The IMF as Crisis Manager: An Assessment of the Strategy in Asia and of Its Criticisms

Abstract

The praise for the Fund’s intervention in Mexico is in stark contrast with the generalized criticism received by the IMF for its handling of the Asian crisis. Criticisms poured from the right and from the left. Calls for reforming the Fund, severely curtailing its powers came both from left-wing critics pointing to the increase in unemployment and poverty caused by the recession deepened (if not actually created) by Fund-sponsored restrictive policies, and from right-wing economists and politicians that pointed to the moral hazard generated by the implicit guarantee the Fund was seen to give to international investors that their financial investments were safe even in the event of a financial or currency collapse in those countries. Criticisms were so strong that the Fund itself, notoriously oblivious to them under normal conditions, seemed to feel shaken. Unusually humble, soul-searching papers, examining the Fund’s handling of the Asian crisis, were produced by staff economists and a