CHAPTER 3: INTERNATIONAL MONETARY FUND

OBJECTIVE OF INTERNATIONAL MONETARY FUND

According to the Article 1 of International Monetary Fund Agreement, the main objectives of the
International Monetary Fund are:
(1) International Monetary Co-operation: The most important objective of the International Monetary
Fund is establishing monetary relationship among the member countries through a permanent Organisation.
There should not be any lacking in fulfilling this objective, so regular advice is given to it through the
committee of Specialists related to the fund.
(2) Promotion of Balanced Growth of International Trade: The International Monetary Fund plays an
important role in promoting a balanced development of trade and establishing a high level of employment in
the member countries. According to the provision of the fund a member country can not put any ban on the
international transactions without the permission of the International Monetary Fund.
(3) Stability of Exchange Rate: It is also an objective of the International Monetary Fund to bring stability
in the exchange rate. If there arises a possibility of fall in exchange rate of a country the fund gives proper
suggestions and cooperation to that country.
(4) Multilateral Payments: One objective of the International Monetary Fund is to co-operate in the
arrangement of multilateral payments by ending exchange regulation of different countries.
(5) Financial Assistance: The International Monetary Fund gives economic assistance to poor countries to
consolidate their financial conditions by granting them short term loans. This helps in maintaining the
balance of trade among the member countries.
(6) Duration and Degree of Disequilibrium: An objective of the International Monetary Fund is to try to
minimize the duration and degree of disequilibrium of member countries.

MEMBERSHIP OF INTERNATIONAL MONETARY FUND

Any country can obtain the membership of the International Monetary Fund. The only condition for this is
that the country has to promise to follow all provisions of the articles of International Monetary Fund
Agreement. If a country disobeys any provisions/article of the International Monetary Fund Agreement its
membership can be terminated. 30 countries had taken the membership of the International Monetary Fund
on 27th December, 1945 at the time of its foundation. The membership increased to be 40 on 1st March,
1947. The number of members was 155 and 183 in 1991 and 1994 respectively. At present, there are 186
member countries of the International Monetary Fund.
If any country wants to give up the membership of the International Monetary Fund, it can do this by giving
written information. The International Monetary Fund cannot compel a country to continue its membership.

MANAGEMENT AND ORGANISATION OF INTERNATIONAL MONETARY FUND

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The management of International Monetary Fund is done by two Organisational institutions which are as
follows:
(1) Board of Governors: One representative from every member country of the International Monetary
Fund is appointed in the Board of Governors. Their tenure is of 5 years. A member country can also appoint
Governor who can take part in the meeting only in the absence of the Governor. At least one meeting of the
board is essential within a year. The main functions of the Board of Governors include making policies,
making amendments in quotas of the member countries, giving admission to new member countries, electing
managers and taking financial decisions about the equity rates of the currencies of member countries.
(2) Board of Directors There is a Board of Directors consisting of 21 members for the operation of the
function of the International Monetary Fund. It has seven permanent members out of which the maximum
quota of 5 members are elected from faraway Pacific Ocean region. 1 member comes from Canada. Besides
3 mem-bers from Latin American countries and 2 from European countries.

FUNCTIONS OF THE INTERNATIONAL MONETARY FUND

The International Monetary Fund performs the following functions to meet its objectives.
(1) Giving Economic Aid: The International Monetary Fund is a running fund, so the loan granted by it
cannot be left with a member country for a long time. The main objective of the International Monetary
Fund is providing economic assistance for balancing the trade deficit. The International Monetary Fund
grants its member countries loans up to the equal of their quotas. This aid is given for a period from 3 to 5
years. The International Monetary Fund is called ‘Emergency Friend’. If the condition deteriorates in a
country due to political or economic reasons, the International Monetary Fund gives short term credit for
improvement.
(2) Determination of Exchange Rate : An important work of the International Monetary Fund is
determining the exchange rates for the member countries. It is essential for the member countries to follow
the rules related to the exchange rates made by the International Monetary Fund. The exchange rates are
determined in gold or dollar.
(3) Technical Assistance : The International Monetary Fund not only provides economic aids to member
countries but also grants them technical aids. With the view of giving technical aids, the International
Monetary Fund helps its member countries in determining currencies, taxes, exchange rates and policies
through its specialists, sometimes the International Monetary Fund also sends the external experts into
member countries for assistance and consultations.
(4) Training Programmes : The International Monetary Fund has been arranging the system of training
related to international payment, economic development, financial managements etc. since 1951. Generally
the period of training for the high ranks officials of the central banks and governments is from 6 to 12
months. Generally the medium of training is speeches and debates.

