The Banks and the IMF: the Nature of, and Scope for, Co-operation

Abstract

Elementary economic theory gives us some insight into the principles underlying the relationship between the banks and the Fund, since it establishes the circumstances under which private markets fail to generate an efficient solution. Apart from distributional issues, to be considered in the next section, economies of scale and externalities are amongst the principal causes of market failure. Further examination of these causes, as applied to private international financial markets, provides an initial outline of the delineation of activities between the banks and the Fund.