The goal of this paper is to discuss the origin and role of the International Monetary Fund.

Essay by lasalleUniversity, Bachelor'sA, March 2004

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The goal of this paper is to discuss the origin and role of the International Monetary Fund. The International Monetary Fund is a specialized agency of the United Nations system that was set up by a treaty in 1945 in order to help improve the world economy. The IMF's headquarters is located in Washington, D.C.; 184 worldwide country representatives govern it. The IMF works for global wealth by promoting the balanced expansion of world trade, stability of exchange rates, avoidance of competitive devaluations, and orderly correction of balance of payments problems.

The origin of the IMF dates back to when it was created in 1944 at a United Nations conference held at Bretton Woods, New Hampshire. Representatives of 45 governments agreed on a framework for economic cooperation designed to avoid a repletion of the disastrous economic policies that had contributed to the Great Depression of the 1930's. During the 1940's, economic activity in the major industrial countries weakened.

Countries attempted to defend their economies by increasing restrictions on imports, but this just worsened world trade, output, and employment. To conserve diminishing reserves of gold and foreign exchange, some countries devalued their currencies, and some introduced complex restrictions on their citizens' freedom to hold foreign exchange. For example, the United States would not allow its citizens to exchange paper money for gold anymore. The U.S. wanted its' citizens to trust the government. These changes, however, proved self-defeating, and no country was able to maintain its competitive advantage for long. The international economy, world trade, employment, and living standards in many countries declined.

As World War II was coming to an end, the head allied countries thought up an assortment of plans to bring order to international monetary relations. At the Bretton Woods conference, the International Monetary Fund was born.