loans to
resolve economic problems. Per loan conditionality, states must accept the IMF’s conditions
for loaning. Via the sacrificing of levels of domestic political autonomy in exchange for funds,
the IMF links a state’s domestic security policy and governmental institutions with
economics, encouraging interstate cooperation to achieve economic stability.

Word Count: 828

Bibliography

Haas, Ernst B. “Why Collaborate? Issue-Linkage and International Regimes.” World

Politics 32, No. 3 (April 1980): 357-405.
International Monetary Fund, Articles of Agreement of the International Monetary
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“IMF Factsheets List.” International Monetary Fund. Accessed 31 March, 2019.
https://www.imf.org/en/About/Factsheets.
Poast, Paul. “Does Issue Linkage Work? Evidence from European Alliance
Negotiations, 1860 to 1945.” International Organization 66, No. 2 (2012): 277–310.
doi:10.1017/S0020818312000069.
Thacker, Strom C. "The High Politics of IMF Lending." World Politics 52, No. 1 (1999):
38-75. http://www.jstor.org/stable/25054100.

5“IMF Surveillance,” International Monetary Fund. Accessed 31 March, 2019.

https://www.imf.org/en/About/Factsheets/IMF-Surveillance.