Description
Abstract: On June 15, 2007, the International Monetary Fund (IMF) adopted the "2007 Decision on Bilateral Surveillance over Members' Policies," a landmark reform that modernizes the general principles of the IMF's bilateral surveillance. This paper assesses the first year of the Decision's implementation in Article IV reports. We develop a questionnaire based on the key aspects of the Decision, which is used to evaluate Article IV reports published before and after the adoption of the new Decision for twenty-four countries. We find that the Decision has significantly increased the overall quality of Article IV reports, with improvements noted in emerging-market, advanced, and developing countries. Bilateral surveillance is more focused on external stability and core macroeconomic policies. Exchange rate analysis, in particular, has improved significantly. We note, however, that the integration with multilateral surveillance remains relatively weak and that cross-country spillovers still do not receive sufficient attention. Moreover, while most reports examine domestic stability in some detail, the link between domestic stability and external stability is not adequately analyzed. On the issue of the even-handed application of the Decision, we conclude that implementation has been broadly similar across country income groups, although differences remain for specific aspects of the Decision.