IMF, Democracy and Economic Development: Review and Critique

Psofogiorgos, Nikolaos - Alexandros and Metaxas, Theodore (2017): IMF, Democracy and Economic Development: Review and Critique.

Abstract

IMF was established as a financial institution for the promotion of world trade and international financial stability of members. However, IMF focused on assistance to developing countries and transition economies and as a result seems to have political implications. Many studies suggest that IMF lending programs undermine the quality of democracy in the countries which make use of the institution's resources. This conventional idea is rooted in two basic assumptions: First, when negotiations are made, the doors are closed. Secondly, the IMF programs impose strict limits on political power of borrowers that may result in power distribution consequences. Other studies result in a positive relationship between IMF programs and democracy. Maybe the presence of an IMF loan itself doesn’t affect the democracy, but high loan reforms required have negative impact on democratic practices. This effect depends on the type of reforms that are required by the loan.

• Item Type: MPRA Paper
• Language: English
• Keywords: IMF, democracy, reforms, political implications
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions; G - Financial Economics > G0 - General > G01 - Financial Crises; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth

References

Alesina, A., & Weder, B. (1999). Do corrupt governments receive less foreign aid? (No. w7108). National bureau of economic research.

Cingranelli, D. (2009). IMF programs and human rights, 1981–2003. The Review of International Organizations, 4(1), 47-72.

Babb, S. L., & Carruthers, B. G. (2008). Conditionality: Forms, function, and history. Annual Review of Law and Social Science, 4, 13-29.

Barro, R. J., & Lee, J. W. (2005). IMF programs: Who is chosen and what are the effects?. Journal of monetary Economics, 52(7), 1245-1269.

Bienen, H. S., & Gersovitz, M. (1985). Economic stabilization, conditionality, and political stability. International Organization, 39(04), 729-754.

Brown, C. (2009). Democracy’s friend or foe? The effects of recent IMF conditional lending in Latin America. International Political Science Review, 30(4), 431-457.

Bueno de Mesquita, Bruce, Alastair Smith, Randolph M, Siverson, and James D.Morrow, 2003, The Logic of Political Survival, Cambridge, Mass: MIT Press

Bunce, V., & Wolchik, S. (2010). A regional tradition: The diffusion of democratic change under communism and postcommunism. na.

Cheibub, José Antonio, Jennifer Gandhi, and James Raymond Vreeland. "Democracy and dictatorship revisited." Public choice 143.1-2 (2010): 67-101.

Conway, P. (2003). Endogenous IMF conditionality: theoretical and empirical implications. University of North Carolina: Chapel Hill.

Dreher, A. (2006). IMF and economic growth: The effects of programs, loans, and compliance with conditionality. World Development, 34(5), 769-788.

Dreher, A., & Gassebner, M. (2008). Do IMF and World Bank programs induce government crises? An empirical analysis.

Dreher, A., & Jensen, N. M. (2007). Independent actor or agent? An empirical analysis of the impact of US interests on international monetary fund conditions. Journal of law and Economics, 50(1), 105-124.

Geddes, B. (1999, September). Authoritarian breakdown: Empirical test of a game theoretic argument. In annual meeting of the American Political Science Association, Atlanta (Vol. 2).

Gilligan, M. J., & Sergenti, E. J. (2008). Do UN interventions cause peace? Using matching to improve causal inference. Quarterly Journal of Political Science, 3(2), 89-122.

Hartzell, C. A., Hoddie, M., & Bauer, M. (2010). Economic liberalization via IMF structural adjustment: Sowing the seeds of civil war?. International Organization, 64(02), 339-356.

Kahler, M. (1993). Bargaining with the IMF: Two-level strategies and developing countries. Double-edged diplomacy: International bargaining and domestic politics, 363-94.

Kapur, D., & Naim, M. (2005). The IMF and democratic governance. Journal of Democracy, 16(1), 89-102.

Keohane, R. O., Macedo, S., & Moravcsik, A. (2009). Democracy-enhancing multilateralism. International organization, 63(01), 1-31.

Lake, D. A., & Baum, M. A. (2001). The invisible hand of democracy political control and the provision of public services. Comparative political studies, 34(6), 587-621.

Marshall, M. G. (2010). Major episodes of political violence (MEPV) and conflict regions, 1946–2008. Center for Systemic Peace.

Michaelowa, K., & Hänny, S. M. (2010). The Impact of World Bank and IMF Programs on Democratization in Developing Countries.

Nelson, S., & Wallace, G. (2011). Are IMF programs really bad for democracy?. Buffett Center for International and Comparative Studies Working Paper Series.

Nelson, S., & Wallace, G. (2005, September). Conditional credibility: explaining the impact of the IMF on democratization. In Annual Meeting of the American Political Science Association, Washington, DC (pp. 1-5).

Nooruddin, I., & Simmons, J. W. (2006). The politics of hard choices: IMF programs and government spending. International Organization, 60(04), 1001-1033.

Ross, M. L. (2001). Does oil hinder democracy?. World politics, 53(3), 325-361.

Simmons, B. A., & Hopkins, D. J. (2005). The constraining power of international treaties: Theory and methods. American Political Science Review, 99(04), 623-631.

Staiger, D. O., & Stock, J. H. (1994). Instrumental variables regression with weak instruments.

Stiglitz, J. (2000). What I learned at the world economic crisis. Globalization and the poor: Exploitation or equalizer, 195-204.

Svensson, J. (2000). Foreign aid and rent-seeking. Journal of International Economics, 51(2), 437-461.

Vreeland, J. R. (2003). The IMF and economic development. Cambridge University Press.