imf programs do they work can they be made to work better abstract a central issue in the debate about a new international financial architecture has been whether programs of policy reform supported by the international monetary fund work the fund claims that on balance they do because of their positive effect on the balance of payments others claim that programs are ineffective and suggest that they should be discontinued this paper reviews the econometric evidence dealing with the macroeconomic effects of imf programs it goes on to provide additional evidence and judges success against alternative criteria although the record is not good the paper argues that it would be unwise for the fund to cease lending and to abandon conditionality altogether imf programs need to be redesigned and refocused the paper concludes by identifying a number of principles that should underpin reform

borrowing from the imf the policy implications of recent empirical research abstract at a time when the future of the international monetary fund is being widely debated a number of relevant and important studies have been published which advance our knowledge of the factors which determine borrowing from the fund there has been little attempt however to put this recent empirical research into context or to extract from it appropriate policy conclusions while dissent remains over some issues there is an emerging consensus on others which provides a firm empirical foundation for policy formulation unfortunately the policy stance adopted by the g7 is in many ways at odds with much of the recent empirical research

the imf a bird s eye view of its role and operations the international monetary fund imf is the world s premier international financial institution with 184 member countries and active programmes in a significant number of them at any one time the fund attracts a great deal of attention much of it critical but the discussion is often polemic in style strongly held but frequently opposing views are expressed this survey attempts to examine in an objective way the theory and evidence relating to the fund s operations many aspects of the empirical research are relatively recent and a universal consensus is yet to emerge as a consequence there is scope for disagreement to persist however the research is also gradually clarifying many important issues the format for the survey is to examine the life cycle of imf arrangements what makes a country turn to the fund for assistance should the imf be lending what influences the outcome of negotiations and the design of programmes are imf programmes effective and why do some countries make prolonged use of imf resources for completeness there is also some discussion of the history of the imf the extent to which fund policies have been influenced by advances in economic theory and the fund s systemic role important organisational and governance issues are also covered briefly although primarily adopting an economist s perspective the survey reflects the growing recognition that in order to understand the imf s operations economics has to be combined with politics examining the imf is an exercise in applied political economy copyright 2007 the author journal compilation 2007 blackwell publishing ltd

geopolitics and international organizations an empirical study on imf facilities there is growing awareness that the distribution of imf facilities may not be influenced only by the economic needs of 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 a wide array of 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 geopolitical 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 non concessional 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

revisiting the effects of imf programs on poverty and inequality investigating how lending programs of the international monetary fund imf affect poverty and inequality we explicitly address model uncertainty we control for endogenous selection into imf programs using data on 86 low and middle income countries for the 1982 2009 period and analyze program effects on various poverty and inequality measures the results rely on averaging over 90 specifications of treatment effect models and indicate adverse short run effects of imf agreements on poverty and inequality for the whole sample while for a 2000 2009 subsample the results are reversed there is evidence that significant short run effects might disappear in the long run author s abstract

dependency revisited international markets business cycles and social spending in the developing world while increased exposure to the global economy is associated with increased welfare effort in the organization for economic cooperation and development oecd the opposite holds in the developing world these differences are typically explained with reference to domestic politics tradables unions and the like in the developing world are assumed to have less power or interests divergent to those in the oecd interests that militate against social spending i claim that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets while income shocks associated with international markets are quite modest in the oecd they are profound in developing nations in the oecd governments can respond to those shocks by borrowing on capital markets and spending countercyclically on social programs no such opportunity exists for most governments in the developing world most of which have limited access to capital markets in tough times more significant incentives to balance budgets and as a result cut social spending at the times it is most needed thus while internationally inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations it undercuts the capacity of governments in the developing world to smooth consumption and particularly consumption by the poor across the business cycle the author would like to thank steph haggard kristin bakke wongi choe tim jones and seminar participants at duke university penn state university washington university mit and the university of new mexico for their helpful comments nancy brune mark hallerberg and rolf strauch and nita rudra were very generous in providing their capital account oecd fiscal and potential labor power data respectively

the scope of imf conditionality international organizations are governed by two parallel sets of rules formal rules which embody consensual procedures and informal rules which allow exceptional access for powerful countries a new data set drawn from the imf s records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution s autonomy i find evidence of u s influence which operates to constrain condition ality but only in important countries that are vulnerable enough to be willing to draw on their influence with the united states in ordinary countries under ordinary circumstances broad authority is delegated to the imf which adjusts conditionality to accommodate local circumstances and domestic political opposition the imf has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality international organizations have become increasingly important actors in inter national politics they have proliferated have expanded in membership have acquired new legal enforcement powers and have extended their reach into the details of domestic political economy in their member states af ew including the international monetary fund imf or simply the fund command significant resources and wield considerable authority some critics have argued that these international organizations are sufficiently autonomous to create a democratic def icit at the international level as they pursue a vision of undemocratic liberal ism 1 other critics have argued that international organizations are nothing more than instruments in the hands of powerful states 2 these critiques of course cannot simultaneously be true and both run into difficulties the puzzle that the rogue agency view cannot explain is why the principals have chosen to delegate so much authority in principal agent terms this view posits that both screening and monitoring have failed the principals are unable to select agents with preferences similar to their own and are unable

