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The determinants of IMF fiscal conditionalities: economics or politics?

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  • Guimaraes, Bernardo
  • Ladeira, Carlos Eduardo

Abstract

Conditionalites, measures that a borrowing country should adopt to obtain loans from the International Monetary Fund (IMF), are pervasive in IMF programs. This paper estimates the effects of political and economic factors on the number of conditions and on the size of fiscal adjustment requested in an agreement. As found in the literature, political proximity of the borrowing country to the Fund’s major shareholders has an important effect on the number of conditions. However, the magnitude of fiscal adjustment requested by the IMF is strongly affected by the size of a country’s fiscal deficit but not by political proximity. We also find a very small correlation between the number of conditions and the requested fiscal adjustment.

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  • Guimaraes, Bernardo & Ladeira, Carlos Eduardo, 2017. "The determinants of IMF fiscal conditionalities: economics or politics?," LSE Research Online Documents on Economics 86171, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86171
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    More about this item

    Keywords

    IMF; conditionalities; fiscal adjustment; political proximity; fiscal deficit;
    All these keywords.

    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
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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