Joe Stiglitz may be warning about irrational exuberance in the markets right now, but the Washington-based think tank, Centre for Economic and Policy Research (CEPR), has their eye on the Kool aid the IMF was selling over the past couple years. A little over a week since the IMF gave themselves a pat on the back for a job well done during the crisis, the CEPR argues that, if anything, the IMF should be asking for forgiveness for making the situation worse.
In a paper analysing the IMF's agreements with 41 borrowing countries during the crisis, the Washington-based Centre for Economic and Policy Research (CEPR) found that 31 of the agreements contained so-called "pro-cyclical" macroeconomic policies, which - in the face of a significant slowdown in growth or in a recession - would be expected to exacerbate the downturn.
"In many cases the fund's pro-cyclical policies were based on over-optimistic assumptions about economic growth," said the thinktank. This means the measures proposed were too restrictive for the countries involved and did not produce the longer-lasting economic growth predicted
But the potential future global lender of last resort is not going to take smack talk like that lying down. Whether you throw insults or shoes their way, the IMF stands tall.
In response to the findings, the IMF said: "The CEPR reaches seriously misleading conclusions about the pro-cyclicality of policies in IMF-supported programmes, relying on faulty analysis and often inaccurate information.
Misleading conclusions based on faulty analysis and inaccurate information you say? It's probably not a coincidence they're based in Washington.
IMF policies deepened financial crisis, says CEPR [Guardian.co.uk]