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

the effect of imf programs on economic growth abstract using a bivariate dynamic version of the heckman selection model we estimate the effect of participation in international monetary fund imf programs on economic growth we find evidence that governments enter into agreements with the imf under the pressures of a foreign reserves crisis but they also bring in the fund to shield themselves from the political costs of adjustment policies program participation lowers growth rates for as long as countries remain under a program once countries leave the program they grow faster than if they had remained but not faster than they would have without participation

a public choice approach to international organization the purpose of this paper has been to develop a positive theory of international organization which can supplement the conventional normative theory used as a positive theory the conventional approach draws much of its plausibility from the fact that it relies on the reasons given by the decision makers and reported in the media and on the lofty objections stated in the charters of international agencies the public choice approach by its very nature is precluded from accepting such evidence in some respects it must appear dismal and perhaps cynical it is a positive theory which tries to explain but just as the conventional normative theory tends also to be used as a positive theory our positive theory is likely to have normative implications as well it does not imply that international organization is generally undesirable but it can be used to emphasize the advantages of decentralized policy making and to warn against a naive internationalism which welcomes international agreements for their own sake regardless of what is being agreed upon international organization can be and is abused and the cause is not an occasional lack of virtue among politicians but a systematic built in tendency toward collusion at the expense of the citizens such collusion is not only undesirable in itself there is also the danger that it discredits and crowds out unambiguously desirable forms of international cooperation agreements to remove non market obstacles to market interdependence in the field of international trade and capital movements

the revolving door duration and recidivism in imf programs quarterly evidence on participation in imf programs for the period 1974 2003 is examined statistically using the techniques of hazard analysis and error correction estimation three hypotheses are proposed and tested and the results support a revolving door explanation of participation in imf programs first an increase in cumulative prior participation in imf programs is found to cause a reduction on average in the length of a new spell of participation second the length of time between participation spells is reduced significantly with an increase in cumulative prior participation in imf programs third the evolution of reserve adequacy is shown to be significantly and positively affected by participation in imf programs the results depict a revolving door to imf participation and for those countries with prior participation the door revolves more rapidly this result is shown to depend critically upon the mix of countries considered the increase in recidivism is a phenomenon most strongly observed among the least developed countries while the reduction in duration is more strongly observed in the emerging and transition economies these results are derived while controlling for country specific unobserved heterogeneity year specific demand effects external shocks and pre existing policy distortions

the effects of imf programs in the third world debate and evidence from latin america abstract this article reviews the debate about the effects of imf sponsored stabilization programs in the third world after examining recent studies by fund economists results of a new study on a latin american country set are presented in this research imf programs are associated with insignificant changes in the current account significant improvements in the overall balance of payments increases in inflation mixed effects on growth and a strong and consistent pattern of reduction in labor share of income the latter result is incorporated into a distribution oriented critique of fund policy

ideology and voter preferences as determinants of financial globalization we propose that the global spread of ideas affects international economic openness policies and that to omit ideology as an explanatory variable for economic globalization is to risk omitted variable bias using voting data we create measures of global ideology regarding economic openness and propose that changes in both global and domestic ideology influence how open or closed to international finance an economy is we also test other influences on liberalization including proposed state centered diffusion mechanisms using pcsts and system gmm models we estimate the determinants of change in international capital account regulation for 82 countries 1955 to 1999 we thereby examine diffusion of both liberalizations 1950s and 1990s and closures 1960s and 1970s changes in both global and domestic ideology robustly influence liberalization and closure the capital account policies of neighboring countries positively and of the leading economies negatively also influenced a country s capital account liberalization

strategic interaction and trade policymaking formal analysis and simulation this paper introduces a simple game theoretic model and a monte carlo simulation of trade negotiations with the aim of identifying the nature of the selection bias that may threaten valid inference from empirical tests relying on data from trade disputes insights from the formal model are used to critically engage recent empirical analyses this model is applied more specifically to the american use of section 301 as an instrument to prise open foreign markets the results of the game theoretical model and the monte carlo simulation demonstrate that despite significant statistical results models of trade negotiations might potentially suffer from misspecification due to non random selection effects

demand for a simple weather insurance product in india theory and evidence this article analyzes the demand for a simple rainfall based weather insurance product among farmers in rural india we explore the predictions of a standard expected utility theory framework on the nature of demand in terms of price the basis of the hedge and risk aversion using data from a randomized control trial we find that demand behaves as predicted it falls with price and basis risk and is hump shaped in risk aversion with price sensitivity decreasing at higher levels of basis risk we estimate a negative price elasticity of 0 58 and find that doubling the distance to a reference weather station decreases demand by 18 these results indicate that improving pricing and quality of insurance products can directly increase demand in addition we examine the impact of insurance training relative to other mechanisms designed to increase understanding the evidence suggests that increased incentives to learn or learning by using are more effective at increasing both understanding and demand finally we contribute to the scarce evidence on the demand for insurance over time in terms of our main interventions we find that the effect of premium subsidies persists over time while the impact of investments in new weather stations diminishes and the effect of increased training in the first season seems to disappear during the second season importantly while having previously purchased insurance does not encourage future uptake receiving a payout does this could reflect issues of trust in the product or the insurance company and constitutes an important topic for future research

