The International Monetary Fund and its New Economics

Abstract

ABSTRACTThis article focuses on a key element of the IMF's agenda for change: the repackaging of its economics of crisis around inflation targeting. It examines how this new policy regime redefines the political economy of the IMF's policy advice, and contextualizes it by focusing on Eastern Europe, the region worst affected by the global financial crisis which began in 2007. The article compares the conditionalities designed under the new and old policy regimes and argues that the mainstreaming of inflation targeting reproduces the IMF's function within a neoliberal political economy. It shows how, depending on the role of the IMF in the policy process, the models that inform policy are employed differently. During ‘normal’ times, models engender a contractionary bias that favours speculative capital. When acting as ‘lender of last resort’, the IMF retains the traditional emphasis on fiscal contractions, paying only lip service to its new economics of crisis while further ignoring crucial questions of macroeconomic policy coordination or the destabilizing potential of short‐term capital inflows.