Independent Actor or Agent? An Empirical Analysis of the Impact of U.S. Interests on International Monetary Fund Conditions
01 Feb 2007-The Journal of Law and Economics (The University of Chicago Press)-Vol. 50, Iss: 1, pp 4
TL;DR: The authors analyzed whether IMF conditionality is exclusively designed to be in line with observable economic indicators or whether it is partly driven by the IMF's major shareholder, the United States, and revealed that the number of conditions on an IMF loan depended on a borrowing country's voting pattern in the UN General Assembly.
Abstract: In this paper, we analyze whether International Monetary Fund (IMF) conditionality is exclusively designed to be in line with observable economic indicators or whether it is partly driven by the IMF's major shareholder, the United States. A panel data analysis of 206 letters of intent from 38 countries, submitted during the period April 1997 through February 2003, revealed that the number of conditions on an IMF loan depended on a borrowing country’s voting pattern in the UN General Assembly. Closer allies of the United States (and other Group of 7 [G7] countries) received IMF loans with fewer conditions, especially prior to elections. These results are relevant to current public policy debates on the role and process of setting IMF loan conditions and provide broader insight into the influence of the United States and other G7 countries on international institutions.
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TL;DR: The authors proposed a dynamic ordinal spatial model to estimate state ideal points from 1946-2012 on a single dimension that reflects state positions towards the U.S. led liberal order, and used information about the content of the UN's agenda to make estimates comparable across time.
Abstract: UN General Assembly votes have become the standard data source for measures of the degree to which states have common preferences over foreign policy. Almost without exception, those papers use dyadic indicators of voting similarity between states. We propose a dynamic ordinal spatial model to estimate state ideal points from 1946-2012 on a single dimension that reflects state positions towards the U.S. led liberal order. We use information about the content of the UN's agenda to make estimates comparable across time. Compared to existing measures, our estimates better separate signal from noise in identifying foreign policy shifts, have greater face validity, allow for better inter-temporal comparisons, are less sensitive to shifts in the UN's agenda, and are strongly correlated with measures of liberalism. We show that the choice of method is consequential with a replication of a prominent application to the democratic peace.
439 citations
TL;DR: This paper proposed a dynamic ordinal spatial model to estimate state ideal points from 1946 to 2012 on a single dimension that reflects state positions toward the US-led liberal order, using information about the content of the UN's agenda to make estimates comparable across time.
Abstract: United Nations (UN) General Assembly votes have become the standard data source for measures of states preferences over foreign policy. Most papers use dyadic indicators of voting similarity between states. We propose a dynamic ordinal spatial model to estimate state ideal points from 1946 to 2012 on a single dimension that reflects state positions toward the US-led liberal order. We use information about the content of the UN’s agenda to make estimates comparable across time. Compared to existing measures, our estimates better separate signal from noise in identifying foreign policy shifts, have greater face validity, allow for better intertemporal comparisons, are less sensitive to shifts in the UN’ agenda, and are strongly correlated with measures of liberalism. We show that the choice of preference measures affects conclusions about the democratic peace.
388 citations
TL;DR: The authors investigated whether temporary members of the United Nations Security Council receive favorable treatment from the International Monetary Fund (IMF) using panel data for 197 countries over the period from 1951 to 2004.
361 citations
Cites background from "Independent Actor or Agent? An Empi..."
...Our data on the number of IMF conditions are from Dreher (2004), extended in Dreher and Jensen (2007)....
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...32 For the list of countries and number of letters included in the sample, see Dreher and Jensen (2007)....
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...For in depth consideration of international political factors, see Thacker (1999), Stone (2002, 2004), Dreher and Jensen (2007), Oatley and Yackee (2004), Barro and Lee (2005). to agree.11 Thus, the IMF may be a less effective tool when the major shareholders disagree on a specific resolution…...
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...31 See IMF (2001), Gould (2003), Dreher (2004), Bulíř and Moon (2004), Ivanova et al. (2005), and Dreher and Jensen (2007)....
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TL;DR: A new data set drawn from the IMF's records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution's autonomy as mentioned in this paper.
