Politics and IMF Conditionality

Abstract

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Pleasing the Principal: U.S. Influence in World Bank Policymaking

“…Dreher and Jensen (2007) show that countries voting with the United States in the UN General Assembly receive fewer conditions, especially before elections. Dreher, Sturm, and Vreeland (2015) find that countries that are temporary members of the UNSC receive 30% fewer conditions. Similarly, Stone (2004, 2008, 2011) argues that major stakeholders selectively intervene in cases relevant to their interests to limit conditionality or its enforcement.…”

“…Given their domestic policy constraints, countries that are more democratic ( polity2 ) should receive fewer conditions (Stone 2008, 614). Next, countries that are world bank board member s or unsc member s might receive fewer conditions–both positions offer states transient political power that they could expend to bargain down the stringency of conditionality (Dreher, Sturm, and Vreeland 2009, 2015; Kaja and Werker 2010). Additionally, those that are at war or in an election year may receive a break on conditionality, as war implies reduced state capacity and IOs wish to avoid skewing elections (Stone 2011).…”

“…We do not believe that favoritism occurs because borrower states convince the United States to intervene on their behalf in exchange for votes, as Dreher, Sturm, and Vreeland (2015) claim takes place at the IMF. If power were exercised instrumentally in this way, we would expect to see borrower countries with politically advantageous positions, such as representation on the United Nations Security Council (UNSC), using their leverage to reduce their conditionality burden.…”

“…Thus, whether conditionality itself is politicized is essential to understanding who wields power in IOs. Because of this, conditionality has been extensively studied in the context of International Monetary Fund (IMF) loans, where politically important countries face fewer or less stringent conditions (Dreher and Jensen 2007; Dreher, Sturm, and Vreeland 2015; Stone 2008, 2011).…”

IMF Programs and the Risk of a Coup d’état

“…16 When a country is in the negotiation phase prior to IMF arrangement, a leadership has at least some say in the number and types of conditions that will be implemented. Since the conditions imposed by the IMF result from a nonrandom process (Dreher, Sturm, and Vreeland 2015), it is likely that the leaders who undertake a large number of economic reforms are fundamentally different from the leaders who do not. This type of unit-level heterogeneity can cause major problems for the empirical analysis, as one of the most important assumptions in statistics (for making causal inferences) is that the untreated units are exactly the same as the treated units.…”