Munich Personal RePEc Archive

IMF, Democracy and Economic Development: Review and Critique

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

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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.

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