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Journal Article•DOI•

The Scope of IMF Conditionality

Randall W. Stone1•
University of Rochester1
01 Oct 2008-International Organization (Cambridge University Press)-Vol. 62, Iss: 4, pp 589-620
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
Citations
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Journal Article•
The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics

[...]

Hal Hill
01 Aug 2002-Journal of Southeast Asian Economies
TL;DR: The Elusive Quest for Growth: Economists' Adventures and misadventures in the Tropics by William Easterly as discussed by the authors is an important, controversial, unusual, and accessible book that is destined to be an influential and enduring contribution to the development economics literature.
Abstract: The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics. By William Easterly. Cambridge, MA: The MIT Press, 2001. Pp. xiii + 342. This is an important, controversial, unusual, and accessible book. It has already received a lot of public attention, and it is destined to be an influential and enduring contribution to the development economics literature. The book is important because there is arguably no topic more critical than understanding why so many of the world's poor remain poor, and why a fortunate few countries have "grown out of poverty" in the post-war period. William Easterly has worked for many years in the world's preeminent international development agency (like it or not, that is what the World Bank is). He has been one of the leading intellectual thinkers in the bank, and has published widely in the top economic journals. The book is controversial because it has hit the headlines, with major write-ups in the world's most influential newspapers, including the New York Times and the International Herald Tribune. It is written by a World Bank insider who is critical of donors' development efforts, moreover coming at a time when the bank itself is in a state of flux bordering at times on turmoil. The volume is accessible because it exhibits an all-too-rare capacity among economists to write with a wider audience in mind. The author demonstrates an uncanny knack in distilling complex theory and analytics for a general audience. Finally, it is unusual for features noted below, especially its structure and writing style. If the book has two key messages, they are that "people respond to incentives" and that "growth is good for the poor". These might appear awfully obvious to mainstream economists and to the general community in well-managed, fast-growing economies. But it is surprising how widely these messages have been ignored by governments in poor countries and by international development agencies. The book consists of fourteen chapters, all but the last followed by an "Intermezzo", and is organized into four sections. The first and last chapters and these Intermezzi portray the human dimensions of poverty in the Third World. The two substantive sections look at "Panaceas that Failed" and "People Respond to Incentives". The "panaceas" refer to theories and recipes for rapid growth, which in the author's view, have failed to live up to expectations. The first substantial chapter looks at the disappointing record of international development assistance. In aggregate, it is very difficult to discern a statistical relationship which demonstrates that aid has made a difference. Then Easterly switches to the micro, looking at Ghana, a country full of hope on the threshold of independence (and often likened to Malaysia), but whose per capita income is now little different from that of 1950. The author also attacks the "financing gap" literature, which became popular with the Harrod-Domar growth models, and later with the work of Rostow in the 1960s. This "gaps" literature had largely dropped out of academic discourse by 1980, but we are told here that it lived on in international agencies, and was employed to justify aid programmes. While the author's story in these two chapters is a largely negative one, it needs to be emphasized that in countries with sound economic policies -- that is, much of Southeast Asia until recently -- well-run aid programmes can make a difference. Perhaps more could have been made of this point. Continuing this demolition of an "inputs" approach to growth, Easterly revisits "Solow's Surprise: investment is not the key to growth". The proposition that investment alone is no guarantee of growth is, of course, widely accepted in the academic literature, but it, too, has apparently not percolated through some international financial institutions. There is also a useful, sceptical discussion in this chapter of the total factor productivity (TFP) literature, including a recounting of the astounding Young-Krugman allegation that Singapore recorded zero TFP growth for its first twenty years or so of independence. …

366 citations

Journal Article•DOI•
IMF conditionality and development policy space, 1985–2014

[...]

Alexander Kentikelenis1, Thomas Stubbs2, Lawrence King2•
University of Oxford1, University of Cambridge2
24 May 2016-Review of International Political Economy
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 background from "The Scope of IMF Conditionality"

  • ...To do so, we build on a growing literature (Dreher et al. 2015; IEO 2007a; 2007b; Stone 2008), and examine the ‘scope’ of IMF conditionality: how many policy areas are subject to reform in IMF programmes? Such metrics speak directly to issues of mission creep examined above, as critics argue that IMF conditionality has veered into an ever-growing number of policy areas....

