Search

Begin New Search Topic International Trade and Finance Author Edwin M. Truman

1. The IMF should enhance the role of SDRs to strengthen the international monetary system

Author:
Edwin M. Truman
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The special drawing right (SDR), issued by the International Monetary Fund (IMF), has the potential to strengthen dramatically the international monetary system. Established in 1969 and allocated twice during its first decade, the SDR was in the institutional closet from 1980 until 2009, when $250 billion in SDRs was allocated to members of the IMF to help address the global financial crisis. In 2021 another $650 billion in SDRs was allocated to help address the coronavirus pandemic. The SDR has proved itself as a crisis instrument. This paper addresses critically the arguments against SDR allocations. It proposes regular annual SDR allocations, along with measures to make the SDR more attractive to critics and measures to build out the SDR system in support of the international monetary system. The paper includes an appendix on the history of the SDR. A second appendix analyzes SDR use following the 2009 and 2021 allocations and finds that contrary to the popular myth, many countries other than low-income members of the IMF benefited directly in multiple ways from those allocations.
Topic:
International Trade and Finance, Financial Crisis, Finance, and IMF
Political Geography:
Global Focus

2. Survival of the International Monetary Fund and Global Economic Cooperation

Author:
Edwin M. Truman
Publication Date:
04-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The International Monetary Fund (IMF)—a quota-based institution—faces a test of its survival as the linchpin of the global financial safety net. Its roughly $1.4 trillion in total financial resources is scheduled to begin to shrink in 2020. In 2015, IMF members committed to strengthening IMF financial resources in the 15th General Review of Quotas, which will end in December 2019. Over the past 25 years, the United States has led the way for a gradual redistribution of IMF quota shares toward faster-growing emerging-market and developing countries. Any significant redistribution of quota shares requires an increase in total quotas. Because of its share of votes in the IMF, the United States must agree to any change in quotas. The Trump administration, however, has signaled that it favors no such change. If the United States does not reverse its stance, IMF members will lose an opportunity to strengthen the institution at a time of global financial uncertainty. Truman says the United States could still change its position and recommends how other member countries should press it to do so.
Topic:
International Trade and Finance, Politics, International Monetary Fund, Global Political Economy, Donald Trump, and Economic Cooperation
Political Geography:
North America, Global Focus, and United States of America

3. What Next for the IMF?

Author:
Edwin M. Truman
Publication Date:
01-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
After the Obama administration's four failed attempts to win congressional approval of the 2010 quota and governance reform for the International Monetary Fund (IMF), it is time to recognize that implementation of the agreement may be indefinitely delayed. The international community must therefore prepare for the likelihood of a new world order in which the IMF augments its funding and reforms its governing structure without US participation. This Policy Brief examines four options for the IMF: First, wait for the US Congress to pass the necessary legislation. Second, complete a new, augmented IMF quota and governance package and again wait for the United States to give its formal approval. Third, bypass the US Congress and risk losing the US veto over a few important decisions on the structure of the IMF. Fourth, let the Fund adopt a reform and financing package within a structure that potentially excludes US participation and eliminates the US veto in the new entity.
Topic:
Economics, International Trade and Finance, International Monetary Fund, Governance, and Reform

4. IMF Reform Is Waiting on the United States

Author:
Edwin M. Truman
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The vital role played by the International Monetary Fund (IMF) in stabilizing the world economy and financial system is in serious jeopardy. The failure in mid-January by the US Congress to approve IMF reform legislation that had been pending for more than three years did not simply bring to a screeching halt a decade of slow progress reforming the governance of the Fund to make it more representative, legitimate, and therefore effective. Congress's balking on this issue also did substantial, actual damage to the US reputation around the world, as the leaders of many countries called into question Washington's ability to deliver on promises made in international economic agreements.
Topic:
Economics, International Trade and Finance, International Monetary Fund, and Reform
Political Geography:
United States

5. Progress on Sovereign Wealth Fund Transparency and Accountability: An Updated SWF Scoreboard

Author:
Edwin M. Truman and Allie E. Bagnall
Publication Date:
08-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The term sovereign wealth fund (SWF) had not been coined a decade ago. By 2007, economists and the financial world were alternatively excited about or alarmed by the growing influence of these institutions, though in fact many of them had been around for decades. Politicians in countries in which the funds invested generally welcomed the additional financial resources from abroad while expressing concern about the motivations of investors and what they feared could be threats to political, economic, and financial security. The general public in the countries in which the funds were based realized at the same time that political leaders were investing large amounts of national wealth at home and abroad with limited disclosure, and they wanted to know more.
Topic:
Economics, Globalization, International Trade and Finance, Foreign Direct Investment, and Sovereign Wealth Funds

