IMF Lending and Geopolitics

56 Pages Posted: 21 Nov 2008

See all articles by Julien P. M. Reynaud

Julien P. M. Reynaud

International Monetary Fund (IMF)

Julien Vauday

Université Paris I Panthéon-Sorbonne

Date Written: November 14, 2008


There is growing awareness that the distribution of IMF facilities may not be influenced only by the economic needs of the borrowers. This paper focuses on the fact that the IMF may favour geopolitically important countries in the distribution of IMF loans, differentiating between concessional and non-concessional facilities. To carry out the empirical analysis, we construct a new database that compiles proxies for geopolitical importance for 107 IMF countries over 1990-2003, focusing on emerging and developing economies. We use a factor analysis to capture the common underlying characteristic of countries' geo-political importance as well as a potential analysis since we also want to account for the geographical situation of the loan recipients. While controlling for economic and political determinants, our results show that geopolitical factors influence notably lending decisions when loans are nonconcessional, whereas results are less robust and in opposite direction for concessional loans. This study provides empirical support to the view that geopolitical considerations are an important factor in shaping IMF lending decisions, potentially affecting the institution's effectiveness and credibility.

Keywords: factor analysis, geopolitics, International Monetary Fund, potential analysis

JEL Classification: F33, H77, O19

Suggested Citation

Reynaud, Julien P. M. and Vauday, Julien, IMF Lending and Geopolitics (November 14, 2008). ECB Working Paper No. 965, Available at SSRN: or

Julien P. M. Reynaud (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Julien Vauday

Université Paris I Panthéon-Sorbonne ( email )

12, place du Panthéon
Paris, IL

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