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  • ...To do so, we build on a growing literature (Dreher et al. 2015; IEO 2007a; 2007b; Stone 2008), and examine the ‘scope’ of IMF conditionality: how many policy areas are subject to reform in IMF programmes?...

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Journal Article•DOI•
The Costs of Favoritism: Is Politically-Driven Aid Less Effective?

[...]

Axel Dreher1, Stephan Klasen2, Stephan Klasen3, Stephan Klasen4, James Raymond Vreeland5, Eric Werker6 •
Heidelberg University1, Institute for the Study of Labor2, University of Göttingen3, Center for Economic Studies4, Yale University5, Harvard University6
19 Mar 2010-Social Science Research Network
TL;DR: This article examined the ex-post performance ratings of World Bank projects and generally found that projects that are potentially politically motivated, such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank, are no more likely, on average, to get a negative quality rating than other projects.
Abstract: As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically-motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated – such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank – are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.

236 citations

Cites background or result from "The Scope of IMF Conditionality"

  • ...Stone ð2008Þ also uses these two variables as proxies for economic vulnerability....

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  • ...We conclude that the interaction of “vulnerability” and political importance does not matter for project numbers, and therefore the mechanism suggested in Stone ð2008Þ for the IMF does not drive our results for the World Bank....

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Posted Content•
Master or Servant? Common Agency and the Political Economy of IMF Lending

[...]

Mark S. Copelovitch1•
University of Wisconsin-Madison1
15 Nov 2009-Social Science Research Network
TL;DR: The authors argue that preference heterogeneity among G-5 governments is a key determinant of variation in the IMF loan size and conditionality, and propose a common agency theory of IMF policymaking, in which the Fund's largest shareholders -the G-five countries that exercise de facto control over the Executive Board - act collectively as its political principal.
Abstract: What explains the substantial variation in the International Monetary Fund's lending policies over time and across cases? Some scholars argue that the IMF is the servant of the United States and other powerful member-states, while others contend that the Fund's professional staff acts independently in pursuit of its own bureaucratic interests. I argue that neither of these perspectives, on its own, fully and accurately explains IMF lending behavior. Rather, I propose a "common agency" theory of IMF policymaking, in which the Fund's largest shareholders - the G-5 countries that exercise de facto control over the Executive Board - act collectively as its political principal. Using this framework, I argue that preference heterogeneity among G-5 governments is a key determinant of variation in IMF loan size and conditionality. Under certain conditions, G-5 preference heterogeneity leads to conflict or "logrolling" within the Executive Board, while in others it creates scope for the IMF staff to exploit "agency slack" and increase its policymaking autonomy. Statistical analysis of an original dataset of 197 non-concessional IMF lending to 47 countries from 1984 to 2003 yields strong support for this framework and its empirical predictions. In clarifying the politics of IMF lending, the article sheds light on the merits of recent policy proposals to reform the Fund and its decision-making rules. More broadly, it furthers our understanding of delegation, agency, and the dynamics of policymaking within international organizations (IOs).

226 citations

Cites background from "The Scope of IMF Conditionality"

  • ...In such cases, he argues, the United States assumes “temporary control” of Fund decision-making and ensures that its “valued client” states receive favorable IMF treatment, in the form of reduced conditionality (Stone 2008:590)....

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  • ...…the financial and geopolitical interests of the United States (Thacker 1999; Oatley and Yackee 2004; Broz and Hawes 2006; Dreher and Jensen 2007; Stone 2002, 2004, 2008), the structure of political institutions in borrower countries (Vreeland 2003, 2005), and/or the IMF staff’s bureaucratic…...

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  • ...Despite an extensive empirical literature, scholars continue to disagree about the key factors explaining this variation in IMF lending (Joyce 2004; Steinwand and Stone 2008)....

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Journal Article•DOI•
Master or Servant? Common Agency and the Political Economy of IMF Lending

[...]

