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Who adjusts? Exchange rate regimes and finance versus labor under IMF programs

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  • Saliha Metinsoy

    (Erasmus University Rotterdam, Mandeville Building)

Abstract

Who adjusts under International Monetary Fund (IMF) programs and why? In this paper, I demonstrate that labor groups adjust when there is a fixed exchange rate regime and international financial groups are strong enough to defend the peg. In that case, the Fund substitutes currency devaluation with lowering labor costs via labor market reform. Lower wages are used to increase competitiveness and support exports. In other words, the Fund makes labor ‘cheaper’ through its labor market reform when money cannot be made ‘cheaper’ due to strong international financial interests. To test this theory, I use a mixed-method approach. I complement the case comparison of Latvia and Hungary in 2008–two very similar cases except for their exchange rate regime and the influence of international finance on their economy–with a large-N study using a global sample of IMF borrowers over the years 1989 and 2014. The paper shows that international organizations such as the IMF might amplify the voice of the strong (financial interests) while making the ‘weak’ (labor groups) weaker via their conditionality.

Suggested Citation

  • Saliha Metinsoy, 2025. "Who adjusts? Exchange rate regimes and finance versus labor under IMF programs," The Review of International Organizations, Springer, vol. 20(3), pages 631-668, September.
    • Handle: RePEc:spr:revint:v:20:y:2025:i:3:d:10.1007_s11558-024-09540-9
    DOI: 10.1007/s11558-024-09540-9
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    Keywords

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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