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Geopolitics and international organizations: An empirical study on IMF facilities

  • Reynaud, Julien
  • Vauday, Julien

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.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 89 (2009)
Issue (Month): 1 (May)
Pages: 139-162

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Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:139-162
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