In some of its policy thinking the IMF has undergone deep transformations that often point in a more Keynesian direction. The most radical change has been in the IMF’s research on the systemic risks posed by the interconnectedness of global banks, followed by its views on capital controls, and its interventions in the austerity debate.
Surprising its critics, the IMF has endorsed capital controls — of which it was a staunch opponent for decades — as well as state spending to stimulate the economy under certain conditions. Moreover, it has been sharply critical of the theory — popular with E.U. institutions — that spending cuts reignite growth and has become an advocate of slightly more progressive taxation systems. The IMF now holds a strong preference for more spending on public investment and safety nets as the main instruments in the stimulus toolbox.
Most surprising, perhaps, has been the fact that the Fund’s research and position papers recently began to openly embrace a critical approach to global banks by portraying them as “super spreaders” of systemic risk.