Mark S. Copelovitch1•
University of Wisconsin-Madison1
01 Mar 2010-International Studies Quarterly
TL;DR: The authors argue that preference heterogeneity among G5 governments is a key determinant of variation in IMF loan size and conditionality. But they also argue that neither of these perspectives, on its own, fully and accurately explains IMF lending behavior.
Abstract: What explains the substantial variation in the International Monetary Fund’s (IMF) lending policies over time and across cases? Some scholars argue that the IMF is the servant of the United States and other powerful member-states, while others contend that the Fund’s professional staff acts independently in pursuit of its own bureaucratic interests. I argue that neither of these perspectives, on its own, fully and accurately explains IMF lending behavior. Rather, I propose a ‘‘common agency’’ theory of IMF policymaking, in which the Fund’s largest shareholders—the G5 countries that exercise de facto control over the Executive Board (EB)—act collectively as its political principal. Using this framework, I argue that preference heterogeneity among G5 governments is a key determinant of variation in IMF loan size and conditionality. Under certain conditions, preference heterogeneity leads to either conflict or ‘‘logrolling’’ within the EB among the Fund’s largest shareholders, while in others it creates scope for the IMF staff to exploit ‘‘agency slack’’ and increase its autonomy. Statistical analysis of an original data set of 197 nonconcessional IMF loans to 47 countries from 1984 to 2003 yields strong support for this framework and its empirical predictions. In clarifying the politics of IMF lending, the article sheds light on the merits of recent policy proposals to reform the Fund and its decision-making rules. More broadly, it furthers our understanding of delegation, agency, and the dynamics of policymaking within international organizations.

208 citations

References
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Book•
Globalization and Its Discontents

[...]

Joseph E. Stiglitz
01 Jun 2002
TL;DR: The promise of global institutions broken promises freedom to choose, the East Asia crisis - how IMF policies brought the world to the verge of a global meltdown who lost Russia? unfair trade laws and other better roads to the market the IMF's other agenda the way ahead.
Abstract: The promise of global institutions broken promises freedom to choose? the East Asia crisis - how IMF policies brought the world to the verge of a global meltdown who lost Russia? unfair trade laws and other mischief better roads to the market the IMF's other agenda the way ahead.

6,541 citations

"The Scope of IMF Conditionality" refers background in this paper

  • ...…See Krasner 1985; and Dreher and Vaubel 2004+ 31+ See Putnam 1988; and Haggard and Kaufman 1995+ 32+ Williamson 1983+ 33+ See Meltzer 2000; Easterly 2001; and Stiglitz 2002+ 34+ See Feldstein 1998; Hills, Peterson, and Goldstein 1999; and Goldstein 2001+ 35+ Feldstein 1998+ An extreme example of…...

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  • ...…the case+ Experience with the raw data reveals that many structural reforms 39+ See Hills, Peterson, and Goldstein 1999; Meltzer 2000; and Stiglitz 2002+ 40+ See Blustein 2001; IEO 2003 and 2004; and Mussa 2002+ 600 International Organization D ow nl oa de d fr om h tt ps :// w w w .c am…...

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  • ...10 17 /S 00 20 81 83 08 08 02 11 not privy to the negotiations with a fait accompli—they must either support the government’s program in spite of their misgivings or forfeit IMF support—while making it more difficult to organize punishment+ The testable implication of this argument is that governments have incentives to accept more intrusive conditions if they are constrained by legislative opposition or numerous coalition members, because conditions are a means for leaders to nullify the constraints of domestic politics+ The null hypothesis—also an influential view—is that the borrowing country prefers fewer conditions and will exercise any leverage it has to reduce the scope of conditionality+30 In this view, represented by the literature on two-level games, domestic constraints represent bargaining leverage and should be associated with less intrusive forms of conditionality+31 Describing IMF Conditionality Twenty-five years ago,Williamson summarized the charges of the IMF’s critics as including a doctrinaire adherence to free markets, insensitivity to individual country conditions, and the overriding of national sovereignty+32 The Fund continues to be criticized for applying one-size-fits-all policy prescriptions without sensitivity to context, ignoring borrowers’ domestic political constraints, and promoting the interests of major shareholding governments ~or their elites! at the expense of borrowing countries’ needs+33 Especially following the Asian crisis, the IMF was faulted for conditionality that sought to control too many policy variables, many of which extended beyond its traditional areas of competence34; moreover critics claimed, such conditionality did not help and may even have hurt economic prospects+35 Sympathetic insiders and the Fund itself have conceded that conditionality may, as a consequence of these shortcomings, have been superficially implemented, requiring a shift to greater “ownership” of reform by country authorities and “streamlining” of its content+36 30+ See Krasner 1985; and Dreher and Vaubel 2004+ 31+ See Putnam 1988; and Haggard and Kaufman 1995+ 32+ Williamson 1983+ 33+ See Meltzer 2000; Easterly 2001; and Stiglitz 2002+ 34+ See Feldstein 1998; Hills, Peterson, and Goldstein 1999; and Goldstein 2001+ 35+ Feldstein 1998+ An extreme example of the proliferation of conditions is the program introduced in Ukraine on the eve of its financial collapse in 1998, which contained 227 prior actions and performance criteria ~Ukraine 1998!+ Goldstein 2001 judged conditionality to have been excessively intrusive during the Asian crisis+ Based on their conclusion that IMF-supported programs are associated with lower GDP growth rates, Przeworski and Vreeland 2000 inferred that lending is conditioned on inappropriate policy measures+ 36+ Khan and Sharma 2001; and Drazen 2002 call for greater ownership; IMF 2005 introduced the initiative to streamline conditionality+ Even studies showing beneficial outcomes of IMF programs, while recognizing the value of commitment to policy reform, question whether the form or scope of conditionality is crucial to achieving the needed commitment; see Mody and Saravia 2006+ 598 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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Journal Article•DOI•
Diplomacy and domestic politics: the logic of two-level games

