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IMF Conditionality: Theory and Evidence

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Author Info
Axel Dreher () (KOF Swiss Economic Institute, ETH Zurich)

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Abstract

This article analyzes whether and to what extent reliance on conditionality is appropriate to guarantee the revolving character of Fund resources. The paper presents theoretical arguments in favour of conditionality, and those against the use of conditions. It summarizes the track record of program implementation and discusses the evidence of factors determining implementation. Whether proponents or critics of conditionality can be supported by existing data analysis is also investigated, as is the success of conditionality in terms of outcomes. The final section draws policy implications.

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Publisher Info
Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 08-188.

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Length: 56 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:kof:wpskof:08-188

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Related research
Keywords: IMF; conditionality; compliance; implementation;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dhonte, Pierre, 1997. "Conditionality as an Instrument of Borrower Credibility," IMF Papers on Policy Analysis and Assessments 97/2, International Monetary Fund. [Downloadable!]
  2. Giulio Federico, 2001. "IMF Conditionality," Economics Papers 2001-W19, Economics Group, Nuffield College, University of Oxford, revised 01 Sep 2001. [Downloadable!]
  3. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 17-41, August. [Downloadable!] (restricted)
  4. Axel Dreher & Roland Vaubel, 2003. "The Causes and Consequences of IMF Conditionality," International Finance 0309004, EconWPA, revised 17 Oct 2003. [Downloadable!]
    Other versions:
  5. Prasanna Gai & Ashley Taylor, 2004. "International financial rescues and debtor country moral hazard," Money Macro and Finance (MMF) Research Group Conference 2003 34, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  6. William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June. [Downloadable!]
  7. Howard White & Oliver Morrissey, 1997. "Conditionality When Donor And Recipient Preferences Vary," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(4), pages 497-505.
  8. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006. "Does Aid for Education Educate Children? Evidence from Panel Data," KOF Working papers 06-146, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
    Other versions:
  9. Haggard, Stephan, 1985. "The Politics of Adjustment: Lessons from the IMF's Extended Fund Facility," International Organization, MIT Press, vol. 39(3), pages 505-34, Summer.
  10. Axel Dreher & Roland Vaubel, 2004. "Do IMF and IBRD Cause Moral Hazard and Political Business Cycles? Evidence from Panel Data," Open Economies Review, Springer, vol. 15(1), pages 5-22, January. [Downloadable!] (restricted)
  11. Joseph P. Joyce, 2006. "Promises Made, Promises Broken: A Model Of Imf Program Implementation," Economics and Politics, Blackwell Publishing, vol. 18(3), pages 339-365, November. [Downloadable!] (restricted)
  12. Hutchison, Michael M. & Noy, Ilan, 2003. "Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 991-1014, December. [Downloadable!] (restricted)
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  13. Haggard, Stephan, 1985. "The politics of adjustment: lessons from the IMF's Extended Fund Facility," International Organization, Cambridge University Press, vol. 39(03), pages 505-534, June. [Downloadable!]
  14. Axel Dreher, 2003. "The influence of elections on IMF programme interruptions," The Journal of Development Studies, Taylor and Francis Journals, vol. 39(6), pages 101-120, January. [Downloadable!] (restricted)
  15. Zlata Hajro & Joseph Joyce, 2009. "A true test: do IMF programs hurt the poor?," Applied Economics, Taylor and Francis Journals, vol. 41(3), pages 295-306. [Downloadable!] (restricted)
  16. Boockmann, Bernhard & Dreher, Axel, 2003. "The contribution of the IMF and the World Bank to economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 633-649, September. [Downloadable!] (restricted)
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  17. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-77, May. [Downloadable!] (restricted)
  18. Svensson, Jakob, 2003. "Why conditional aid does not work and what can be done about it?," Journal of Development Economics, Elsevier, vol. 70(2), pages 381-402, April. [Downloadable!] (restricted)
  19. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
  20. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September. [Downloadable!] (restricted)
  21. Michele Fratianni & John Pattison, 2004. "Who is Running the IMF: Critical Shareholders or the Staff?," Working Papers 2004-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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  22. Graham Bird & Dane Rowlands, 1997. "The Catalytic Effect of Lending by the International Financial Institutions," The World Economy, Blackwell Publishing, vol. 20(7), pages 967-991, November. [Downloadable!] (restricted)
  23. Silvia Marchesi & Laura Sabani, 2007. "IMF concern for reputation and conditional lending failure: theory and empirics," Working Papers 114, University of Milano-Bicocca, Department of Economics, revised 2007. [Downloadable!]
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  24. Stone, Randall W., 2008. "The Scope of IMF Conditionality," International Organization, Cambridge University Press, vol. 62(04), pages 589-620, October. [Downloadable!]
  25. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, 06. [Downloadable!] (restricted)
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  26. Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  27. Michael Mussa & Miguel A. Savastano, 1999. "The IMF Approach to Economic Stabilization," IMF Working Papers 99/104, International Monetary Fund.
  28. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank. [Downloadable!]
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  29. Michaelowa, Katharina, 2003. " The Political Economy of the Enhanced HIPC-Initiative," Public Choice, Springer, vol. 114(3-4), pages 461-76, March. [Downloadable!] (restricted)
  30. Lancaster, Carol, 1999. "Aid Effectiveness in Africa: The Unfinished Agenda," Journal of African Economies, Oxford University Press, vol. 8(4), pages 487-503, December.
  31. Evrensel, Ayse Y., 2002. "Effectiveness of IMF-supported stabilization programs in developing countries," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 565-587, October. [Downloadable!] (restricted)
  32. Pierre Dhonte, 1997. "Conditionality as an Instrument of Borrower Credibility," IMF Policy Discussion Papers 97/2, International Monetary Fund.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Axel Dreher & Stefanie Walter, 2008. "Does the IMF Help or Hurt? The Effect of IMF programs on the likelihood and outcome of currency crises," KOF Working papers 08-186, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  2. Knack, Stephen, 2008. "Sovereign rents and the quality of tax policy and administration," Policy Research Working Paper Series 4773, The World Bank. [Downloadable!]
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