Abstract: International organizations are governed by two parallel sets of rules: formal rules, which embody consensual procedures, and informal rules, which allow exceptional access for powerful countries+ A new data set drawn from the IMF 's records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution's autonomy+ I find evidence of U+S+ influence, which operates to constrain condition- ality, but only in important countries that are vulnerable enough to be willing to draw on their influence with the United States+ In ordinary countries under ordinary circumstances, broad authority is delegated to the IMF, which adjusts conditionality to accommodate local circumstances and domestic political opposition+ The IMF has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality+ International organizations have become increasingly important actors in inter- national politics+ They have proliferated, have expanded in membership, have acquired new legal enforcement powers, and have extended their reach into the details of domestic political economy in their member states+ Af ew, including the International Monetary Fund ~IMF, or simply the Fund!, command significant resources and wield considerable authority+ Some critics have argued that these international organizations are sufficiently autonomous to create a democratic def- icit at the international level, as they pursue a vision of "undemocratic liberal- ism+" 1 Other critics have argued that international organizations are nothing more than instruments in the hands of powerful states+ 2 These critiques, of course, cannot simultaneously be true, and both run into difficulties+ The puzzle that the rogue-agency view cannot explain is why the principals have chosen to delegate so much authority+ In principal-agent terms, this view posits that both screening and monitoring have failed: the principals are unable to select agents with preferences similar to their own, and are unable
340 citations
Cites background or result from "Independent Actor or Agent? An Empi..."
...…of conditionality reported below, I include only observations that fall on test dates to avoid inflating the number of observations+ 37+ See Gould 2003; Dreher and Jensen 2007; and Copelovitch 2004+ 38+ Mussa and Savastano 1999+ The Scope of IMF Conditionality 599 D ow nl oa de d fr om h tt ps…...
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...…of the recent quantitative literature on IMF lending, see Steinwand and Stone 2008+ 11+ See Polak 1991; Gould 2003 and 2006; Copelovitch 2004; and Dreher and Jensen 2007+ 12+ The only systematic quantitative evidence of interference by countries other than the United States is from the…...
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...…to report data that low-capacity governments would not ordinarily generate without prodding from the IMF+ 50+ See Thacker 1999; Barro and Lee 2005; and Dreher and Jensen 2007+ A series of influential studies support the argument that the United States uses aid as an instrument of foreign policy+…...
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...…for the degree of democracy, presidential systems receive 7 percent fewer conditions than parliamentary democracies+ This effect is consistent with a 61+ Dreher and Jensen 2007+ 614 International Organization D ow nl oa de d fr om h tt ps :// w w w .c am br id ge .o rg /c or e....
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...…them to respond to failure by expanding their definitions of the problems to be solved+ 9+ Meltzer 2000+ 10+ See Thacker 1999; Barro and Lee 2005; Dreher and Jensen 2007; Eichengreen, Gupta, and Mody 2006; and Stone 2002 and 2004+ For a review of the recent quantitative literature on IMF…...
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TL;DR: The authors revisited two long-standing controversies: Has the policy content of IMF programs evolved to allow for more policy space? Do these programmes now allow for the protection of labour and social policies?
Abstract: In recent years, the International Monetary Fund (IMF) has re-emerged as a central actor in global economic governance. Its rhetoric and policies suggest that the organization has radically changed the ways in which it offers financial assistance to countries in economic trouble. We revisit two long-standing controversies: Has the policy content of IMF programmes evolved to allow for more policy space? Do these programmes now allow for the protection of labour and social policies? We collected relevant archival material on the IMF's lending operations and identified all policy conditionality in IMF loan agreements between 1985 and 2014, extracting 55,465 individual conditions across 131 countries in total. We find little evidence of a fundamental transformation of IMF conditionality. The organization's post-2008 programmes reincorporated many of the mandated reforms that the organization claims to no longer advocate and the number of conditions has been increasing. We also find that policies intro...
272 citations
Cites methods from "Independent Actor or Agent? An Empi..."
...…studies have shown the measure is a suitable proxy for the intrusiveness of conditionality (Caraway, Rickard, and Anner 2012; Copelovitch 2010; Dreher and Jensen 2007; Dreher, Sturm, and Vreeland 2009; 2015), and it has been fruitfully employed in the IMF’s own studies (Bulir and Moon 2004;…...
