On US politics and IMF Lending
The political factors, which shape IMF lending to LDCs, have attracted much attention. The same goes for the role and influence of the US. However, formal modelling is scant. In this paper, we assume that the US is principal within the IMF and seeks to maximize its impact on the policy stance of debtor countries. We derive the optimal loan allocation mechanism, and test the hypothesis that the probability of an IMF loan is increasing in the amount of political concessions countries make. A political concession is defined as the distance between a country’s bliss point and its actual policy stance measured relative to the US. We propose a bliss-point proxy and test our hypothesis in a sample of 68 countries during the period 1986-94. There is support for our hypothesis in the data. Finally, we show that omitting bliss points may lead to endogeneity bias in empirical work.
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| Length: | 30 pages |
| Date of creation: | Aug 2004 |
| Date of revision: | |
| Handle: | RePEc:kud:kuiedp:0411 |
| Contact details of provider: | Postal: Phone: (+45) 35 32 30 10 Fax: +45 35 32 30 00 Web page: http://www.econ.ku.dk Email: More information through EDIRC
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References listed on IDEAS
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- Barro, Robert J. & Lee, Jong-Wha, 2005.
"IMF programs: Who is chosen and what are the effects?,"
Journal of Monetary Economics,
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- Robert J Barro & Jong-Wha Lee, 2003. "IMF Programs: Who Is Chosen and What Are the Effects?," Departmental Working Papers 2003-09, The Australian National University, Arndt-Corden Department of Economics.
- Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
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- repec:cto:journl:v:20:y:2000:i:1:p:85-103 is not listed on IDEAS
- Graham Bird & Dane Rowlands, 2003. "Political Economy Influences Within the Life-Cycle of IMF Programmes," The World Economy, Wiley Blackwell, vol. 26(9), pages 1255-1278, 09.
- Morris Goldstein & Peter Montiel, 1986. "Evaluating Fund Stabilization Programs with Multicountry Data: Some Methodological Pitfalls (Evaluation des programmes de stabilisation du Fonds à partir de données sur divers pays: quelques écueils," IMF Staff Papers, Palgrave Macmillan, vol. 33(2), pages 304-344, June.
- Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
- Maskin, Eric S., 2000. "Auctions, development, and privatization: Efficient auctions with liquidity-constrained buyers," European Economic Review, Elsevier, vol. 44(4-6), pages 667-681, May.
- Gould, Erica R., 2003. "Money Talks: Supplementary Financiers and International Monetary Fund Conditionality," International Organization, Cambridge University Press, vol. 57(03), pages 551-586, June.
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