Politics and IMF Conditionality

42 Pages Posted: 9 Jul 2013

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

James Raymond Vreeland

Princeton University - Woodrow Wilson School of Public and International Affairs

Multiple version iconThere are 2 versions of this paper

Date Written: June 30, 2013

Abstract

Bailouts sponsored by the International Monetary Fund (IMF) are famous for their conditionality: in return for continued installments of desperately needed loans, governments must comply with austere policy changes. Many have suggested, however, that politically important countries face rather weak stringency. Obstacles to testing this hypothesis include finding a measure of political importance that is not plagued by endogeneity and obtaining data on IMF conditionality. We propose to measure political importance using temporary membership on the United Nations Security Council and analyze a newly available dataset on the level of conditionality attached to (a maximum of) 314 IMF arrangements with 101 countries over the 1992 to 2008 period. We find a negative relationship: Security Council members receive about 30 percent fewer conditions. This suggests that the major shareholders of the IMF trade softer conditionality in return for political influence over the Security Council.

Keywords: IMF, UN Security Council, voting, aid, conditionality

JEL Classification: O190, O110, F350

Suggested Citation

Dreher, Axel and Sturm, Jan-Egbert and Vreeland, James Raymond, Politics and IMF Conditionality (June 30, 2013). CESifo Working Paper Series No. 4308. Available at SSRN: https://ssrn.com/abstract=2290949

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

James Raymond Vreeland

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.profvreeland.com

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