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Geopolitics and International Organizations? An Empirical Study on IMF Facilities

Author

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  • Julien Reynaud
  • Julien Vauday

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique)

Abstract

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.

Suggested Citation

  • Julien Reynaud & Julien Vauday, 2009. "Geopolitics and International Organizations? An Empirical Study on IMF Facilities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00367845, HAL.
  • Handle: RePEc:hal:cesptp:hal-00367845
    DOI: 10.1016/j.jdeveco.2008.07.005
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00367845
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    3. Guimarães, Bernardo de Vasconcellos & Ladeira, Carlos Eduardo de Almeida, 2015. "The determinants of IMF fiscal conditionalities: economics or politics?," Textos para discussão 391, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    4. Christoph Moser & Jan-Egbert Sturm, 2011. "Explaining IMF lending decisions after the Cold War," The Review of International Organizations, Springer, vol. 6(3), pages 307-340, September.
    5. Caspar Sauter & Jean-Marie Grether & Nicole A. Mathys, 2019. "A global compass for the great divergence: emissions vs. production centers of gravity 1820-2008," CESifo Working Paper Series 7557, CESifo.
    6. Akerman, Ariel Kessel & Weller, Leonardo & Pessoa, Joao Paulo, 2020. "The West’s Teeth: IMF Conditionality During the Cold War," SocArXiv vxbw9, Center for Open Science.
    7. Dreher, Axel & Walter, Stefanie, 2010. "Does the IMF Help or Hurt? The Effect of IMF Programs on the Likelihood and Outcome of Currency Crises," World Development, Elsevier, vol. 38(1), pages 1-18, January.
    8. Broich, Tobias, 2017. "Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa," China Economic Review, Elsevier, vol. 46(C), pages 180-207.
    9. Caselli, Francesca & Reynaud, Julien, 2020. "Do fiscal rules cause better fiscal balances? A new instrumental variable strategy," European Journal of Political Economy, Elsevier, vol. 63(C).
    10. Axel Dreher & Matthew Gould & Matthew Rablen & James Vreeland, 2014. "The determinants of election to the United Nations Security Council," Public Choice, Springer, vol. 158(1), pages 51-83, January.
    11. Mohd Fairuz Md. Salleh & Wan Sallha, Yusoff & Norida Basnan, 2016. "Does Smart Power of ASEAN Cooperation Influence Firm Value? Evidence from Geopolitical Perspective," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(3), pages 83-97, JUNE.
    12. Valentin Lang, 2021. "The economics of the democratic deficit: The effect of IMF programs on inequality," The Review of International Organizations, Springer, vol. 16(3), pages 599-623, July.
    13. Lang, Valentin, 2016. "The Economics of the Democratic Deficit: The Effect of IMF Programs on Inequality," Working Papers 0617, University of Heidelberg, Department of Economics.
    14. repec:dug:journl:y:2016:i:3:p:83-97 is not listed on IDEAS
    15. Lang, Valentin F. & Presbitero, Andrea F., 2018. "Room for discretion? Biased decision-making in international financial institutions," Journal of Development Economics, Elsevier, vol. 130(C), pages 1-16.
    16. Broich, Tobias, 2017. "Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa," MERIT Working Papers 2017-011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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