Fischer Discusses IMF Program Design at AEA

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Page 23

Below are excerpts of remarks by Stanley Fischer, First Deputy Managing Director of the IMF, on IMF program design delivered at the session he chaired, "Applied Economics in Action: The International Monetary Fund," at the AEA conference.

Many questions remain open in the imprecise art of IMF program design, which involves multiple-level principal-agent problems. Most surprisingly, the IMF has not yet converged on the exchange rate system to recommend in different circumstances. Despite the frequent charge that the IMF adopts a one-size-fits-all approach, IMF programs in fact support a remarkable variety of exchange rate systems, from currency boards to free floating. Other recurring issues of program design include:

* the optimal pace of stabilization, particularly how rapidly to attempt to reduce inflation and the budget deficit;

* the optimal pace of structural adjustment, and more generally, how to design programs to increase growth over the medium term;

* how to ensure that stabilization does not adversely affect the poor;

* whether programs, particularly structural programs, should be kept simpler, and if so, what...