IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v89y2009i1p139-162.html
   My bibliography  Save this article

Geopolitics and international organizations: An empirical study on IMF facilities

Author

Listed:
  • Reynaud, Julien
  • Vauday, Julien

Abstract

There is growing awareness that the distribution of IMF facilities may not be influenced only by the economic needs of borrowers. This paper focuses on the fact that the IMF may favour geopolitically important countries in the distribution of IMF loans, differentiating between concessional and non-concessional facilities. To carry out the empirical analysis, we construct a new database that compiles a wide array of proxies for geopolitical importance for 107 IMF countries over 1990-2003, focusing on emerging and developing economies. We use a factor analysis to capture the common underlying characteristic of countries' geopolitical importance as well as a potential analysis since we also want to account for the geographical situation of the loan recipients. While controlling for economic and political determinants, our results show that geopolitical factors influence notably lending decisions when loans are non-concessional, whereas results are less robust and in opposite direction for concessional loans. This study provides empirical support to the view that geopolitical considerations are an important factor in shaping IMF lending decisions, potentially affecting the institution's effectiveness and credibility.

Suggested Citation

  • Reynaud, Julien & Vauday, Julien, 2009. "Geopolitics and international organizations: An empirical study on IMF facilities," Journal of Development Economics, Elsevier, vol. 89(1), pages 139-162, May.
  • Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:139-162
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-3878(08)00080-1
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ades, Alberto & Chua, Hak B, 1997. "Thy Neighbor's Curse: Regional Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 2(3), pages 279-304, September.
    2. Bird, Graham, 1996. "Borrowing from the IMF: The policy implications of recent empirical research," World Development, Elsevier, vol. 24(11), pages 1753-1760, November.
    3. Thimann, Christian & Reynaud, Julien & Gatarek, Lukasz, 2007. "Proximity and linkages among coalition participants: a new voting power measure applied to the International Monetary Fund," Working Paper Series 819, European Central Bank.
    4. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2006. "Does Membership on the UN Security Council Influence IMF Decisions? Evidence from Panel Data," CESifo Working Paper Series 1808, CESifo Group Munich.
    5. Peter Bernholz, 2006. "International political system, supreme values and terrorism," Public Choice, Springer, vol. 128(1), pages 221-231, July.
    6. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    7. Michael Mussa, 1999. "Reforming the International Financial Architecture: Limiting Moral Hazard and Containing Real Hazard," RBA Annual Conference Volume,in: David Gruen & Luke Gower (ed.), Capital Flows and the International Financial System Reserve Bank of Australia.
    8. Dietz, Simon & Neumayer, Eric & De Soysa, Indra, 2007. "Corruption, the resource curse and genuine saving," Environment and Development Economics, Cambridge University Press, vol. 12(01), pages 33-53, February.
    9. Joyce, Joseph P., 1992. "The economic characteristics of IMF program countries," Economics Letters, Elsevier, vol. 38(2), pages 237-242, February.
    10. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
    11. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    12. Axel Dreher & Jan-Egbert Sturm, 2006. "Do IMF and World Bank Influence Voting in the UN General Assembly?," CESifo Working Paper Series 1724, CESifo Group Munich.
    13. Harrigan, Jane & Wang, Chengang & El-Said, Hamed, 2006. "The economic and political determinants of IMF and world bank lending in the Middle East and North Africa," World Development, Elsevier, vol. 34(2), pages 247-270, February.
    14. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    15. 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.
    16. Przeworski, Adam & Vreeland, James Raymond, 2000. "The effect of IMF programs on economic growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 385-421, August.
    17. Bird, Graham & Hussain, Mumtaz & Joyce, Joseph P., 2004. "Many happy returns? Recidivism and the IMF," Journal of International Money and Finance, Elsevier, vol. 23(2), pages 231-251, March.
    18. Reinhold Kosfeld & Jørgen Lauridsen, 2008. "Factor analysis regression," Statistical Papers, Springer, vol. 49(4), pages 653-667, October.
    19. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
    20. 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.
    21. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
    22. Marchesi, Silvia & Sabani, Laura, 2007. "IMF concern for reputation and conditional lending failure: Theory and empirics," Journal of Development Economics, Elsevier, vol. 84(2), pages 640-666, November.
