IMF Conditionality and the Theory of Special Interest Politics
- PDF / 212,496 Bytes
- 23 Pages / 441 x 666 pts Page_size
- 112 Downloads / 193 Views
www.palgrave-journals.com/ces
IMF Conditionality and the Theory of Special Interest Politics1 WOLFGANG MAYER1 & ALEX MOURMOURAS2 1 2
University of Cincinnati, Cincinnati, OH 45221, USA. E-mail: [email protected]; International Monetary Fund, Washington, DC 20431, USA.
This paper presents an analytical discussion of IMF conditionality based on the theory of special interest politics. We outline a simple political–economy model of special interest group politics, extended to include the interaction of the IMF with the government of a country making use of IMF resources. Conditional lending turns the IMF into a benevolent lobby that can exert beneficial impacts on the government’s policy choices. In addition to addressing the international spillover effects of national economic policies, conditionality can help reduce policy inefficiencies generated by domestic conflicts of interest and limited ownership. Comparative Economic Studies (2004) 46, 400–422. doi:10.1057/palgrave.ces.8100064
Keywords: IMF, conditionality, common agency models, lobbying, grants versus loans JEL Classifications: E61, F33, F34
INTRODUCTION The International Monetary Fund (IMF) was created in the aftermath of World War II to promote stability and prosperity in the international monetary and financial system. A key function of the IMF is to make loans to countries facing shortages of foreign exchange. The IMF’s financial support gives countries breathing room, while they adjust their economic policies to solve their external payment difficulties. To ensure that borrowing governments follow policies that are consistent with the IMF’s purposes, its financial resources are disbursed gradually and on condition that borrowers avoid 1 The views expressed in this paper are those of the authors and should not be attributed to the International Monetary Fund.
W Mayer & A Mourmouras IMF Conditionality and Special Interest Politics
401
measures that are destructive to national and international prosperity. The IMF’s rules for disbursing assistance have evolved gradually and have been continuously adapted to solve emerging problems – recycling petrodollars in the 1970s, overcoming the debt crisis in the 1980s, and integrating the transition countries and dealing with capital-account crises in the 1990s. While necessary, conditionality has become somewhat controversial over the years, leading to periodic reviews – within the IMF and by the broader academic community – of the analytical principles underlying it and the practical ways in which it has been applied. The most recent such internal review was conducted during 2000–2002, with extensive external input and participation. The review highlighted the critical importance of country ownership, defined as the ability and willingness of country authorities and other key stakeholders to implement policy programmes agreed with the IMF, which was underscored by the poor record of some programmes that were not based on reasonably broad coalitions in recipient countries. It concluded that while country o
Data Loading...
