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Abstract

During the 1990s, the International Monetary Fund failed to develop clear exchange rate policy norms for developing countries, despite the fact that oversight of the international monetary system is central to its mandate. Explaining this behaviour requires revising theories of autonomous agenda-setting and ‘ceremonial conformity’ in international organizations (IOs). I argue that IOs often adopt a posture of strategic ambiguity when confronted with a combination of divisions among major member states and a lack of consensus in the profession that provides the organization's source of expert legitimacy. However, while the ambiguity helps avoid conflict in the short run, it undermines organizational governance capacity in the medium run, resulting in coordination failures. The empirical analysis relies on internal records of Fund meetings on the exchange rate issue, interviews with former IMF officials and analysis of the organization's governance role during currency crises in Mexico, Russia, Brazil and Argentina.