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(5) Advice on Exchange control : Many suggestions are given by the International Monetary Fund for
regulation of foreign exchanges from time to time. Monetary and financial policies are discussed while
giving such suggestions.

What Is a Crawling Peg?

A crawling peg is a system of exchange rate adjustments in which a currency with a fixed exchange rate is
allowed to fluctuate within a band of rates. The par value of the stated currency and the band of rates may
also be adjusted frequently, particularly in times of high exchange rate volatility. Crawling pegs are often
used to control currency moves when there is a threat of devaluation due to factors such as inflation or
economic instability. Coordinated buying or selling of the currency allows the par value to remain within
its bracketed range.

Current account convertibility

Current account convertibility refers to the freedom to convert your rupees into other internationally
accepted currencies and vice versa without any restrictions whenever you make payments.
Similarly, capital account convertibility means the freedom to conduct investment transactions without any
constraints. Typically, it would mean no restrictions on the amount of rupees you can convert into foreign
currency to enable you, an Indian resident, to acquire any foreign asset. Similarly, there should be no
restraints on your NRI cousin bringing in any amount of dollars or dirhams to acquire an asset in India.

EVOLUTION OF INTERNATIONAL MONETARY SYSTEM

The international monetary system is the framework within which countries borrow, lend, buy, sell and
make payments acress political frontiers. The framework determines how balance of payments
disequilibrium is resolved. Numerous frameworks are possible and most have been tried in one forms or
another. The international monetary system can be broadly classified as below:
PRE BWS PERIOD: GOLD STANDARD SYSTEM:
Gold Standard System (1870-1914):
The gold standard was the first universally implemented system for valuing currencies. It was promoted by
banks of England. It was an exchange rate in which gold coins were freely minted by the central bank of a
country. The gold standard was adopted by UK in 1821, germany in 1875, france in 1878, us in 1879, and
Russia in 1897. The gold standard system has 3 variants:1) the gold specie 2) the gold exchange and 3) the
gold bullion.
The gold standard is a system in which international currencies are tied to a specific amount of gold. Almost
from the dawn of the history gold was considered as the medium of exchange because gold was durable,
storable, portable and easily divisible.the gold standard, gold jwellery could be converted into gold coins and
used as legal tender.
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 Under relative gold standard, gold was considered as the currency standard and each currency was
convertible into gold as a specified rate. Thus exchange rate betwenn two currency was determined by their
relative convertible rates.
The official central exchange rate between two currencies remained constant since the official prices of gold
was constant

The Gold standard

The gold standard is a monetary system where a country's currency or paper money has a value directly
linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold.
A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That
fixed price is used to determine the value of the currency. For example, if the U.S. sets the price of gold at
$500 an ounce, the value of the dollar would be 1/500th of an ounce of gold.

