BERKELEY, Calif. — The International Monetary Fund, many say, has had a good crisis. As recently as three years ago, many observers thought that the Fund had outlived its usefulness and should be closed down. Since then, it has intervened in Hungary, Latvia, Iceland and Ukraine, among other crisis-stricken countries — and has received a massive infusion of new resources.
Part of the explanation for the higher esteem in which the IMF is now held is its recent display of intellectual flexibility — a rare virtue for a big, lumbering bureaucracy. It has rethought its traditional opposition to capital controls. It has suggested that central banks may want to consider higher inflation targets in order to avoid hitting the zero bound in the event of deflationary shocks. For this, it drew a stern reproach from Germany's Bundesbank — a clear sign that it is doing something right.
The IMF has also put in place a Flexible Credit Line to disburse funds quickly — and free of onerous conditions — to countries buffeted by financial crosswinds through no fault of their own. The problem is that, despite its alluring name, the new facility has had few takers, and no Asian takers in particular.
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