    23. Andrew W. Shoyer, 2003. "Panel Selection in WTO Dispute Settlement Proceedings," Journal of International Economic Law, Oxford University Press, vol. 6(1), pages 203-209, March.
    24. Andrew K. Rose, 2007. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," The World Economy, Wiley Blackwell, vol. 30(1), pages 22-38, January.
    25. Mark B. Stewart, 2007. "The interrelated dynamics of unemployment and low-wage employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 511-531.
    26. Conway, Patrick, 1994. "IMF lending programs: Participation and impact," Journal of Development Economics, Elsevier, vol. 45(2), pages 365-391, December.
    27. Joseph P Joyce, 2004. "Adoption, Implementation and Impact of IMF Programmes: A Review of the Issues and Evidence1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 46(3), pages 451-467, September.
    28. Carlos A Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth," IMF Working Papers 99/85, International Monetary Fund.
    29. Helge Berger & Jakob de Haan & Jan-Egbert Sturm, 2005. "Which Variables Explain Decisions on IMF Credit? An Extreme Bounds Analysis�," TWI Research Paper Series 13, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    30. Axel Dreher & Silvia Marchesi & James Raymond Vreeland, 2007. "The Politics of IMF Forecasts," KOF Working papers 07-176, KOF Swiss Economic Institute, ETH Zurich.
    31. Chad P. Bown, 2005. "Participation in," World Bank Economic Review, World Bank Group, vol. 19(2), pages 287-310.
    32. Lorenzo Bini Smaghi, 2006. "Powerless Europe: Why is the Euro Area Still a Political Dwarf?," International Finance, Wiley Blackwell, vol. 9(2), pages 261-279, August.
    33. Sebastian Edwards & Julio Santaella, 1993. "Devaluation Controversies in the Developing Countries: Lessons from the Bretton Woods Era," NBER Chapters,in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 405-460 National Bureau of Economic Research, Inc.
    34. 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.
    35. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October.
    36. Axel Dreher, 2004. "Does the IMF cause moral hazard? A critical review of the evidence," International Finance 0402003, EconWPA, revised 20 Dec 2004.
    37. Knight, Malcolm & Santaella, Julio A., 1997. "Economic determinants of IMF financial arrangements," Journal of Development Economics, Elsevier, vol. 54(2), pages 405-436, December.
    38. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2006. "Does membership on the UN security council influence IMF decisions?," KOF Working papers 06-151, KOF Swiss Economic Institute, ETH Zurich.
    39. J. Alonso-Meijide & C. Bowles, 2005. "Generating Functions for Coalitional Power Indices: An Application to the IMF," Annals of Operations Research, Springer, vol. 137(1), pages 21-44, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fratzscher, Marcel & Reynaud, Julien, 2011. "IMF surveillance and financial markets--A political economy analysis," European Journal of Political Economy, Elsevier, vol. 27(3), pages 405-422, September.
    2. Dreher, Axel & Voigt, Stefan, 2011. "Does membership in international organizations increase governments' credibility? Testing the effects of delegating powers," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 326-348, September.
    3. Mohd Fairuz Md. Salleh & Wan Sallha, Yusoff & Norida Basnan, 2016. "Does Smart Power of ASEAN Cooperation Influence Firm Value? Evidence from Geopolitical Perspective," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(3), pages 83-97, JUNE.
    4. Axel Dreher & Matthew Gould & Matthew Rablen & James Vreeland, 2014. "The determinants of election to the United Nations Security Council," Public Choice, Springer, vol. 158(1), pages 51-83, January.
    5. Guimarães, Bernardo de Vasconcellos & Ladeira, Carlos Eduardo de Almeida, 2015. "The determinants of IMF fiscal conditionalities: economics or politics?," Textos para discussão 391, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    6. Lang, Valentin, 2016. "The Economics of the Democratic Deficit: The Effect of IMF Programs on Inequality," Working Papers 0617, University of Heidelberg, Department of Economics.
    7. Christoph Moser & Jan-Egbert Sturm, 2011. "Explaining IMF lending decisions after the Cold War," The Review of International Organizations, Springer, vol. 6(3), pages 307-340, September.
    8. 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.
    9. repec:eee:chieco:v:46:y:2017:i:c:p:180-207 is not listed on IDEAS
    10. Dreher, Axel & Voigt, Stefan, 2011. "Does membership in international organizations increase governments' credibility? Testing the effects of delegating powers," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 326-348, September.
    11. repec:dug:journl:y:2016:i:3:p:83-97 is not listed on IDEAS
    12. repec:eee:deveco:v:130:y:2018:i:c:p:1-16 is not listed on IDEAS
    13. Broich, Tobias, 2017. "Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa," MERIT Working Papers 011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:139-162. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/devec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.