Can the IMF’s wonks change China?
The Wall Street Journal‘s Real Time China blog picks up on an interesting section in the International Monetary Fund’s new World Economic Outlook report: In its World Economic Outlook released Monday, the IMF cited a report in the People’s Daily from last year, in which Li Daokui, an academic adviser to China’s central bank, is ...
The Wall Street Journal's Real Time China blog picks up on an interesting section in the International Monetary Fund's new World Economic Outlook report:
The Wall Street Journal‘s Real Time China blog picks up on an interesting section in the International Monetary Fund’s new World Economic Outlook report:
In its World Economic Outlook released Monday, the IMF cited a report in the People’s Daily from last year, in which Li Daokui, an academic adviser to China’s central bank, is cited as saying that China will not repeat Japan’s mistake in the 1980s of letting its exchange rate surge in response to foreign pressure.
In an unusual move, the IMF devoted an entire three-page section of the report to dissecting and rebutting the argument that the Plaza Accord of 1985—in which Japan agreed to a substantial rise in the yen against the dollar—led to its economic crisis later that decade.
The real problem, the IMF argues, was that Japanese authorities were overly concerned about the effect of yen appreciation and overreacted to a slowdown in the first half of 1986, which led them the implement “a sizeable macroeconomic stimulus” that year.
This kind of wonkish back-and-forth begs the question of whether the IMF has any real influence over Beijing (or Washington, for that matter). It clearly doesn’t have the kind of leverage it has over borrowing countries or countries that might need to borrow in the near future. Instead, any influence must come through compelling economic analysis. How capable the Fund is of winning those conceptual battles is an open question. The recent internal IMF analysis of the institution’s performance in the run-up to the financial crisis suggests that major-power government experts were much more capable of changing the Fund’s mind than the other way around.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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