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Robert D. Putnam1•
Harvard University1
01 Jun 1988-International Organization
TL;DR: In this paper, the authors propose a theory of ratification in the context of domestic political games and international political games, which is applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.
Abstract: Domestic politics and international relations are often inextricably entangled, but existing theories (particularly “state-centric” theories) do not adequately account for these linkages. When national leaders must win ratification (formal or informal) from their constituents for an international agreement, their negotiating behavior reflects the simultaneous imperatives of both a domestic political game and an international game. Using illustrations from Western economic summitry, the Panama Canal and Versailles Treaty negotiations, IMF stabilization programs, the European Community, and many other diplomatic contexts, this article offers a theory of ratification. It addresses the role of domestic preferences and coalitions, domestic political institutions and practices, the strategies and tactics of negotiators, uncertainty, the domestic reverberation of international pressures, and the interests of the chief negotiator. This theory of “two-level games” may also be applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.

6,155 citations

"The Scope of IMF Conditionality" refers background in this paper

  • ...…on the ground that may make dangerous nonsense of idealistic policy reforms+ Policy briefs representing the bureaucratic rent-seeking view 62+ See Putnam 1988; Mansfield, Milner, and Rosendorff 2000; and Martin 2000+ 63+ See Milesi-Ferretti 1995; and Cukierman and Tommasi 1998+ The Scope of IMF…...

