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Do External Interventions Work? The Case of Trade Reform Conditions in IMF Supported Programs

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  • Shang-Jin Wei
  • Zhiwei Zhang

Abstract

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had conditions on trade reforms in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of trade conditions in IMF programs has not been systematically studied. Using a unique dataset, this paper provides such an assessment. It finds that trade conditions are associated with an increase in trade openness on average, but the effect comes mostly from countries that, by some measure, have a high degree of "willingness to reform."

Suggested Citation

  • Shang-Jin Wei & Zhiwei Zhang, 2006. "Do External Interventions Work? The Case of Trade Reform Conditions in IMF Supported Programs," NBER Working Papers 12667, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12667
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    References listed on IDEAS

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    1. Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, vol. 86(2), pages 52-56, May.
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    12. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, January.
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    Cited by:

    1. Stephanie J. Rickard & Teri L. Caraway, 2019. "International demands for austerity: Examining the impact of the IMF on the public sector," The Review of International Organizations, Springer, vol. 14(1), pages 35-57, March.
    2. Ernesto Crivelli & Mr. Sanjeev Gupta, 2014. "Does conditionality in IMF-supported programs promote revenue reform?," IMF Working Papers 2014/206, International Monetary Fund.
    3. Wei, Shang-Jin & Zhang, Zhiwei, 2010. "Do external interventions work? The case of trade reform conditions in IMF supported programs," Journal of Development Economics, Elsevier, vol. 92(1), pages 71-81, May.
    4. Bernhard Reinsberg & Thomas Stubbs & Alexander Kentikelenis & Lawrence King, 2020. "Bad governance: How privatization increases corruption in the developing world," Regulation & Governance, John Wiley & Sons, vol. 14(4), pages 698-717, October.
    5. Pierre-Louis Vézina, 2014. "Race-to-the-bottom Tariff Cutting," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 444-458, August.
    6. Thomas Stubbs & Bernhard Reinsberg & Alexander Kentikelenis & Lawrence King, 2020. "How to evaluate the effects of IMF conditionality," The Review of International Organizations, Springer, vol. 15(1), pages 29-73, January.
    7. Rickard, Stephanie J. & Caraway, Teri L., 2019. "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.
    8. Carter Patrick, 2013. "Does Foreign Aid Displace Domestic Taxation?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 1-47, August.
    9. Douglas A. Irwin, 2019. "Does Trade Reform Promote Economic Growth? A Review of Recent Evidence," Working Paper Series WP19-9, Peterson Institute for International Economics.
    10. Alice Nicole Sindzingre, 2015. "‘Policy Externalisation’ Inherent Failure: International Financial Institutions’ Conditionality in Developing Countries," Post-Print hal-01668363, HAL.
    11. Jinjarak, Yothin & Salinas, Gonzalo & Tsikata, Yvonne M., 2013. "The effect of World Bank trade adjustment assistance on trade and growth, 1987–2004: Is the glass half full or half empty?," Economic Systems, Elsevier, vol. 37(3), pages 415-430.
    12. Iasmin Goes, 2023. "Examining the effect of IMF conditionality on natural resource policy," Economics and Politics, Wiley Blackwell, vol. 35(1), pages 227-285, March.
    13. Stubbs, Thomas & Kentikelenis, Alexander & Stuckler, David & McKee, Martin & King, Lawrence, 2017. "The impact of IMF conditionality on government health expenditure: A cross-national analysis of 16 West African nations," Social Science & Medicine, Elsevier, vol. 174(C), pages 220-227.
    14. Bown, Chad, 2007. "Developing Countries and Enforcement of Trade Agreements: Why Dispute Settlement Is Not Enough," CEPR Discussion Papers 6459, C.E.P.R. Discussion Papers.
    15. Bown, Chad P. & Tovar, Patricia, 2011. "Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform," Journal of Development Economics, Elsevier, vol. 96(1), pages 115-125, September.
    16. Bernard M. Hoekman, 2013. "Multilateral Institutions and African Economic Integration," RSCAS Working Papers 2013/67, European University Institute.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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