6. Implementation of the Santiago Principles for Sovereign Wealth Funds: A Progress Report

Author:
Edwin M. Truman
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
At the annual meeting of the International Forum of Sovereign Wealth Funds (IFSWF) held in Oslo, Norway on October 2-3, 2013, the forum reviewed and subsequently released its second report on members' experiences in the application of the Santiago Principles for sovereign wealth funds (SWFs). The Santiago Principles were adopted by a group of countries with such funds in September 2008 in response to concerns about threats to political, economic, and financial security in countries receiving SWF investments. The objective was to promote the transparency and accountability of SWFs for the countries of origin as well as the countries in which the funds were investing.
Topic:
Economics, International Trade and Finance, and Sovereign Wealth Funds
Political Geography:
Norway, Latin America, and Santiago

7. Asian and European Financial Crises Compared

Author:
Edwin M. Truman
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The European and Asian financial crises are the two most recent major regional crises. This paper compares their origins and evolution. The origins of the two sets of crises were different in some respects, but broadly similar. The two sets of crises also shared similarities in their evolution, but here the differences were more significant. The European crisis countries received more external financial support, despite the fact that they involved more solvency issues while the Asian crises involved more liquidity issues. On balance, the reform programs in the European crises were less demanding and rigorous than in the Asian crises. Partly as a consequence, the negative impacts on the global economy have been larger. I draw three lessons from this analysis: First, history will repeat itself; there will be other external financial crises. Second, other countries have a stake in appropriate crisis management. Third, the IMF and other countries were mistaken in treating the European crises as individual country crises rather than as a crisis for the euro area as a whole that demanded policy conditionality on all members of the euro area.
Topic:
Economics, International Trade and Finance, International Monetary Fund, and Financial Crisis
Political Geography:
Europe and Asia

8. John Williamson and the Evolution of the International Monetary System

Author:
Edwin M. Truman
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Throughout his brilliant career, John Williamson has frequently focused his considerable analytical skills and powers of persuasion on reform of the international monetary system. This paper examines two principal areas of his concern: (1) exchange rates and the adjustment process, and (2) international liquidity, seigniorage, and the stability of the system. With respect to exchange rates, I find that there has been a moderate reduction in variability, but over the past 40 years external imbalances have, if anything, worsened. The adjustment process has malfunctioned. With respect to international liquidity, reserves have expanded rapidly, but their expansion has been demand-determined, has not involved a remonetization of gold or an increase in inflation. I find that concerns about the size and maldistribution of seigniorage are misplaced. Moreover, we are seeing a steady evolution toward a multicurrency international monetary and financial system. However, reserve diversification does not appear to have adversely affected exchange rate volatility to date. I conclude that the principal benefits of the Bretton Woods international monetary system remain and the principal weaknesses remain. But the system is evolving. It could be improved with respect to the adjustment process and the role of the International Monetary Fund as the international lender of last resort.
Topic:
Economics, Foreign Exchange, International Trade and Finance, International Monetary Fund, Monetary Policy, and Financial Crisis

9. The Outlook for International Monetary System Reform in 2011: A Preliminary Report Card

Author:
Edwin M. Truman
Publication Date:
05-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Reform of the international monetary system was placed on the agenda of the Group of 20 (G-20) a year ago at the initiative of the incoming French leadership of the G-20. On November 4, 2011 in Cannes, France, the G-20 leaders will announce their conclusions and agreements after a year and half of intense dialogue and debate. This policy brief summarizes my preliminary rating of the expected results based on the evidence to date: a barely passing grade on substance but an A for effort. Neither final grade is locked in stone, however.
Topic:
Economics, International Cooperation, International Trade and Finance, International Monetary Fund, Monetary Policy, and Financial Crisis
Political Geography:
France

10. Sovereign Wealth Funds: Is Asia Different?

Author:
Edwin M. Truman
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Sovereign wealth funds (SWFs) have become a prominent feature of the international financial landscape. They are sufficiently diverse in their origins, structures, and objectives that generalizations are perilous. However, legitimate concerns have been raised in home and host countries about the management, behavior, and interactions of these funds. Many of those concerns can be addressed via increased accountability and transparency. The Santiago Principles are a good start in doing so, but Edwin M. Truman's SWF scoreboard points to areas where these principles can be improved. Meanwhile, SWF compliance must be further increased. At the same time, the Organization for Economic Cooperation and Development (OECD) effort to address concerns from the host-country side has not resulted in the erection of new barriers to that form of cross-border investment, but the OECD failed to reverse the creeping financial protectionism of the past decade. Because of their size and the source of their funding, some Asian funds are different. As a result, they will be held to a higher standard of accountability and transparency even as their government owners press for more openness to cross-border investment.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Asia

11. IFSWF Report on Compliance with the Santiago Principles: Admirable but Flawed Transparency

Author:
Edwin M. Truman and Sarah Bagnall
Publication Date:
08-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
On July 7, 2011 the International Forum of Sovereign Wealth Funds (IFSWF) released a report on IFSWF Members' Experience in the Application of the Santiago Principles. The report is a self-assessment of the voluntary compliance of 21 member sovereign wealth funds (SWFs) with the Generally Accepted Principles and Practices of SWFs, issued in October 2008. We commend the IFSWF for undertaking the surveys on which the report is based, for the later decision to publish the results, and for the detail included in the report. However, as with many self-assessments, the report has some flaws. The principal flaw is that the characterization of the extent of compliance with the Santiago Principles is exaggerated.
Topic:
Economics, International Trade and Finance, Markets, and Sovereign Wealth Funds
Political Geography:
Santiago