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...Despite this, previous studies have shown the measure is a suitable proxy for the intrusiveness of conditionality (Caraway, Rickard, and Anner 2012; Copelovitch 2010; Dreher and Jensen 2007; Dreher, Sturm, and Vreeland 2009; 2015), and it has been fruitfully employed in the IMF’s own studies (Bulir and Moon 2004; Ivanova et al....
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References
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3,499 citations
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TL;DR: Tufte, a political scientist who covered the 1976 U.S. presidential election for "Newsweek" as mentioned in this paper, provided an eyeopening view of the impact of political life on the national economy of America and other capitalist democracies.
Abstract: Speculations about the effects of politics on economic life have a long and vital tradition, but few efforts have been made to determine the precise relationship between them. Edward Tufte, a political scientist who covered the 1976 Presidential election for "Newsweek," seeks to do just that. His sharp analyses and astute observations lead to an eye-opening view of the impact of political life on the national economy of America and other capitalist democracies.The analysis demonstrates how politicians, political parties, and voters decide who gets what, when, and how in the economic arena. A nation's politics, it is argued, shape the most important aspects of economic life--inflation, unemployment, income redistribution, the growth of government, and the extent of central economic control. Both statistical data and case studies (based on interviews and Presidential documents) are brought to bear on four topics. They are: 1) the political manipulation of the economy in election years, 2) the new international electoral-economic cycle, 3) the decisive role of political leaders and parties in shaping macroeconomic outcomes, and 4) the response of the electorate to changing economic conditions. Finally, the book clarifies a central question in political economy: How can national economic policy be conducted in both a "democratic" and a "competent" fashion?
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TL;DR: The relationship between political and economic cycles is one of the most widely studied topics in political economics as mentioned in this paper, and a thorough overview of the theoretical literature and a vast amount of empirical evidence is presented.
Abstract: The relationship between political and economic cycles is one of the most widely studied topics in political economics. This book examines how electoral laws, the timing of elections, the ideological orientation of governments, and the nature of competition between political parties influence unemployment, economic growth, inflation, and monetary and fiscal policy. The book presents both a thorough overview of the theoretical literature and a vast amount of empirical evidence.A common belief is that voters reward incumbents who artificially create favorable conditions before an election, even though the economy may take a turn for the worse immediately thereafter. The authors argue that the dynamics of political cycles are far more complex. In their review of the main theoretical approaches to the issues, they demonstrate the multifaceted relationships between macroeconomic and political policies. They also present a broad range of empirical data, from the United States as well as OECD countries. One of their most striking findings is that the United States is not exceptional; the relationships between political and economic cycles are remarkably similar in other democracies, particularly those with two-party systems.
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TL;DR: This article found that a country's U.S. aid increases by 59 percent and its U.N. aid by 8 percent when it rotates onto the Security Council during key diplomatic events.
Abstract: Ten of the 15 seats on the U.N. Security Council are held by rotating members serving two-year terms. We find that a country’s U.S. aid increases by 59 percent and its U.N. aid by 8 percent when it rotates onto the council. This effect increases during years in which key diplomatic events take place (when members’ votes should be especially valuable), and the timing of the effect closely tracks a country’s election to, and exit from, the council. Finally, the U.N. results appear to be driven by UNICEF, an organization over which the United States has historically exerted great control.
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"Independent Actor or Agent? An Empi..." refers background in this paper
...However, with regard to the UN Security Council, Kuziemko and Werker (2006) showed that rotating members receive more aid from the United States during their tenure than before, especially during years with key diplomatic events....
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TL;DR: The authors found that political realignment toward the United States, the largest power in the IMF, increases a country's probability of receiving an IMF loan, suggesting that these processes are best modeled dynamically.
Abstract: Analysts have long suspected that politics affects the lending patterns of the International Monetary Fund (IMF), but none have adequately specified or systematically tested competing explanations. This paper develops a political explanation of IMF lending and tests it statistically on the developing countries between 1985 and 1994. It finds that political realignment toward the United States, the largest power in the IMF, increases a country's probability of receiving an IMF loan. A country's static political alignment position has no significant impact during this period, suggesting that these processes are best modeled dynamically. An analysis of two subsamples rejects the hypothesis that the IMF has become less politicized since the end of the cold war and suggests that the influence of politics has actually increased since 1990. The behavior of multilateral organizations is still driven by the political interests of their more powerful member states.
635 citations