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The Influence of IMF Programs on the Re-election of Debtor Governments

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  • Axel Dreher

Abstract

The paper develops a model explaining why IMF programs are less likely to be concluded before national election dates. Since conclusion of an IMF arrangement may signal the incumbent's incompetence, rational voters use this signal when deciding upon his re-election. In order to demonstrate competence, politicians may therefore decide not to conclude IMF programs prior to elections. The model also shows that re-election probabilities of politicians who nevertheless conclude arrangements at election times depend on the state of the economy. Using panel data for 96 countries between 1976 and 1997, the model is tested empirically. The results show that conclusion of an IMF arrangement within six months prior to an election increases re-election probabilities when GDP growth is low, but reduces the chance to win an election with high growth rates. Copyright Blackwell Publishing Ltd 2004.

Suggested Citation

  • Axel Dreher, 2004. "The Influence of IMF Programs on the Re-election of Debtor Governments," Economics and Politics, Wiley Blackwell, vol. 16(1), pages 53-76, March.
  • Handle: RePEc:bla:ecopol:v:16:y:2004:i:1:p:53-76
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    Cited by:

    1. Roland Vaubel & Axel Dreher & Uğurlu Soylu, 2007. "Staff growth in international organizations: A principal-agent problem? An empirical analysis," Public Choice, Springer, vol. 133(3), pages 275-295, December.
    2. Dreher, Axel & Lamla, Michael J. & Lein, Sarah M. & Somogyi, Frank, 2009. "The impact of political leaders' profession and education on reforms," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 169-193, March.
    3. Liesbet Hooghe & Gary Marks, 2015. "Delegation and pooling in international organizations," The Review of International Organizations, Springer, vol. 10(3), pages 305-328, September.
    4. Dreher, Axel, 2006. "IMF and economic growth: The effects of programs, loans, and compliance with conditionality," World Development, Elsevier, vol. 34(5), pages 769-788, May.
    5. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.
    6. Uma Ramakrishnan & Alun H. Thomas, 2006. "The Incidence and Effectiveness of Prior Actions in IMF-supported Programs," IMF Working Papers 06/213, International Monetary Fund.
    7. Axel Dreher, 2002. "The Development and Implementation of IMF and World Bank Conditionality," International Finance 0207003, EconWPA.
    8. Axel Dreher & Nathan Jensen, 2003. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," International Finance 0310004, EconWPA, revised 08 Jan 2004.
    9. Dreher, Axel & Walter, Stefanie, 2010. "Does the IMF Help or Hurt? The Effect of IMF Programs on the Likelihood and Outcome of Currency Crises," World Development, Elsevier, vol. 38(1), pages 1-18, January.
    10. Timm M. Prein & Almuth Scholl, 2018. "The Impact of Bailouts on Political Turnover and Sovereign Default Risk," Working Paper Series of the Department of Economics, University of Konstanz 2018-04, Department of Economics, University of Konstanz.
    11. Christian H Ebeke & Dilan Ölcer, 2013. "Fiscal Policy over the Election Cycle in Low-Income Countries," IMF Working Papers 13/153, International Monetary Fund.
    12. Axel Dreher & Roland Vaubel, 2004. "The Causes and Consequences of IMF Conditionality," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(3), pages 26-54, May.
    13. Dreher, Axel & Vaubel, Roland, 2009. "Foreign exchange intervention and the political business cycle: A panel data analysis," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 755-775, September.
    14. repec:eee:jcecon:v:46:y:2018:i:1:p:157-173 is not listed on IDEAS
    15. Zeaiter, Hussein Zeaiter, 2013. "Sovereign Debt Defaults: Evidence using Extreme bounds Analysis," Working Papers 32/2013, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).
    16. Axel Dreher, 2005. "Does the IMF Influence Fiscal and Monetary Policy?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 8(3), pages 225-238.
    17. Harry Seldadyo & J. Paul Elhorst & Jakob De Haan, 2010. "Geography and governance: Does space matter?," Papers in Regional Science, Wiley Blackwell, vol. 89(3), pages 625-640, August.
    18. Jan-Egbert Sturm & Helge Berger & Jakob de Haan, 2005. "Which Variables Explain Decisions On Imf Credit? An Extreme Bounds Analysis," Economics and Politics, Wiley Blackwell, vol. 17, pages 177-213, July.
    19. Jeroen Klomp & Jakob Haan, 2013. "Political budget cycles and election outcomes," Public Choice, Springer, vol. 157(1), pages 245-267, October.

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