While the fact that its former head is an alleged rapist caught some by surprise, the observation that the IMF has no credibility whatsoever has been well known for a long time by all market skeptics. It is therefore gratifying to discover that the IMF's own internal audit committee has just concluded that the International Bailout Fund is full of it: "policy conclusions from International Monetary Fund research don’t always follow the underlying analysis, thereby potentially harming the institution’s reputation, according to an internal audit. “Many staff indicated that they often felt pressure to align their conclusions with IMF views,” the institution’s Independent Evaluation Office said in a report released today." And not only is the IMF lying, it also happens to be incompetent: "The office found that from 1999 until 2008 the “relevance” of research was hampered by insufficient consultation with the topic countries, the evaluation office said in a statement. The technical quality of working, regional and background papers was “quite uneven,” the study found." The culprit: the IMF's endless brown-nosing to Ben Bernanke: "An audit released in February found IMF economists missed signs of fragility that led to the 2008 financial collapse, partly because agency staff were “in awe of” monetary authorities in the U.S. and other major economies." We can't wait for the Tweet pics released from the tete-a-tete sessions behind close doors between Bernanke and "in awe of" Lagarde.
IMF directors “considered it critical for the credibility of the institution that the conclusions of in-house research are not biased by the IMF’s position on the subject or excessively influenced by other work done internally,” according to a separate statement from the IMF board.
The IMF should conduct periodic strategic reviews of the uses of its research products in consultation with country authorities, and staff should consult with country authorities on topics for the background papers that accompany bilateral and regional surveillance, according to the audit released today.
Performance evaluations at the IMF should reward staff according to the caliber of research they perform and quality assurance procedures should be enhanced. At the same time, new and alternative ideas should be encouraged, the audit said.
IMF management should “cultivate an open, independent and innovative research environment, explicitly encouraging staff to explore differing and alternative views,” IEO Director Moises Schwartz said in the statement.
Reacting to the audit’s proposals, the IMF agreed to consider naming a senior staff member to coordinate and ensure the quality of agency research, according to the board statement.
The board also agreed that IMF staff should consult more with host country authorities on research to monitor regions and countries. Directors pledged to improve dissemination of IMF studies, while “a number” of directors stressed the need to boost staff diversity from an academic and professional standpoint.
Let us try to summarize the findings: if the IMF were to actually do work, stop being in awe of central bankers, and actually think indepedenetly, it may regain credibility? Sounds about right.