monetary sovereignty of developing countries under the IMF's NOT
As noted by Edwin Heron [2008, p.119]: "the power of the Fed is having could be Keynesian in 1970, monetarist after 1979, original with Greenspan and may be new Keynesian with Bernanke without having to change its institutional framework. "This phrase sums up the meaning of a responsible central bank in a sovereign country and can be monetarily considered standard for analyzing the dynamics and effectiveness of sovereignty currency of a country. How far then
cooperation with BWI question the monetary sovereignty of developing countries undergoing adjustment? Cooperation agreements with the Bretton Woods Institutions (BWI) they affect significantly the sovereignty and monetary management of adjusting countries? Those are the two central issues that need to be asked here.
is known, the focus of relations with BWI conditionalities that are consistent negotiations with Member States in need of funding. If in the general framework, the IMF is required to enforce macroeconomic balance via a sharp framing of criteria to be met, the World Bank is traditionally held to finance development in all its dimensions with mixed results that are already known. Next to fiscal discipline, liberalization measures and other criteria in the ten commandments of the Washington Consensus, the monetary tightening that is among the criteria stars Structural Adjustment Policy (SAP). The IMF in particular makes this test a strict dogma. In all negotiations with Member States, the model of the Monetary Approach to Balance of Payments (PBMA) Polak [1957] is the reference model of the IMF. This model takes into account the primary objective of monetary tightening to prevent slippage of an inflationary monetary policy expansionary. Two schools have more influence on the IMF in recent years: New Classical Economics (NEC) and the New Economy Policy (NEP). Among the leaders of the son of the NEC, quoting J Barro [1974, 1983], Robert Lucas [ 1995], Kydland and Prescott [1977]. Among the main proposals of this approach, there is first the hypothesis of rational expectations but Lucas also time inconsistency of discretionary policies strongly developed by Kydland and Edward Prescott [1977], which earned them the Nobel Prize in 2004. This approach comes in the wake of Friedman's monetarism, which states that "inflation is everywhere a monetary phenomenon." J Barro and David Gordon [ 1983] have subsequently refined this approach introducing the "concept of the central bank's reputation," which is to incorporate inflation expectations in the analysis. NEP among economists recognized it as Ann Krueger [1993.2002] or the proponents of public choice which includes Buchanan, Tollison and Gordon Tullock [1980]. This trend highlights the reading of the political environment in which fits the requirements of the Fund adopts a functionalist conception of the state. Questioning the effectiveness of government policy in monetary management is the main argument of the monetarists, NEC, among which are derived NEP key IMF officials. As early as 1985, Rogoff has developed the theory of "strategic delegation" which encourages giving more independence to the central bank. The independence of the central bank appears to Rogoff optimal solution to deter politicians from the political and monetary control by the objective of price stability. It is quite normal as we see a strict rule of monetary tightening in the negotiating framework of IMF programs. Stand By agreement of the SBA or emerging countries in SAF, ESAF and PRGF poor countries, there is no mention of leaving the monetary tightening. The control of inflation remains in fact the main objective of banks central adjusting countries at the expense of growth. In the eyes of the technicians of the IMF, obviously inspired monetarist, there is no question of adopting any form of monetary stimulus on pain of fueling inflation. It is a radical position in which No negotiation is possible. In this case, despite the central bank independence stipulated by its statute aims primarily the fight against inflation, leaving aside any sort of adjustment considered capital in the conduct of a real responsible economic policy but not a passive economic policy that characterizes these countries because of the conditionalities of SAPs. With reference to Article IV of the IMF, Michel Lelart [2007, p.73] summarizes in a synthetic way the constraints on developing countries as part of the PAS: "Each country will endeavor to direct its policy ... economic, it must not only direct but try to do so, each country will seek to promote stability ... it should not promote it but only seek to do so, finally, each country will avoid handling rates ... exchange, it is not forbidden him to manipulate the exchange rate, he need only avoid doing so. "In Africa, as in emerging countries, the IMF has always been present in the framing of monetary policy. Financial Programming (including money) of adjusting countries must have the endorsement of the IMF if the subsequent release of funds and related programs could be suspended. Still, in many countries, the IMF does not hesitate to interfere directly in