12. G-20 Reforms of the International Monetary System: An Evaluation

Author:
Edwin M. Truman
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
With great French fanfare the G-20 committed itself in Seoul, Korea a year ago “to build a more stable and resilient international monetary system (IMS), including by further strengthening global financial safety nets.” As subsequently elaborated by French President Sarkozy and other French government officials, the agenda for IMS reform included five elements: surveillance of the global economy and financial system, the international lender-of-last-resort mechanisms (global financial safety nets), the management of global capital flows, reserve assets and reserve currencies, and IMS governance.
Topic:
Economics, Globalization, International Trade and Finance, Markets, and International Monetary Fund
Political Geography:
Korea

13. Asian Regional Policy Coordination

Author:
Edwin M. Truman
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper addresses two central questions for Asia and the world: (1) What is the purpose of Asian regional policy coordination going forward? (2) Will Asian regional policy coordination substitute or complement global policy coordination? The paper examines the potential coverage and content of such policy coordination, what is meant by Asia in this context, and how Asia fits in with global policy coordination processes. Truman addresses three related aspects of Asian regional policy coordination: macroeconomic policies, reserve management, and crisis management. He concludes that while the countries in the Asian region have not completely exploited the scope for regional policy coordination, more ambitious efforts focused on close integration are not likely to bear fruit, in particular, if they are conceived and promoted under the banner of Asian exceptionalism. These conclusions are based on two main considerations: First, Asian economies differ, and will continue to differ, sufficiently in size and stage of development such that it is difficult to conceive of a successful voluntary blending of their interests. Second, the central lesson of the global financial crisis and its current European coda is that global economic and financial integration has advanced sufficiently that countries can run but they cannot hide individually or in sub-global groups of countries.
Topic:
Economics, International Trade and Finance, and Regional Cooperation
Political Geography:
Europe and Asia

14. The International Monetary Fund and Regulatory Challenges

Author:
Edwin M. Truman
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The International Monetary Fund (IMF) plays a substantial regulatory role in the international monetary and financial system. The IMF has been assigned a formal regulatory role in a limited number of areas such as obligations covering exchange rate policies. The Fund has a broader informal regulatory role derived from the voluntary consent of its members such as in surveillance over members' financial sector policies and international payments imbalances. The IMF's regulatory role is unlike that of its member governments within their own jurisdictions. The Fund's formal and informal regulation must be constantly nurtured and renewed via peer-review processes.
Topic:
Debt, Economics, International Organization, International Trade and Finance, International Monetary Fund, and Monetary Policy

15. On What Terms Is the IMF Worth Funding?

Author:
Edwin M. Truman
Publication Date:
12-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In the first decade of the 21st century the International Monetary Fund (IMF) faced crises of legitimacy, relevance, and budgetary finance. It now confronts what likely will be the worst global recession since World War II, potentially huge demands for its financial assistance with limited resources, and calls for it to play a more central role in the international financial and regulatory systems. At the same time, the incoming Barack Obama administration must decide what to do about the modest package of IMF reforms that was completed in the spring of 2008. The package requires US congressional approval to go into effect. This paper reviews the recent, slow progress on IMF reform and makes recommendations to the Obama administration against the background of that record, the emerging global recession, and continuing financial turmoil. I recommend that the IMF package be reopened to include a doubling of IMF quotas and an amendment that will permit the Fund to swap special drawing rights (SDR) with major central banks to finance its short-term lending facility. I also recommend a special allocation of 50 billion SDR. If these proposals are turned down by the G-20 at its meeting in April 2009, I reluctantly recommend that the Obama administration seek congressional approval of the IMF package as it now stands because a failure to do so would seriously undermine the Fund as a central multilateral institution.
Topic:
Development, International Organization, International Political Economy, International Trade and Finance, and Global Recession
Political Geography:
United States

16. The Case for an International Reserve Diversification Standard

Author:
Edwin M. Truman and Anna Wong
Publication Date:
05-2006
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Rumors about the actual or potential currency diversification of countries' foreign exchange holdings out of dollars are not a new phenomenon. This working paper argues that such concerns about reserve diversification are exaggerated. We present evidence that the extent of actual diversification has been modest to date. Nevertheless, the potential for reserve diversification adds volatility to foreign exchange markets and can catalyze abrupt exchange rate movements. We argue that policymakers acting in their own national interests can do something constructive to reduce the volatility introduced into foreign exchange and financial markets by rumors of large-scale international foreign exchange reserve diversification. We propose the voluntary adoption by major foreign exchange reserve holders in particular of an International Reserve Diversification Standard consisting of two elements: (1) routine disclosure of the currency composition of official foreign exchange holdings and (2) a commitment by each adherent to adjust gradually the actual currency composition of its reserves to any new benchmark for those holdings.
Topic:
Economics, Foreign Exchange, Government, and International Trade and Finance