On the Viability of Conditional Assistance Programs

30 Pages Posted: 3 Mar 2006

See all articles by Wolfgang Mayer

Wolfgang Mayer

University of Cincinnati - McMicken College of Arts and Sciences - Department of Economics

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: June 2005

Abstract

Economic adjustment and reform programs, including those supported by international financial institutions (IFIs), must cope with informational asymmetries and special interest politics. This presents a particularly serious issue when IFIs make structural economic reforms a condition for providing economic assistance. This paper examines what conditions must be satisfied to make conditional assistance programs viable; that is, to ensure that the assistance-receiving government not only takes the assistance but also implements reforms, without compromising the country`s political stability and the IFI`s financial integrity. It is pointed out that tightly budgeted conditional assistance programs never bring about reforms, that the IFI`s cost of viable programs rises with the dependence of the government on domestic interest groups, and that unconditional assistance might be viable when conditional assistance is not.

Keywords: IMF, economic reforms, conditionality, viability, incentive compatibility

JEL Classification: E61, F33, F34

Suggested Citation

Mayer, Wolfgang and Mourmouras, Alexandros, On the Viability of Conditional Assistance Programs (June 2005). IMF Working Paper, Vol. , pp. 1-30, 2005. Available at SSRN: https://ssrn.com/abstract=887990

Wolfgang Mayer (Contact Author)

University of Cincinnati - McMicken College of Arts and Sciences - Department of Economics ( email )

1202 Crosley
P.O. Box 210371
Cincinnati, OH 45221-0371
United States
513-556-2600 (Phone)
513-556-2669 (Fax)

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Room 5-311
Washington, DC 20431
United States
202-623-5402 (Phone)
202-589-5402 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
63
Abstract Views
627
rank
360,646
PlumX Metrics