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Do IMF and World Bank programs induce government crises An empirical analysis

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  • Dreher, Axel
  • Gassebner, Martin

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 in the presence of Bank and Fund involvement. While the effect of the IMF to some extent depends on the model specification, the impact of the World Bank is 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 IFI programs when the economy performs better. The (economic) conditions present when a new IFI program is initiated, however, do not play a major role for crisis probability. Finally, only programs concluded by the current government affect crises, while those inherited by preceding governments do not.

Suggested Citation

  • Dreher, Axel & Gassebner, Martin, 2008. "Do IMF and World Bank programs induce government crises An empirical analysis," Proceedings of the German Development Economics Conference, Zurich 2008 13, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec08:13
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    Citations

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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, pages 307-340.
    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. Psofogiorgos, Nikolaos - Alexandros & Metaxas, Theodore, 2017. "IMF, Democracy and Economic Development: Review and Critique," MPRA Paper 79403, University Library of Munich, Germany.
    6. 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.
    7. 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.
    8. 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.
    9. repec:spr:revint:v:12:y:2017:i:4:d:10.1007_s11558-016-9250-3 is not listed on IDEAS
    10. 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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