 The gold standard is a monetary system in which a currency's value is pegged to gold.
 Before being a medium of exchange, gold was used for worship.
 With its large discoveries of gold, England became the first country to implement the gold standard.
 The Bretton Woods agreement established that the U.S. dollar was the dominant reserve currency and that
the dollar was convertible to gold at the fixed rate of $35 per ounce.
 In 1971, President Nixon stopped the convertibility of the U.S. dollar to gold.
GOLD EXCHANGE STANDATD ( 1925-1933)
Another version of gold standard system was the gold exchange standard, where one country’s currency was
expressed in terms of another country’s currency, which was on gold bullion standard. The advantage was
that only the country on gold bullion standard had to maintain gold reserve and the other country needed to
simply hold reserves of the currency to which its currency was linked.
Under this system, the currency in use was made of gold or was convertible into gold at a fixed rate. The
value of the currency unit was defined in terms of certain weight of gold, that is, so many grains of gold to
the rupee, the dollar, the pound, etc. the central bank of the country was always ready to buy and sell gold at
the specified price. The rate at which the standards money of the country was convertible into gold was
called the mint price of gold.
FEATURES OF GOLD STANDARDS SYSTEM:
1) Each country was required to establish a central bank with an exclusive authority to print and issue their
respective currency notes.
2) The countries gold reserves were required to be in custody of central bank.
3) Each central bank was required to announce an official price of gold and to provide an irrevocable guarantee
to buy and sell unlimited quantity of gold at official price.
4) Each currency note was required to contain an irrevocable promise to redeem the note on demand against
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 specified quantity of gold.
5) The total value of currency notes in circulation was required to be limited to the value of gold with the
central bank. Therefore there was a 1:1 relation between gold with central bank and money supply in
circulation.
ADVANTAGES OF GOLD STANDARDS:-
1) It is very easy system to implement and operate.
2) It provided fully secured payment and settlement system through transfer of gold from deficit to surplus
country.
3) It provided for a very high level of stability in exchange rates which promoted international trade and
investment.
4) It provided an in build mechanism for achieving equilibrium in an international trade called “price species
adjustments mechanism” (PASM)
DISADVANTAGE OF GOLD STANDARD:
1) It did not provide for revision of gold price in keeping with the increasing manufacturing cost of gold.
2) It was a very inflexible system due to which it was difficult to adjust money supply during economy stress in
situation such as natural disaster, war, economy depression etc.
3) PSAM was ineffective in situation where a country had recurring trade deficit.
4) It contributed to recessions due to which deficit countries suffered from lower lower investments and
employment opportunities.
BRETTON WOODS SYSTEM:
Because of the breakdown of gold standard system, the world monetary system was in a very chaotic
position. Hence the policymaker of US,UK and other allies initiated with the process of reviving and
restructuring the world monetary system as it was urgently required to revamp the economies after the
destruction caused by world war II. Hence in july 1944, representatives of 44 major economies met at
brettenwoods, a town in Hampshire in US to finalize a new system for currency value and new international
financial architecture to be implemented during this conference, two multilateral institution were
established:
FEATURES OF BWS:
1) Usd As Universal Reserve Asset:- The USD Was Given The Status Of Universal Reserve Asset In
Addition To Gold. This Means Countries Could Issue Currency Notes Against A Reserve Basket Containing
Both Gold And Usd.
2) Fixing Value Of Gold In Usd:- The Value Of USD Was Fixed At 1 Ounce Gold Is Equal To USD 35 (1
Oz Gold= Usd 35)
3) Unconditional Guarantee By Us Federal Reserve Bank: Us Federal Reserve Bank Provided An
Unconditional Guarantee To Buy And Sell Unlimited Quantity Of Gold At The Fixed Prices. This Was
Known As Gold Convertibility Clause.
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4) Pegging And Parity Concept: No Other Country Was Required To Value Its Currency In Terms Of Gold.
The Value Of Each Currency Was Foxed Against USD.
5) Par Value Mechanism: Effectively A Three Way Relationship Was Created Between Gold, Usd And
Individual Currency. This Was Called Par Value Mechanism.
6) Parity Rate Support Points: Currency Rates Were Allowed To Move In A Narrow Range In Both The
Sides Of Parity Rates Up To +/-1%. The Extreme Points Of Variation Zone Were Called Support Points Or
Intervention Points.
7) Central Bank Participation: Exchange Rates Were Expected To Be Controlled Within The Variation
Zone Through Intervention. This Concept Means The Central Bank Proactively Participates In Domestic
Foreign Exchange Market By Buying And Selling Foreign Currency So As To Influence The Exchange
Rate.
8) IMF Assistance:IMF Provided The Undertaking To Financially Assist All Members Fpor Intervention.
9) Currency Devalution Limit: In Case Of Structural Imbalance In Countries BOP The IMF Undertook To
Help Members To Devalue Their Currency Approximately.
10) International Vechicle Currency:- International Payments Could Be Made Either In Gold Or In US
Dollars. Officially Dollar Became An International Reserve Currency And Vehicle
ADVANTAGES OF BWS:
1) The advantage of Bretton woods system was that the number countries had to maintain only the reserve of
dollars which helped them in overcoming the problem of maintain gold reserve.
2) The countries could also earn interest on their dollar reserve unlike in the gold reserve system.
3) The Bretton woods system sought to secure the advantage of the gold standard without its advantage.
4) The gold standard imposed monetary discipline on the countries involved. Any country experiencing
inflation would have lost gold and therefore would have had a decree in the amount of money available to
spend.
5) The gold standard maintained fixed exchange rates. Fixed exchange rates were seen as desirable because
they reduced the risk of trading with other countries.
6) The United States had emerged from world II as the strongest economy in the world. Unlike Europe and
japan, the United States had experienced very little destruction on its own land.
7) The benefits of the Bretton woods system were a significant expansion of international trade and investment
as well as a notable macroeconomic performance.
DISADVANTAGE OF BWS:
1) Weaknesses of the system were capital movement restrictions throughout the Bretton woods years,
government needed to limit capital flows in order to have a certain extent of control
2) Another negative aspect was the pressure Bretton woods put on the United States, which was not willing to
supply the amount of gold the rest of the world demanded, because the gold reserve declined and eroded the
confidence in the dollar.
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3) There was not enough gold available to allow people to buy all the new goods and service that could be
produced. And the gold that was available was mainly located in the Soviet Union.
4) The success of Bretton woods system was essentially based on the unconditional supply of dollars by US.
However US could not do it for a long time as it was still under the system of gold standard.

