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Albany, NY – In today's Academic Minute, Dr. Martin Edwards of Seton Hall University explains why many countries around the world have embraced a high level of transparency concerning their economic performance.
Martin Edwards is an associate professor in the School of Diplomacy and International Relations at Seton Hall University where his expertise includes international organizations and international political economy. As part of a multiyear grant from the National Science Foundation, Edwards is currently engaged in a study of International Monetary Fund surveillance of member countries.
Dr. Martin Edwards - The IMF and Transparency in Global Economics
One of the tasks that the International Monetary Fund (or IMF) performs is holding annual consultations with countries. This is a means for the Fund to give economic advice to policymakers. Since 1997, countries have increasingly chosen to make the findings of these consultations publicly available on the IMF's website. The growth of this norm of transparency represents a quiet transformation of the world's economy. Aided by a grant from the National Science Foundation, I've been working to understand how this change has come about.
What countries are releasing is the actual document that's prepared for the IMF's executive board. The most recent report on the US economy, which was released in July, was a 70 page document that called for additional measures to help the housing market as well as tax cuts for firms to hire the unemployed. In 2010, 89% of the 135 countries that had an Article IV consultation released their staff reports.
Why have countries chosen to be transparent? Two factors are important. First, the information that countries release, about the size of the budget and trade deficits, about unemployment, are exactly what freely elected governments discuss. Democratic governance seems to go hand in hand with international economic transparency. Second, countries respond to what their neighbors do. Countries in regions that have greater transparency are themselves more likely to release the findings of the consultation.
The growth of this transparency provides a way for markets to work more efficiently and for countries to work together. While we're not out of the present global economic crisis, this norm will help us to avoid the next one.