funding for innovation in small firms the role of government abstract this paper examines some of the issues facing innovative small firms the shortage of enterprise funding for such small firms can be explained by the uncertainty associated with such ventures uncertainty which is magnified in the case of hightechnology firms we characterise the uncertainty as an information gap both technological and commercial which is exacerbated by an asymmetry of interest between the founders of a firm and private sector sources of finance we explore the sources of this uncertainty and examine the effect that one government scheme the small firms merit awards for research and technology smart has had in offsetting such problems some suggestions for improvements in policy in the light of the experience of smart are put forward

economic determinants of imf financial arrangements abstract we analyze factors that lead to imf approval of financial arrangements we account for both economic variables that induce a country to seek an imf arrangement demand side factors and macroeconomic policy commitments that the imf considers when deciding whether to approve it supply side factors using a pooled sample of annual observations for 91 developing countries over 1973 1991 we obtain maximum likelihood bivariate and univariate probit estimates of the approval of an imf arrangement for a given country in a given year a number of demand side and supply side variables are statistically significant determinants of the approval of an imf arrangement

independent actor or agent an empirical analysis of the impact of u s interests on international monetary fund conditions abstract in this paper we analyze whether international monetary fund imf conditionality is exclusively designed to be in line with observable economic indicators or whether it is partly driven by the imf s major shareholder the united states a panel data analysis of 206 letters of intent from 38 countries submitted during the period april 1997 through february 2003 revealed that the number of conditions on an imf loan depended on a borrowing country s voting pattern in the un general assembly closer allies of the united states and other group of 7 g7 countries received imf loans with fewer conditions especially prior to elections these results are relevant to current public policy debates on the role and process of setting imf loan conditions and provide broader insight into the influence of the united states and other g7 countries on international institutions

the international monetary fund in a time of crisis a review of stanley fischer s imf essays from a time of crisis the international financial system stabilization and development stanley fischer was deputy managing director of the imf from 1994 to 2001 and perhaps more than any other individual he personifies the international rapid response to financial crises in the 1990s this book is a collection of essays written during his tenure at the imf taken together the essays represent the strongest and most logical defense of imf initiatives in the 1990s in print my review essay comprises six parts in parts 2 through 4 i provide an overview of fischer s arguments in three central areas of contention stabilization policy the impact of imf programs on poverty and the imf s anticipation of and response to international financial crisis i then compare fischer s arguments to those raised by the imf s critics during that period the controversial issues of these parts can be resolved only through empirical investigation but on the issues of greatest importance from the financial crises of the 1990s both fischer and the imf s critics make logically consistent arguments with little empirical support in part 5 i review the recent empirical literature to illuminate what evidence has been found in support of or counter to the assertions of fischer and the imf s critics part 6 provides conclusions and suggestions for follow on empirical research

over optimism and the imf one way of assessing the impact of imf programmes is to see whether performance and policy targets are achieved however does a failure to hit targets mean that the programmes have been unsuccessful or could it be that targets have been too ambitious this paper analyses political economy factors impinging on governments and on the imf that may lead to serial over optimism it goes on to examine the empirical evidence that is consistent with over optimism having considered whether over optimism is a cause for concern and concluded that it is the paper considers reforms that would allow realism to replace it by eliminating over optimism it is argued that the psychology of failure surrounding imf programmes could be significantly reduced or even broken

global horse trading imf loans for votes in the united nations security council we investigate whether temporary members of the united nations security council receive favorable treatment from the international monetary fund imf using panel data for 197 countries over the period from 1951 to 2004 our results indicate a robust positive relationship between temporary security council membership and participation in imf programs even after accounting for economic political and country specific factors there is also evidence that security council membership reduces the number of conditions included in imf programs imf loans seem to be a mechanism by which the major shareholders of the fund can win favor with voting members of the security council

the imf forever an analysis of the prolonged use of fund resources considerable concern has been expressed about the prolonged use made of international monetary fund imf resources by a number of member countries some commentators have seen this as being fundamentally at odds with the role of the imf as a source of temporary balance of payments support and as one aspect of mission creep by the fund the perceived importance of the issue is reflected by the fact that the first report of the fund s independent evaluation office focused on it this article provides a detailed analysis of the prolonged use of fund resources it assesses the extent to which it is a problem and draws on available empirical evidence both qualitative and quantitative to isolate the causes of prolonged use it concludes by examining the policy questions to which prolonged use gives rise