REASON FOR FAILURE OF BWS:

1) The BWS was merely a variant of gold exchange system and as such it was also constrained by availability
of gold.
2) As in the case of gold standard, this system also dish not provided for any revision in the price of gold. Due
to inflation, it became uneconomical to produce gold.
3) The system did not provide for any revaluation of parties dur to which surplus countries such as west
Germany and Japan continued to enjoy export competitiveness against the US economy.
4) The system did not provide for a revision in the price of gold in terms of USD. Due to this, it was not
possible to devalue the US dollar continued trade deficit.
5) Every member country had the right to accumulate dollar reserve and for that obviously they had to
consistently have a positive balance of trade with US.
6) The success of Breton woods system was essentially based on the unconditional supply of dollars by US.
Howe ever US could not do it for a long time as it was still under the system of gold standards.
7) The continued trade deficit of the US created an over- supply of USD in the international financial markets
which reduced the acceptability of the USD.

FIXED EXCHANGE RATES

The fixed exchange rate is the system in which the monetary authority fixes the value of the domestic
currency to a foreign currency or to a basket of currencies.
It is also called as hard peg or rigid peg and when one currency is pegged to a foreign currency and its value
is set at regular intervals according to some preset criteria of the average exchange rate over the previous
few months in the foreign exchange market which makes the system more responsive to the market value of
the domestic currency this system of determining the value of currency is called as crawling peg system.

FLUCTUATING EXCHANGE RATES

Fixed exchange rate regime is rarely practiced by any country at present. Almost all countries, at present,
have adopted some forms of flexible exchange rate policy. In spite of making several attempts, when the
various ways of stabilizing the exchange rates went futile. IMF proposed the flexible exchange rate system
in 1978.

