![]() In these instances, several different reasons for devaluation can be discerned, all tending to suggest the nature of fundamental disequilibrium. Over the years member countries have proposed a number of changes in par values and, where par values did not exist, in their prevailing exchange rates, and the Fund has generally concurred. But the absence of definitions has not meant that the conditions described could not be recognized when they were thought to occur. In fact, even when the Fund has taken decisions denoting its concurrence with the proposed rate changes of individual countries, it has rarely used these terms. Subsequently, the need for exact definitions of these terms has not been a pressing one therefore such definitions, which could limit the leverage of future Fund actions, have been avoided. And in the early 1950’s some sizable devaluations excited in at least one Executive Director the fear of excessive, if not competitive, depreciation. In the twenty-odd years since these concepts were formulated, the Fund has never attempted to define precisely either “fundamental disequilibrium” or “competitive depreciation.” In its first years, in response to members’ requests, the Fund did make two interpretations of its Articles involving the first term. The second relates not only to the need for devaluation but also to its size: competitive depreciation is to be avoided. The first provides a criterion by which to judge the need for a change in par value: par values are to be altered only to correct a fundamental disequilibrium. The Fund’s Articles contain two basic concepts applicable to changes in par values. These last two types of devaluation are discussed in Chapter 7. Later, they were obliged to devalue again. Some countries which had introduced fluctuating rates subsequently undertook to support these rates. Third, devaluation has occurred through the use of steadily depreciating fluctuating rates. Canada, the Philippines, and Thailand afford noteworthy examples of this type of devaluation. Second, in a few countries devaluation has been effected by the temporary institution of a fluctuating exchange rate only later was a new par value established. The reasons for devaluation in this manner, and the Fund’s views, are discussed in Chapter 6. ![]() The first comprises partial and selective devaluations through the alteration of multiple rates these were very frequent until the late 1950’s. Exchange rates have also been altered in three other ways. These rate adjustments form the subject of this chapter. The major examples of rate adjustment between 19 through what, in the parlance of economists, is called “altering the pegs” were the devaluations of the major currencies in September 1949, devaluations by Mexico (1954) and Pakistan (1955), and the German and Dutch revaluations of 1961. Furthermore, the Fund has had to decide what to do when members change exchange rates that have not been agreed as par values: adjustment of exchange rates is not always effected by the simple mechanism set up in the Articles-that is, from one unitary par value to another. The role of the Fund in a matter explicitly stated by the Articles to be reserved to the initiative of members has also had to be clarified. The issues which have come to the fore include the reasons for devaluation, the magnitudes of the changes, and the possibility of adverse consequences for other members. J ust as the fund has had to develop policies pertaining to the establishment and maintenance of par values, so it has had to evolve policies relating to changes in those par values and in other exchange rates.
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