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International Monetary Fund

Abstract

This paper reviews key findings of the IMF’s Annual Report for the fiscal year ended September 1946. This report covers the operations and policies of the IMF in the period from May 6, 1946, when the Executive Directors held their first meeting in Washington, through early September 1946. Since it is intended that in future years the annual report of the Executive Directors will cover the operations of the IMF in the preceding fiscal year, such figures as are here presented deal mainly with the period ending June 30, 1946.

International Monetary Fund

's operations, modifications and additions will have to be made as new problems are encountered. Many of these problems cannot be foreseen at this time. Others have been considered by the Executive Directors, but their solution has been postponed wherever practicable in order that the formulation of the Rules and Regulations to handle them may reflect the experience of the Fund. The modifications and additions will be presented for review at future meetings of the Board of Governors. Interpretations Under the Fund Agreement one of the functions of the Executive

International Monetary Fund

United Kingdom given significant infrastructure needs. The rationale for the “over the cycle” formulation is to allow automatic stabilizers to work without jeopardizing long-term fiscal sustainability. This formulation of the rule provides an ex-post test of whether the golden rule has been met. By identifying economic cycles and in turn the cyclical effects on public finances, it also aims to assess the underlying structural fiscal position. 2. While the golden rule is widely seen as having constrained discretion, the “over the cycle” formulation of the rule gives

International Monetary Fund

the same conviction, 127 and this sharpened what was thought to be the discriminatory formulation of the rule. The result of these reactions to the provision was an amendment that modified two features of the provision. Authority to take a decision approving a uniform proportionate change in the par values of the currencies of all members remains a reserved power of the Board of Governors, but the decision can be taken only by an 85 per cent majority of the total voting power, and there is no longer any requirement that the changes must be approved by members

International Monetary Fund

corporation beyond its charter by means of an estoppel. 42 However, it has been said that “when international law borrows an idea from municipal systems, there is no reason why the international formulation of the rule should be identical with that of national law…,” 43 This raises an interesting question. What constitutes the essence of a general concept or principle of law and what are the inessential local incidents that should not be carried over into international law? It is likely that this is a problem on which not much guidance can be found in general rules. It

Wm. C. Hood, Lyn Squire, Graham Donaldson, Anthony Lanyi, Mr. Willem H. Buiter, Richard C. Marston, Stephen R. Lewis Jr., D.P. Chaudhri, Ajit K. Dasgupta, C. Fred Bergsten, William R. Cline, John Williamson, Donald R. Lessard, and John Williamson

try to see how our inferences about strategic behavior and the potential gains from cooperation may be altered if we allow explicitly for uncertainty about what the true model is?” International economic policy coordination is of course of great interest to the International Monetary Fund, one of whose most important responsibilities is to promote such coordination. The Fund may promote coordination in several ways. It may contribute to the formulation of the rules of the game, as for example when nations are prepared to negotiate what is acceptable, responsible

Ms. Keiko Honjo

rationale for targeting “over the cycle” is to allow automatic stabilizers to work without jeopardizing long-term fiscal sustainability. The present formulation of the rule allows fiscal performance to be tested ex-post as to whether the golden rule has been met. By identifying the cycles and in turn the cyclical effects on the public finances, it also aims to assess the underlying structural fiscal position. While the golden rule is widely seen as having constrained discretion, the “over the cycle” formulation of the rule gives rise to two drawbacks. First, the

Ms. Keiko Honjo
The present formulation of the golden rule in the United Kingdom allows fiscal performance to be tested explicitly on an ex-post basis. However, it requires precise dating of the economic cycle, which can lead to significant controversy. Also, the need to aim for current balance or better "over the cycle" may force fiscal policy to be procyclical toward the end of cycles. Using dynamic stochastic simulations, the paper suggests that making the formulation of the golden rule forward-looking and independent of the dating of the economic cycle would reduce the risk of procyclicality and enhance macroeconomic stability.
Mr. Pierre Dhonte and Mr. Ishan Kapur
This paper proposes an operational interpretation of the concept of economic governance. It argues that the capacity of governments to credibly ensure a secure economic environment provides an important benchmark against which governance can be evaluated. Such an environment—which is essential for sustained growth in a market economy—can be established through a rules–based system which ensures freedom of entry into the market, access to information, and sanctity of contracts. Since creating a secure economic environment involves profound, far–reaching social change, it has historically been a complex and lengthy process in most societies. However, basing policy prescriptions on this benchmark helps avoid possible conflicts between different social and moral values.
Mr. Pierre Dhonte and Mr. Ishan Kapur

principle and the system rests on personal trust. At the other end of the spectrum, the “rule of law” system is based on largely stripping the ruler of discretionary powers. Its essence is best expressed in Hayek’s crisp and non–technical formulation of the rule of law: “…this means that government in all its actions is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge” (Hayek