IMF conditionality: theory and evidence

Abstract

This article analyzes whether and to what extent reliance on conditionality is appropriate to guarantee the revolving character of the resources of the International Monetary Fund (IMF). The paper presents theoretical arguments in favor of conditionality, and those against the use of conditions. It summarizes the track record of program implementation and discusses the evidence of factors determining implementation. Whether proponents or critics of conditionality can be supported by existing data analysis is also investigated, as is the success of conditionality in terms of outcomes. The final section draws policy implications.

International demands for austerity: Examining the impact of the IMF on the public sector

“…The addition of at least one public sector condition to a country's loan program is robustly correlated with a reduction in the public sector wage bill. This finding contributes novel evidence to the ongoing debate over which mechanisms link IMF programs to policy change (Dreher 2009). Our contribution is to provide a convincing test of whether conditionality is one of the mechanisms through which IMF lending has its effects.…”

Does Membership on the UN Security Council Influence IMF Conditionality?

“…Elections are held in the fall every year. Since it is often known in the run up to the election who will be selected, we code our UNSC membership indicator variable one for the year of election, as well as for the two years during which a country serves on the Security Council -and zero 8 Scholars have documented the growth of IMF micro-conditionality over the 1990s (see Vreeland 2007, Dreher 2009, Babb and Buira 2005, Dreher and Vaubel 2004, and Bird 2001. Examination of this category shows the extent.…”

Analysis of the Impact of International Monetary Fund Programs on Economic Performance of Kenya

“…However, from 1980s, the IMF started attaching conditions to advancement of its loans (Koeberle, 2003). The significance of these austerity measures constantly rose over time with the amount of conditions gradually increasing (Dreher, 2009). This addition of austerity measures has faced great criticisms as has the model and the particular content of IMF austerity measures.…”

“…IMF has also been accused of ignoring the needs of the poor and for not taking the social consequences of its conditions into account (Dreher, 2009). Austerity measures leads to reduction in the already poor living conditions of the people.…”