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Fixed exchange rate Floating exchange rate

Value of currency was decide by central bank of the Value of currency decided by market demand
country supply
Exchange rates were fixed Exchange rates were flexible

Changes in exchange rate took place by official Change in exchange rate is by market action
action called devaluation or revaluation represented by depreciation

Due to stability, use of derivatives and risk Due to variability in exchange rate, the use of
management system did not exist derivation and risk management techniques is
critical
Stability of exchange rate promoted trade and There is no such concept in this system
investment
By implication central bank were required to parity There is no mandatory requirement for central
rates through intervention bank to Participate in market.

Value of gold was fixed i.e it was considered a Value of gold is variable, now considered as
financial commodity investments commodity.

World Bank

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 Partnering with Governments
Together, IBRD and IDA form the World Bank, which provides financing, policy advice, and technical
assistance to governments of developing countries. IDA focuses on the world’s poorest countries, while
IBRD assists middle-income and creditworthy poorer countries.
Partnering with the Private Sector
IFC, MIGA, and ICSID focus on strengthening the private sector in developing countries. Through these
institutions, the World Bank Group provides financing, technical assistance, political risk insurance, and
settlement of disputes to private enterprises, including financial institutions.

Functions of the World Bank

 It helps the war-devastated countries by granting them loans for reconstruction.
 Thus, they provide extensive experience and the financial resources of the bank help the poor countries
increase their economic growth, reducing poverty and a better standard of living.
 Also, it helps the underdeveloped countries by granting development loans.
 So, it also provides loans to various governments for irrigation, agriculture, water supply, health, education,
etc.
 It promotes foreign investments to other organizations by guaranteeing the loans.
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 Also, the world bank provides economic, monetary, and technical advice to the member countries for any of
their projects.
 Thus, it encourages the development of of-industries in underdeveloped countries by introducing the various
economic reforms.
Objectives of the World Bank
 This includes providing long term capital to its member nations for economic development and
reconstruction.
 Thus, it helps in inducing long term capital for improving the balance of payments and thereby balancing
international trade.
 Also, it helps by providing guarantees against loads granted to large and small units and other projects for the
member nations.
 So, it ensures that the development projects are implemented. Thus, it brings a sense of transparency for a
nation from war-time to a peaceful economy.
 Also, it promotes the capital investment for member nations by providing a guarantee for capital investment
and loans.
 So, if the capital investment is not available than it provides the guarantee and then IBRD provides loans for
promotional activities on specific conditions.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD)

 WORLD Bank is also known as The International Bank for Reconstruction and Development (IBRD).
 The Second World War damages the economies of the world. So in 1945 it was realized to concentrate on
the reconstruction of that war damaged economies.
 The IBRD was established in Dec. 1945 with the IMF on the basis of recommendations of the Bretton
woods conference that is reason why IMF and World
 Bank are called Bretton woods twin.
 It Head quarters at Washington, USA
 IBRD started working in June 1946.
 As on April 2019; the World Bank of 189 members.
 Current President : David Malpass

Objectives of IBRD
 Rendering assistance in reconstruction and development of countries and investment of capital for
productive purposes.
 Establishment of projects in backward areas to increase employment and increase in income.
 Developing the economic infrastructure through power, transport, communication and irrigation sector.

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 Promoting foreign direct investment.
 Development programme are supported (e.g.: forest development, port, housing, sewage etc., ]
 Promotion of balanced growth of global trade.
 Increasing national income and standard of living.

Functions of IBRD
 It helps the war-devastated countries by granting them loans for reconstruction.
 It provides the financial resources to help the poor countries for increase their economic growth, reducing
poverty and a better standard of living.
 Also, it helps the underdeveloped countries by granting development loans.
 It also provides loans to various governments for irrigation, agriculture, water supply, health, education, etc.
 It promotes foreign investments to other organizations by guaranteeing the loans.
 IBRD provides economic, monetary, and technical advice to the member countries for any of their projects.
 Thus, it encourages the development of industries in underdeveloped countries by introducing the various
economic reforms.

INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA)

 Established in Nov 1960
 Headquarters : Washington, USA
 Current Membership: 173
 IDA is one of the largest sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa
 IDA is called as “SOFT LOAN WINDOW” of the world bank
 It provides loan only for the governments
 Ten years grace period and fifty years maturity & no interest, only a nominal annual rate of 3.4% on the
amounts withdrawn and outstanding is charged to meet the administrative expenses.
Objectives of IDA
 Financial Assistance to less developed countries
 To promote economic development and standard of living
 Increasing productivity particularly by providing finance to meet their important development requirements
 Concentrate upon the poorest countries primarily those with a per-capita GNP of less than 520 dollars

ASIAN DEVELOPMENT BANK

 Asian Development Bank (ADB) was created by Economic Commission for Asia and
 Far East (ECAFE) in 1963

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 Established on 19 Dec, 1966
 Headquarters: Manila, Philippines
 Current President: Masatsugu Asakawa (from 17 January 2020)
 Membership: 68 (Regional members: 49 from Asia and Pacific region and Non-Regional members: 19)
 The company also maintains 31 field offices around the world to promote social and economic development
in Asia.
 The ADB was modelled closely on the World Bank, and has a similar weighted voting system where votes
are distributed in proportion with members' capital subscriptions.

Objectives of Asian Development Bank

 To help the member countries in countering poverty
 To help the countries to go towards economic growth
 To support human development
 To preserving and protecting the environment
 To continue working towards empowering women and improving their status in society

International Trade Agreements

The World Trade Organization (WTO) Agreements create an international trade legal framework for
164 economies around the world. These Agreements cover goods, services, intellectual property,
standards, investment and other issues that impact the flow of trade.

WORLD TRADE ORGANIZATION (WTO)

The World Trade Organization (WTO) was established on January 1, 1995 as a result of the
Conclusion of the Uruguay Round negotiations in 1994.
The WTO is based in Geneva and headed by a Director-General, who is now Roberto Azevêdo from Brazil.
The predecessor of the WTO is the General Agreement on Tariffs and Trade (GATT).
Both the GATT and WTO aim at reducing tariff and eliminating other trade barriers among
Members. The GATT was founded in 1947 with 23 Members and now, the WTO has 164
Members, contributing to 98% of global trade.

Objectives of WTO
• To improve the standard of living of people of the member countries in incomes, employment, production
and trade expansions, utilisation of world resources.
• To ensure full employment and broad increase in effective demand
• To enlarge production and trade of goods
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 • To increase the trade of services
• To ensure optimum utilization of world resources
• To protect the environment
• To accept the concept of sustainable development

Functions of WTO
1. Administration of agreement: It looks after the administration of the 29 agreements
(Signed at the conclusion of Uruguay round in 1994), plus a number of other agreements, entered into after
the Uruguay round.
2. Implementation of reduction of trade barriers: It checks the implementation of the tariff cuts and reduction
of non-tariff measures agreed upon by the member nations at the conclusion of the Uruguay round.
3. Examination of Members’ Trade Policies: It regularly examines the foreign trade policies of the member
nations, to see that such policies are in line with WTO guidelines.
4. Collection of foreign trade information: It collects information in respect of export-import trade, various
trade measures and other trade statistics of member nations.
5. Settlement of disputes: It provides conciliation mechanism for arriving at an amicable solution to trade
conflicts among member nations. The WTO dispute settlement body adjudicates the trade disputes that
cannot be solved through bilateral talks between member nations.
6. Consultancy services: It keeps a watch on the development in the world economy and it provides
consultancy services to its member nations.
7. Forum for negotiation: WTO is a forum where member nations continuously negotiate the exchange of
trade concessions. The member nations also discuss trade restrictions in areas of goods, services, intellectual
property etc.
8. Assistance of IMF and IBRD: It assists IMF and IBRD for establishing coherence in universal economic
policy administration.
The New Development Bank
The New Development Bank, formerly referred to as the BRICS Development Bank, is a multilateral
development bank established by the BRICS states. According to the Agreement on the NDB, "the Bank
shall support public or private projects through loans, guarantees, equity participation and other financial
instruments."
The NDB is a multilateral financial institution established by the BRICS countries, namely, Brazil, Russia,
India, China and South Africa.
 The purpose of NDB is to fund sustainable development projects and infrastructure projects in the BRICS
countries and other developing countries and emerging markets.

