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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 IMF'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, 2003. "Imf Conditionality and Program Ownership; A Case for Streamlined Conditionality," IMF Working Papers 03/98, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/98
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    References listed on IDEAS

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    1. Starmer, Chris & Sugden, Robert, 1993. "Testing for Juxtaposition and Event-Splitting Effects," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 235-254, June.
    2. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, vol. 85(5), pages 1207-1223, December.
    3. R. A. Pollak, 1968. "Consistent Planning," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 201-208.
    4. S. Nuri Erbas, 2002. "Primeron Reforms in a Second-Best Ambiguous Environment; A Case for Gradualism," IMF Working Papers 02/50, International Monetary Fund.
    5. Segal, Uzi, 1987. "The Ellsberg Paradox and Risk Aversion: An Anticipated Utility Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 175-202, February.
    6. P. Lian & S.-J. Wei, 1998. "To Shock or Not to Shock? Economics and Political Economy of Large-Scale Reforms," Economics and Politics, Wiley Blackwell, vol. 10(2), pages 161-183, July.
    7. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    8. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
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    Cited by:

    1. Peter Leeson & Christopher Coyne, 2007. "The reformers’ dilemma: media, policy ownership, and reform," European Journal of Law and Economics, Springer, vol. 23(3), pages 237-250, June.
    2. Jeronimo Zettelmeyer & Jonathan David Ostry & Olivier D Jeanne, 2008. "A Theory of International Crisis Lending and IMF Conditionality," IMF Working Papers 08/236, International Monetary Fund.

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