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  • ...10 17 /S 00 20 81 83 08 08 02 11 conditions—but a bargaining model suggests that the interpretation of these effects depends on the factors that make program approval likely+ The bureaucratic rentseeking perspective predicts that the IMF should offer programs with fewer conditions when its organizational incentives make it disposed to make loans, which would account for the association between a high probability that the IMF grants a program and reduced conditionality+57 However, the results of the first-stage analysis did not support bureaucratic rent-seeking hypotheses about the IMF’s motivations for making loans+58 On the other hand, the research design makes possible a direct test of the causal mechanism of informal governance+ I found above that the most impressive influence on the IMF’s willingness to lend was whether a country was a recipient of U+S+ foreign aid; now I find that countries that were likely to be granted programs were constrained on fewer policy dimensions+ This gives the coefficient in the second stage an interpretation consistent with the earlier findings about the constraining effect of U+S+ aid: the United States intervenes to ensure favorable treatment for valued allies, and this undermines the Fund’s bargaining position+ Countries that are favored in the distribution of IMF programs receive more attractive terms because they know that the Fund’s threat to withhold support if they do not accept its policy recommendations is not credible+ Another important dimension of bargaining power is the borrower’s need for external financing+ Countries that use a large portion of their exports for debt service and that owe a large proportion of their foreign debt in short-term instruments ~resulting in greater rollover risk of external financing! should be particularly dependent on nonmarket sources of financing+ Indeed, I found above that countries with significant external debt are more likely to seek IMF support, and should therefore be willing to accept more conditions in return for that support+ The IMF, on the other hand, aware of its strong bargaining position, should be able to push for far-reaching reforms in this situation+59 The bureaucratic rent-seeking perspective indicates that the Fund should exploit these opportunities to extract extensive reform commitments+ Similarly, countries with more open economies are likely to be more vulnerable to international supply and demand shocks, and the IMF should therefore enjoy a bargaining advantage+ 57+ See Vaubel 1991; and Dreher and Vaubel 2004+ 58+ The IMF does lend more readily to countries that consistently publish data, that make an effort to collect the data that the IMF demands, and that have devalued their currencies, all factors that should satisfy organizational incentives to approve programs only if they are likely to be successful+ However, since these factors also indicate that less conditionality may be necessary for technical reasons that have nothing to do with organizational biases, they do not represent clean tests of a bureaucratic rent-seeking hypothesis+ As noted above, other bureaucratic rent-seeking hypotheses about loan origination were rejected+ 59+ See Mosley 1987; and Stallings 1992+ 612 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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  • ...I propose informal governance as an alternative model+ The building blocks of the argument are: ~1! legitimacy defined in terms of voluntary participation; ~2! conditional delegation; ~3! common long-term interests and conflicting short-term interests; and ~4! formal and informal governance of international organizations+ In order for international institutions to serve anyone’s interests, they must enjoy minimal legitimacy, because they must elicit voluntary participation+ Institutions are useful in order to coordinate expectations, define rules, and facilitate collec- 8+ See Vaubel 1986; Dreher and Vaubel 2004; Przeworski and Vreeland 2000; and Vreeland 2003+ Starting from a different methodological point of view, Barnett and Finnemore 2004 argue that mission creep is a consequence of the bureaucratic nature of international organizations, which causes 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 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 author’s work on Africa, which found that France and Britain intervened on behalf of some of their former colonies with which they maintained close political ties; see Stone 2004+ Subsequent interviews at the Fund have confirmed this pattern but underscored that it is limited to Africa+ In other regions, the United States firmly repulsed other Group of 7 ~G7! countries that sought to interfere, as Japan discovered in Indonesia and Korea+ 13+ Krasner 1985+ 592 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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  • ...10 17 /S 00 20 81 83 08 08 02 11 Table 1 illustrates the substantive variety of IMF conditionality+ Some aspects of IMF conditionality are very consistent: domestic credit is constrained and reserve targets are set about half the time, and there is almost always some limit on public debt or government spending, although the forms of those restrictions vary+ There is a strong emphasis on avoiding foreign debt arrears+ Some programs involve extensive regulation of public spending, taxation, borrowing, and the maturity structure of domestic and foreign debt, while others simply set deficit targets+ However, the frequent criticism that the IMF systematically promoted fixed-exchange rate regimes in the 1990s is not supported by the data on conditionality+39 To the contrary, the data support a different criticism: the Fund is too neutral with respect to exchange rate policy, and allows itself to be captured by country authorities that are determined to defend overvalued exchange rates, as happened in Russia in 1998, Brazil in 1999, and Argentina in 2001+40 Although structural conditions of some sort are being tested 43 percent of the time, even this coarse breakdown of structural reforms into six categories indicates that structural conditionality varies enormously across countries+ In fact, the way I have aggregated the data understates the case+ Experience with the raw data reveals that many structural reforms 39+ See Hills, Peterson, and Goldstein 1999; Meltzer 2000; and Stiglitz 2002+ 40+ See Blustein 2001; IEO 2003 and 2004; and Mussa 2002+ 600 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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  • ...10 17 /S 00 20 81 83 08 08 02 11 Much of this debate has taken place in the absence of quantitative data about the content of conditionality+ This article uses a new data set extracted from the IMF’s Monitoring of Agreements Database ~MONA!, which covers the ninety-six countries that participated in IMF programs between 1992 and 2002+ I reorganized the data in terms of country-month units+ Thus, for each country-month, I identify whether the country was participating in an IMF program and, if so, what performance criteria were currently applicable+ The database codes IMF conditionality in nineteen categories, representing the most frequently applied types, ranging from fiscal and monetary policy to exchange rate restrictions and structural reforms+ The data measure quantitative macroeconomic performance criteria and structural benchmarks, which are the key yardsticks of compliance with conditionality+ Performance criteria are formal conditions that must be met by a corresponding test date, or officially be waived by the Executive Board in the event of noncompliance, in order for scheduled disbursements to be made under IMF programs+ Benchmarks are more specific structural reforms, such as privatization, deregulation, and tax reform, that are used to determine a country’s compliance with a program but do not automatically call for suspending IMF support in the event of nonfulfillment+ This measure of conditionality excludes prior actions, which are conditions that must be met before the Executive Board approves a program+ Excluding prior actions means that I focus on the elements of conditionality that a country promises to implement in the future when it contracts with the Fund, rather than on policy concessions that have been implemented to obtain a program+ The dependent variable of primary interest is the number of categories of conditions subject to test in a particular review+ This measure of conditionality captures the scope—or, to the Fund’s critics, the intrusiveness—of conditionality+ This definition of conditionality focuses on the range of obligations that constrain country authorities at any given point in time+ This measure of conditionality has advantages over assessments of conditionality that depend, for example, on letters of intent+37 As IMF authors have emphasized, conditionality evolves over the course of a program in response to country policies and unanticipated events, so the scope of a program contained in a letter of intent may give a misleading snapshot of what is really a moving target+38 In an average month, six categories of conditions were subject to test at the next review; about two-thirds of the time, at least two and no more than ten types of conditions were under review+ In about 11 percent of program months, no conditions were tested because the program remained open after the final review+ Figure 1 illustrates the variation in the number of categories of conditionality applied+ For the statistical analysis 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 :// w w w .c am br id ge .o rg /c or e....