their monetary management. The IMF Article IV states that a country may choose to define and stabilize its currency against the SDR to another currency to a basket of currencies or float more or less freely. It requires only that its policy is consistent with the objectives of the Fund. The only limitation is the strict prohibition of any reference to gold. Once the choice is made, a country should stick to and implement the system chosen. [Ibid, p.72]. The status of the IMF then gives some leeway to member countries in of monetary or exchange rate regime. But it must at the same time exercising firm surveillance over exchange rate policies of member states, which justifies its regular intervention in the choice of exchange rate regimes in developing countries. One of the provisions of Article IV adopted by the directors April 29, 1979 states: "A member shall avoid manipulating exchange rates ... to prevent the actual adjustment in its balance of payments or to gain an unfair competitive advantage over d other members. "[Ibid, p.76]. This point shows how cooperation with the IMF calls into question the monetary sovereignty of the countries under adjustment. Despite the freedom of choice of monetary and exchange rate regime that gives them status IV, another section of it contradicts what is depriving developing countries of the monetary adjustment that is needed at some point. It thus measures imposed by successive devaluations of the 1980s and 1990s but also those of recent years in African countries, Latin America, the change of regime change just at the request of the IMF, changes in equity in emerging markets. Following the example of Madagascar, the policies of successive devaluations contrary to the arguments of the IMF could not bring fruit. The sharp depreciation Malagasy Franc (FMG) of the order of 4000% from 1973 (the date on which Madagascar left the Franc Zone) in 2008 reflects the slip recess of monetary policy applied by leaders who have succeeded but there are also a large share of responsibility under regular IMF monetary policy applied. Impairments successive FMG from Shadow Program 1994 (IMF requirement that Madagascar spends at a fixed exchange floating exchange) is a concrete example.
monetary sovereignty of developing countries is then questioned in connection with the PAS.L independence of the central bank hides another well-established reality: interference Monetary Fund. This interference monetary challenges not only the actual independence of the central bank but also and especially monetary sovereignty. Many developing countries suffer as well as adjustment of a "disguised monetary sovereignty" to the detriment of their development. But is there a credible alternative approach that strengthens the monetary sovereignty of developing countries? Heterodox economists, Keynesians, Post-Keynesians, Marxists, regulation school or institutionalist all remain committed to controlling all instruments of economic policy by the government to allow greater effectiveness and legitimacy [Heron, 2008 p.116]. Apart from New Keynesians (who think like the neoclassical including NEC and long term money is neutral), the heterodox are not a passive policy of the central bank places great importance on targeting inflation as was the case since 1990 in much of central banks. If their design and their theoretical foundations differ from the other, the ultimate objective of their analysis is the increased flexibility of the central bank therefore its ability to act. Among the various lines of thought we can move forward here, the post-Keynesian monetary analysis is shown in the foreground.
The extension of the work founder of JM Keynes [1930, 1936] follows a considerable expansion of the monetary analysis of his disciples. Keynes to face the crises of the thirties has crossed the Great Britain called expansionary monetary policy in which the central bank independence is a central figure. In his view, the interference of policy maker (politicians) in monetary management may cancel the expected effects of a stimulus so it is vital that the central bank has a real independence. The purpose of the argument of Keynes has always been the revival of economic activity in a context marked by depression. Today, the situation was reversed, the central bank independence is imposed across the DCs to avoid skidding inflationary so dear to the followers of Friedman and the Liberals. The defense of the independence of the central bank n is more so like the days of Keynes. This independence is here today, driven monetarist precepts for maximum curb inflation, which is considered as everywhere a monetary phenomenon, while the time of Keynes has been advocated for a monetary stimulus. The separation of power between political power and the central bank is not based Keynesians. Through the endogenous theory of money, most Post-Keynesians advocate a central bank active rather than passive fit to face the challenges of Recovery and adjustment of monetary economics. Obviously with the support of public power, this option is considered an essential condition for a monetary sovereignty effective both in developing countries than in developed countries.
