PRINCETON, New Jersey — The world economy is increasingly threatened by volatile market reactions to global imbalances at a time when the International Monetary Fund has largely lost its original raison d'etre as the world's central monetary institution. These two developments should stimulate the Fund to claim a new purpose as the world's reserve manager.
In the 1960s, the IMF managed the problems of all the major economies, and in the 1980s and 1990s, it developed as a crisis manager for emerging markets. But that job is much harder now, because of the size of some of the big emerging economies.
And, in any case, the focus of financial nervousness is shifting back to the world economy's core countries, such as the United States, Britain and Australia, which are funding large current account deficits with surpluses from much poorer countries.