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Chapter 10. What Moves the Markets: Basi... > The International Monetary Fund

The International Monetary Fund

The International Monetary Fund (IMF) was founded as a part of the Bretton Woods Agreement in 1944. (The World Bank, the IMF's sister institution, was also founded at the conference.) The intent of the IMF's founders was to help avoid the destructive currency fluctuations in the period before World War II. At that time, each nation had devalued its currency in a bid to make its exports the most competitive. The result shattered economies and helped sow the unrest that flowered into Nazism.

Determined to avoid this ruinous competition, the conferees gave the IMF the responsibility of making sure member nations ran a stable exchange rate and balance of payments. If a country got into trouble, the IMF was there to provide a loan to avoid any wild destabilizations that could upset the global economy. The funds for these bailouts are provided by the member countries, and the size of their quota is mostly determined by the size of their economy and foreign reserves. The six largest quotas are the U.S., Great Britain, Japan, France, Germany, and Saudi Arabia.


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