post-Keynesian monetary theory is essentially based on the endogeneity of money supply. The American Post-Keynesians [Kregel, Randall Wray, Arestis, Dow], the French Post-Keynesians circuit
[Piegay, Rochon, Poulon, Parguez] the Post-Keynesians English [Godley, Kaldor Deleplace, Nell], the Canadian post-Keynesian [Marc Lavoie, Gilles Dostaler] agree that the said money supply can not be fixed in an arbitrary manner by the central bank. It is determined by the credit application and public preferences. This is the famous aphorism that
"Appropriations are deposits," notes Marc Lavoie [2004, p.55] in his work entitled "The post-Keynesian economics." Theory Post Keynesian Monetary reverse causality direction among deposit-credit neoclassical. The banks did not necessarily require advance deposits to extend credit. The creation of credit and bank deposits are made solely on the basis of credibility and security offered by the borrower [Heinsonhn and Steiger, 2000]. The currency bank as central bank money is endogenous and can be set arbitrarily by the central bank. The volume of central bank money is tied to loans granted to bank money and a divider credit. Bank money is not a multiple of the amount of central bank money is the central bank money which is a quotient of the quantity of bank money. A major argument that supports the reverse causality from credit-deposit the Post-Keynesians is that they refute the theory wickselienne loanable funds that the new Keynesians [Stiglitz, Mankiw, Tobin] accept like of neoclassical. The Post-Keynesians argue that unlike the neoclassical investment that is induced savings and not vice versa. Just then the mobilization of domestic resources for financing the activity depends only on the credibility of the borrower and financial standards in existence. The scarcity of funding is conventional [Lavoie, 2004, p .55]. In this context, they refute the existence of a natural rate of interest and inflation can be caused by a growth rate of money instead it is the growth rate of prices and production will cause the increase in the stock of money. The endogenous theory of money attaches great importance between money supply and the production process. It is in this sense that the post-Keynesian monetary theory is regularly equated to a "monetary economy of production" or "Economy of the monetary circuit." Under the practice of monetary policy, the endogeneity of the currency leads to a fundamental character currency on which the main argument of Post-Keynesians face of virulent attacks neoclassical: the "non-neutrality of money." The Post-Keynesians do not see in the independence of central banks in an attempt to impose a neo-classical dichotomous view of the economy between monetary phenomena, such as inflation would fall within the central bank and real phenomena that fall within the market [The Heron 2008, p .117]. For the Keynesians, the money is not neutral since it acts by the credit and the interest rate on output and employment. The unrealistic assumption of rational expectations shows that economic agents do not take into account the long-term horizon as a result, any decision to raise or discipline adopted by the central bank will be incorporated into consumer habits and local investment. Edwin Le Heron [2008] shows that the monetary policy of NEC inspired Friedman's monetarism can be summarized through the theory of central bank credibility. This credibility can be measured through the rate of achievement of the target set that is other than controlling inflation. To Edwin Heron [Ibid, p.116], the two basic theoretical assumptions of independence of central banks: the inflationary bias and rational expectations are contrary to the facts and are now widely questioned. The position of Maurice Allais [1993] also converges in the direction of building a truly state responsible for its monetary policy like the Post-Keynesians. Maurice Allais [1993, p.323] argues: "If we consider not only the history of recent decades, but these past two centuries, and probably that of those who preceded them, monetary factors appear certainly as being of quite exceptional in the functioning of any economy. If, indeed, monetary conditions appropriate measures are not insured, experience shows that there can be neither economic efficiency nor fairness in the distribution of income. "
For all these reasons mentioned above, the cult of price stability, the main objective of central banks in developing countries undergoing adjustment does not necessarily mean the development challenge in developing countries. The principle of independence of central bank policy-source passive monetary should be then replaced by a central bank able to actively cope with the major problem in developing countries: stagnation. In such cases, the monetary sovereignty of the country should no longer be questioning which strengthens the credibility and effectiveness of action by the central bank. It is time that the developing countries change course under penalty of swimming in a sort of "submission monetary chronicle" that has characterized it for decades.
