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"The silent revolution": how the staff exercise informal governance over IMF lending

  • Jeffrey M. Chwieroth
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    his paper examines how the staff exercise informal governance over lending decisions of the International Monetary Fund (IMF or Fund). The essential component of designing any IMF program, assessing the extent to which a borrowing country is likely to fulfill its policy commitments, is based partly on informal staff judgments subject to informal incentives and normative orientations not dictated by formal rules and procedures. Moreover, when country officials are unable to commit to policy goals of the IMF, the IMF staff may bypass the formal channel of policy dialogue through informal contacts and negotiations with more like-minded actors outside the policymaking process. Exercising informal governance in these ways, the staff are motived by informal career advancement incentives and normative orientations associated with the organization’s culture to provide favorable treatment to borrowers composed of policy teams sympathetic toward their policy goals. The presence of these sympathetic interlocutors provides the staff both with greater confidence a lending program will achieve success and an opportunity to support officials who share their policy beliefs. I assess these arguments using a new dataset that proxies shared policy beliefs based on the professional characteristics of IMF staff and developing country officials. The evidence supports these arguments: larger loan commitments are extended to countries where government officials and the Fund staff share similar professional training. The analysis implies informal governance operates in IOs not just via state influence but also through the evolving makeup, incentive structure, and normative orientations of their staffs.

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    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 46623.

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    Date of creation: 25 Sep 2012
    Date of revision:
    Publication status: Published in The Review of International Organizations, 25, September, 2012, 8(2), pp. 265-290. ISSN: 1559-7431
    Handle: RePEc:ehl:lserod:46623
    Contact details of provider: Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
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    1. David Colander, 2003. "The Aging of an Economist," Middlebury College Working Paper Series 0304, Middlebury College, Department of Economics.
    2. Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers.
    3. Allan Drazen, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 36-67.
    4. Miguel A. Savastano & Michael Mussa, 1999. "The IMF Approach to Economic Stabilization," IMF Working Papers 99/104, International Monetary Fund.
    5. Fischer, Stanley, 1997. "Applied Economics in Action: IMF Programs," American Economic Review, American Economic Association, vol. 87(2), pages 23-27, May.
    6. Broz, J. Lawrence & Hawes, Michael Brewster, 2006. "Congressional Politics of Financing the International Monetary Fund," International Organization, Cambridge University Press, vol. 60(02), pages 367-399, April.
    7. Axel Dreher & Roland Vaubel, 2004. "The Causes and Consequences of IMF Conditionality," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(3), pages 26-54, May.
    8. Reinhart, Carmen, 2009. "The Second Great Contraction," MPRA Paper 21485, University Library of Munich, Germany.
    9. Roland Vaubel, 1996. "Bureaucracy at the IMF and the World Bank: A Comparison of the Evidence," The World Economy, Wiley Blackwell, vol. 19(2), pages 195-210, 03.
    10. Braumoeller, Bear F., 2004. "Hypothesis Testing and Multiplicative Interaction Terms," International Organization, Cambridge University Press, vol. 58(04), pages 807-820, October.
    11. Haggard, Stephan, 1985. "The politics of adjustment: lessons from the IMF's Extended Fund Facility," International Organization, Cambridge University Press, vol. 39(03), pages 505-534, June.
    12. Martin Steinwand & Randall Stone, 2008. "The International Monetary Fund: A review of the recent evidence," The Review of International Organizations, Springer, vol. 3(2), pages 123-149, June.
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