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Do IMF and World Bank Programs Induce Government Crises? An Empirical Analysis

Author

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  • Axel Dreher
  • Martin Gassebner

Abstract

We examine whether and under which circumstances World Bank projects and IMF programs affect the likelihood of major government crises. Using a sample of more than 90 developing countries over the period 1970-2002, we find that crises are on average more likely as a consequence of Bank and Fund involvement. While the effects of the IMF to some extent depend on the model specification, those of the World Bank are shown to be robust to the choice of control variables and method of estimation. We also find that governments face an increasing risk to enter a crisis when they remain under an arrangement once the economy performs better. The (economic) conditions present when a new arrangement is initiated, however, do not affect the impact of Fund and Bank on the probability of a crisis. Finally, while crisis probability rises when a government turns to the IFIs itself, programs inherited by preceding governments do not affect the probability of a crisis.

Suggested Citation

  • Axel Dreher & Martin Gassebner, 2008. "Do IMF and World Bank Programs Induce Government Crises? An Empirical Analysis," KOF Working papers 08-200, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:08-200
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    File URL: http://dx.doi.org/10.3929/ethz-a-005640669
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    Cited by:

    1. Liesbet Hooghe & Gary Marks, 2015. "Delegation and pooling in international organizations," The Review of International Organizations, Springer, vol. 10(3), pages 305-328, September.
    2. Aidt, Toke & Albornoz, Facundo & Gassebner, Martin, 2010. "The Golden Halo and Political Transitions," Proceedings of the German Development Economics Conference, Hannover 2010 48, Verein für Socialpolitik, Research Committee Development Economics.
    3. 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.
    4. Doris A. Oberdabernig, 2018. "Determinants of IMF lending: How different is Sub-Saharan Africa?," Economics Bulletin, AccessEcon, vol. 38(1), pages 136-145.
    5. repec:eee:jcecon:v:46:y:2018:i:1:p:157-173 is not listed on IDEAS
    6. Psofogiorgos, Nikolaos - Alexandros & Metaxas, Theodore, 2017. "IMF, Democracy and Economic Development: Review and Critique," MPRA Paper 79403, University Library of Munich, Germany.
    7. Soumyajit Mazumder, 2016. "Can I stay a BIT longer? The effect of bilateral investment treaties on political survival," The Review of International Organizations, Springer, vol. 11(4), pages 477-521, December.
    8. Rickard, Stephanie J. & Caraway, Teri L., 2018. "International demands for austerity: examining the impact of the IMF on the public sector," LSE Research Online Documents on Economics 86636, London School of Economics and Political Science, LSE Library.
    9. Kersting, Erasmus K. & Kilby, Christopher, 2016. "With a little help from my friends: Global electioneering and World Bank lending," Journal of Development Economics, Elsevier, vol. 121(C), pages 153-165.
    10. Li, Larry & Sy, Malick & McMurray, Adela, 2015. "Insights into the IMF bailout debate: A review and research agenda," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 891-914.
    11. Beatrice D. Scheubel & Andrea Tafuro & Benjamin Vonessen, 2018. "STIGMA? WHAT STIGMA? A Contribution to the Debate on the Effectiveness of IMF Lending," CESifo Working Paper Series 7036, CESifo Group Munich.
    12. repec:spr:revint:v:12:y:2017:i:4:d:10.1007_s11558-016-9250-3 is not listed on IDEAS
    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.

    More about this item

    Keywords

    Political Crisis; International Financial Institutions;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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