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IMF Conditionality and Program Ownership : A Case for Streamlined Conditionality

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  • S. NURI ERBAS

Abstract

Program conditionality and ownership are important considerations in the International Monetary Fund's current rethinking of program design. This paper contributes to the literature by developing a theory of program conditionality and ownership on the basis of Cumulative Prospect Theory. The policymaker may value a set of programs, each with fewer conditions, more than an extended program with as many conditions. This valuation bias is greater in ambiguity (Knightian uncertainty) than under uncertainty. If greater valuation of a program engenders more explicit and implicit ownership, then programs with fewer conditions may have a better chance of success. Less is more.

Suggested Citation

  • S. Nuri Erbas, 2004. "IMF Conditionality and Program Ownership : A Case for Streamlined Conditionality," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(3), pages 10-25, May.
  • Handle: RePEc:mes:emfitr:v:40:y:2004:i:3:p:10-25
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    References listed on IDEAS

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    Cited by:

    1. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.
    2. Kutan, Ali M. & Muradoglu, Gulnur, 2014. "Investor wealth, the IMF, and the Asian crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 130-137.
    3. Kutan, Ali M. & Muradoglu, Gulnur & Sudjana, Brasukra G., 2012. "IMF programs, financial and real sector performance, and the Asian crisis," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 164-182.
    4. Evrensel, Ayse Y. & Kim, Jong Sung, 2006. "Macroeconomic policies and participation in IMF programs," Economic Systems, Elsevier, vol. 30(3), pages 264-281, October.

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