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Politics and IMF Conditionality

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Abstract

Bailouts sponsored by the International Monetary Fund (IMF) are famous for their conditionality: in return for continued installments of desperately needed loans, governments must comply with austere policy changes. Many have suggested, however, that politically important countries face rather weak stringency. Obstacles to testing this hypothesis include finding a measure of political importance that is not plagued by endogeneity and obtaining data on IMF conditionality. We propose to measure political importance using temporary membership on the United Nations Security Council and analyze a newly available dataset on the level of conditionality attached to (a maximum of) 314 IMF arrangements with 101 countries over the 1992 to 2008 period. We find a negative relationship: Security Council members receive about 30 percent fewer conditions. This suggests that the major shareholders of the IMF trade softer conditionality in return for political influence over the Security Council.

Suggested Citation

  • Jan-Egbert Sturm & Axel Dreher & James R. Vreeland, 2013. "Politics and IMF Conditionality," KOF Working papers 13-338, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:13-338
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    File URL: http://dx.doi.org/10.3929/ethz-a-009899619
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    Cited by:

    1. Stubbs, Thomas H. & Kentikelenis, Alexander E. & King, Lawrence P., 2016. "Catalyzing Aid? The IMF and Donor Behavior in Aid Allocation," World Development, Elsevier, vol. 78(C), pages 511-528.
    2. 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.
    3. repec:eee:deveco:v:130:y:2018:i:c:p:1-16 is not listed on IDEAS
    4. Binder, Michael & Bluhm, Marcel, 2017. "On the conditional effects of IMF program participation on output growth," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 192-214.
    5. 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.
    6. repec:spr:revint:v:12:y:2017:i:4:d:10.1007_s11558-016-9250-3 is not listed on IDEAS

    More about this item

    Keywords

    IMF; UN Security Council; Voting; Aid; Conditionality;

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F35 - International Economics - - International Finance - - - Foreign Aid

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