China, a country that has never had a relationship with the BWI in particular the IMF deserves to be noted here. The Chinese like the major developed countries has always had its way with its monetary policy. China's economic performance and stability of its currency has never been questioned so far. On the contrary, its monetary sovereignty vis-à-vis the outside is one of the central pieces of its economic takeoff. It is also oil-producing countries of the Middle East. Despite the requirement and the frequent criticisms of the United States and Europe who accuse the Chinese authorities have consistently applied a policy of dumping money by undervaluing the yuan (Chinese currency), China is still far to conduct its monetary policy at will. Monetary sovereignty of China just like the oil countries of the Middle East has never been questioned. On the one hand, they have not had sex sustainable with the BWI (or no). On the other hand, their financial situation allowed them to have an independent monetary policy without much depend on the outside. In all, their monetary sovereignty reinforces the credibility of monetary policy the central bank. But in reality, the direction of causality between the credibility of the monetary policy of central banks and monetary sovereignty remains unresolved.
1-2 3-Sovereignty and credibility of the Central Bank: what relationship?
A question arises: is there a causal relationship between monetary sovereignty and credibility of monetary policy the central bank?
That is what monetary sovereignty above and influence the credibility of the central bank or the reverse? The first case leads to say that the efficiency of monetary policy is primarily the result of the existence of a certain monetary sovereignty deemed essential in the conduct of all monetary and financial reforms envisaged to ensure financial independence. In this sense, the aforementioned conditions that are consistent monetary sovereignty must be met fully or partially . Conditions which state attributes for strikes and money creation, institutional capacity. This scenario can be envisaged in case of major industrialized countries like the United States, major European countries currently a member of the area Euro, Great Britain, Japan, some Middle Eastern oil countries and China. These countries have all their monetary sovereignty in the broadest sense which allowed despite the tensions that have weighed on their economy at a certain time to carry out monetary policy through their respective central bank. For cons, the second case shows that the credibility monetary policy the central bank is a sin qua non condition to achieve monetary sovereignty. No monetary sovereignty may not be so considered without this credibility. But how credible is this here? The credibility of monetary policy the central bank is usually defined as the ability of monetary authorities to impose monetary policy vis-à-vis the objectives required in the general framework of monetary policy at some point. Alternatively, the power of the central bank to respect and uphold its objectives . Questions follow each other to illuminate this debate. The central bank can influence money market as stipulated in its status? Happens to really master the key variables in the economy? To what extent a relaxation of the base rate of the central bank can influence the rate of primary second-tier banks? The manipulation of reserve requirements can really influence the behavior of banks relative to their credit policy? The answers to these questions can be found by analyzing the transmission mechanism of monetary policy but the credibility of the central bank is a parameter not to be overlooked in the analysis. Credibility resulting from the combination of two factors namely the merits of monetary policy and the jurisdiction of the monetary authorities. These are mainly cases of emerging Asia and Latin America, African countries. Some of them have been reforming their financial sector and monetary policy with or without assistance of Bretton Woods. As countries such as Malaysia, South Korea, South Africa. The other emerging or not are always looking for the magic potion to enable them to strengthen the credibility of their central bank in the conduct their monetary policy.
It is quite difficult then to decide on this issue brings monetary sovereignty Does the credibility of the central bank or the opposite? Can we move forward, the goal of all monetary and financial reform is the economic takeoff and the betterment of the people who will necessarily pass through economic growth without neglecting the human dimensions of the economy. Logically, sovereignty and credibility can go together but it is vital that sovereignty above credibility because the credibility of the central bank may be fleeting if the country in question did not really its own monetary sovereignty. Emerging Latin American and Asian victims of financial crises of the 1990s and recent years are examples in this regard.
monetary sovereignty for most developing countries remains a utopia they begin to undertake appropriate monetary reforms to reach this stage in order to assert their independence. Reforms that require projections primarily solid and consistent throughout but not blindly reforms that have predominated since the 1980s in these countries.
As demonstrated above, the post-Keynesian monetary theory offers a promising alternative for developing countries as a whole can recover their monetary sovereignty long scorned by the PAS and the global monetary asymmetry. In any event, the search for optimal monetary regimes in developing countries depends on two things: i) the willingness or otherwise of these countries take ownership of their monetary sovereignty, ii) the different economic structures and economic conditions of each country . The key then is not having monetary sovereignty but to master the challenges resulting whose monetary stabilization (which is not always the case) and use of flexibilities it offers potential in the conduct of monetary policy really responsible.
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