Role Of Federal Reserve Essay

1128 words - 5 pages

Federal Reserve exists to play a role as the last resort of lender for the US economy where International Monetary Funds (IMF) exists to play a similar role for global economy. The International Monetary Fund has become a powerful international institution that provides loans to governments of member countries unable to meet their international financial obligations, such as to public and private lenders or to trade partners. The IMF has played a role as a world finance minister that monitors the global economy ensuring that trade and exchange is occurring smoothly.HistoryThe International Monetary Fund was established at the United Nations Monetary and Financial Conference held at Bretton Woods, New Hampshire, on July 1-22, 1944 to oversee the international monetary system and promote exchange stability and orderly exchange relations among its member countries . Since its establishment, the IMF assisted many countries that tried to rebuild their country after the World War II and that had monetary problems such as East Asia, Mexico, Argentina, Columbia and Russia.MissionA main role of the IMF is to provide loans to countries experiencing balance-of-payments problems so that they can restore their economic stability and sustainable economic growth. The financial assistance provided by the IMF enables countries to rebuild their international reserves, stabilize their currencies, and continue paying for imports without having to impose trade restrictions or capital controls . IMF's roles can be classified into five main operations.1.Promoting international monetary cooperation and providing consultation and collaboration on international monetary problems.2.Facilitating the expansion and balanced growth of international trade, and thereby contributing to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy3.Promoting exchange stability, maintaining orderly exchange arrangements among members, and avoiding competitive exchange depreciation.4.Assisting in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade5.Giving confidence to member countries by making the general resources of the fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity .Strategic FrameworkThe IMF gets its resources from its member countries. Every member country is obligated to contribute funds to the IMF. Each country's contribution is determined based on an assessment of its share of the world economy. Upon joining the IMF, a country must pay 25 percent of its contribution in widely accepted foreign currencies (U.S dollar or...

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