Critically evaluate the effects that Washington Consensus had upon emerging financial markets in terms of their economic growth and volatility of their stock markets? How should the IMF and World Bank conduct policy in the future in developing countries?
Many countries in Latin America fell into debt crisis in 1989 and Washington Consensus was raised to resolve this problem which was advocated by International monetary fund (IMF) and Word Bank (WB). The Washington Consensus, coined by John Williamson in 1990 and informed by neoliberal theory, supplied ten specific economic policies aiming at domestic economic reform in Latin America. The main objectives of those policies were to achieve economic growth and equitable income distribution in the developing world especially in Latin America but the results of the implementation of the policies did not fulfill the requirement as expected. This essay will evaluate the effect of Washington Consensus on emerging financial markets in terms of economic growth and volatility of stock market and suggest some recommendations for IMF and WB to conduct the policy in developing countries in the future. The essay will be demonstrated: the evaluation according to economic growth and stock market volatility and the recommendations suggested to IMF and WB.
The most significant function of Washington Consensus is to promote the economic growth and stabilize the stock market in developing countries especially in Latin America. However, the performance of those policies did not work out as they were intended and even the most ardent advocator now admit the consequence of the reform is lower than expectation on the basis of economic growth according to Rodrik (2006). Moreover, “reform lost momentum in the second half of the 1990s” since the government in Argentina, Bolivia and some other countries has lost the control of price and international trade restrictions (Lora & Olivera 2005). What is more, in the Correa’s(2002) report...
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