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 The NDB is projected as a developmental financial institution that can complement western dominated
global financial institutions (such as the World Bank and the International Monetary Fund), rather than as a
challenge to them.
 It was formerly known as the BRICS Development Bank.
 NDB was founded in 2014.
 The idea behind the NDB was mooted by India at the 4th BRICS Summit in New Delhi in 2012 and the
formation treaty was signed in 2014 in the sixth BRICS Summit in Fortaleza, Brazil.
 The Fortaleza Declaration stated that the NDB would strengthen cooperation among the BRICS members.
 In 2018, the NDB achieved ‘Observer’ status at the United Nations General Assembly.
 To fulfill its purpose, the Bank supports public or private projects through loans, guarantees, equity
participation and other financial instruments.
 It offers technical assistance for projects and conducts information, cultural and personnel exchanges with
the objective of contributing to the attainment of social and environmental sustainability.
 It is headquartered in Shanghai, China. There are regional offices in all other member countries except in
India.

The Organization for Economic Cooperation and Development (OECD)

The Organization for Economic Co-operation and Development (OECD) is a unique forum where the
governments of 37 democracies with market-based economies collaborate to develop policy standards
to promote sustainable economic growth.
Most OECD members are high-income economies with a very high Human Development Index (HDI) and
are regarded as developed countries. OECD members are democratic countries that support free-market
economies.
 It provides a platform for its member countries to compare policy experiences, seek answers to common
problems, identify and share best practices, and coordinate domestic and international policies of its member
nations.
 OECD is an official Permanent observer to the United Nations and is referred to as a think-tank or as a
monitoring group.
 The OECD’s headquarters are at the Château de la Muette in Paris, France.
 The OECD member states collectively comprised 62.2% of global nominal GDP (US$49.6 trillion) and
42.8% of global GDP (Int$54.2 trillion) at purchasing power parity in 2017.
 The international dollar: It is also known as Geary–Khamis dollar.
 It is a hypothetical unit of currency that has the same Purchasing Power Parity (PPP) that the U.S. dollar
had in the United States at a given point in time.
 It is widely used in economics and financial statistics for various purposes, such as to determine and analyze
the PPP and the GDP of various countries and markets.
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 It is based on the twin concepts of PPP of currencies and the international average prices of commodities.
OECD Objectives
The objectives of the OECD include fostering economic development and cooperation and fighting poverty
through the promotion of economic stability.
 It also ensures that the environmental impact of growth and social development is always considered.
 Over the years, OECD has raised the standards of living in multiple countries.
 It has also contributed to the expansion of world trade.
OECD Functions and Responsibilities
The OECD plays an integral role in promoting economic stability on a global scale. The OECD publishes
and updates a model tax convention that serves as a template for allocating taxation rights between
countries.
 The OECD is responsible for publishing economic reports, statistical databases, analyses, and forecasts on
the outlook for economic growth worldwide.
 The group analyzes the impact of social issues on economic growth and makes recommendations to foster
economic growth globally. These recommendations extend forethoughts to the environmental concerns
associated with economic development too.
 The organization endeavors to eliminate bribery and other forms of financial crimes worldwide.
 The OECD also maintains a “blacklist” of nations that are considered uncooperative tax havens.
 It also took efforts to eradicate tax avoidance by profitable corporations and in the G-20 countries. It also
encourages the G-20 countries to promote tax reforms.

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