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Cornell University Press

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Carl Guarneri
01 Jan 1991

3,610 citations

Posted Content•
Who Gives Foreign Aid to Whom and Why

[...]

Alberto Alesina1, Alberto Alesina2, Alberto Alesina3, David Dollar4•
Economic Policy Institute1, Harvard University2, National Bureau of Economic Research3, World Bank4
01 Jun 1998-Social Science Research Network
TL;DR: The authors found that the direction of foreign aid is dictated by political and strategic considerations, much more than by the economic needs and policy performance of the recipients, and that countries that democratize receive more aid, ceteris paribus.
Abstract: This paper studies the pattern of allocation of foreign aid from various donors to receiving countries. We find considerable evidence that the direction of foreign aid is dictated by political and strategic considerations, much more than by the economic needs and policy performance of the recipients. Colonial past and political alliances are the major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond more to political variables, foreign direct investments are more sensitive to economic incentives, particularly property rights in the receiving countries. We also uncover significant differences in the behavior of different donors.

2,346 citations

Journal Article•DOI•
Taking Time Seriously: Time-Series-Cross-Section Analysis with a Binary Dependent Variable

[...]

Nathaniel Beck, Jonathan N. Katz, Richard Tucker
01 Oct 1998-American Journal of Political Science
TL;DR: In this article, a simple diagnostic for temporal dependence and a simple remedy based on the idea that binary dependent variable (BTSCS) data are identical to grouped duration data is proposed.
Abstract: Researchers typically analyze time-series-cross-section data with a binary dependent variable (BTSCS) using ordinary logit or probit. However, BTSCS observations are likely to violate the independence assumption of the ordinary logit or probit statistical model. It is well known that if the observations are temporally related that the results of an ordinary logit or probit analysis may be misleading. In this paper, we provide a simple diagnostic for temporal dependence and a simple remedy. Our remedy is based on the idea that BTSCS data are identical to grouped duration data. This remedy does not require the BTSCS analyst to acquire any further methodological skills, and it can be easily implemented in any standard statistical software package. While our approach is suitable for any type of BTSCS data, we provide examples and applications from the field of International Relations, where BTSCS data are frequently used. We use our methodology to reassess Oneal and Russett's (1997) findings regarding the relationship between economic interdependence, democracy, and peace. Our analyses show that (1) their finding that economic interdependence is associated with peace is an artifact of their failure to account for temporal dependence yet (2) their finding that democracy inhibits conflict is upheld even taking duration dependence into account.

2,329 citations

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Trending Questions (1)
When is conditionality stronger than informality?

Conditionality is stronger than informality when powerful countries are willing to draw on their influence with the United States and when countries are vulnerable enough to be influenced.

See answers from 5 other papers